Gear4music (Holdings) plc Annual Report and Accounts 2016 Annual Report and Accounts 2016
Gear4music (Holdings) plc 
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At a Glance
Learn all about Gear4music
Chief Executive’s Statement
Andrew Wass shares his thoughts
Case Study
Customer proposition
Business Model
How we deliver value
www.gear4music.com
www.gear4musicplc.com
Gear4music 
is the largest 
UK‑based online 
retailer of musical 
instruments and 
music equipment.
Operating from an office, showroom and distribution 
centre in York, the Group sells own-brand musical 
instruments and music equipment alongside premium 
third-party brands including Fender, Yamaha and 
Gibson, to customers ranging from beginners to 
musical enthusiasts and professionals, in the UK 
and, more recently, into Europe.
02
12 16
06 01
Financial 
Statements
Corporate 
Governance
Strategic 
Report
Gear4music (Holdings) plc 
Annual Report and Accounts 2016
Total Revenue (£m)
£35.5m
+46%
2016
2015
2014 £17.7m
£24.2m
£35.5m
European Revenue (£m)
£9.5m
+73%
2016
2015
2014 £2.9m
£5.5m
£9.5m
EBITDA (adjusted) (£k)
£1,681k
+100%
2016
2015
2014 £553k
£842k
£1,681k
Underlying Operating Profit (£k)
£895k
+138%
2016
2015
2014 £236k
£376k
£895k
Website Visitors (m)
10.1m
+24%
2016
2015
2014 6.4m
8.1m
10.1m
Website Conversion (%)
2.28%
+0.32ppts
2016
2015
2014 1.86%
1.96%
2.28%
Highlights
Strategic Report
01 Highlights
02 At a Glance
04 Chairman’s Statement
06 Business Model
08 Market Overview
09 Strategy
10 Key Strengths
11 Key Performance Indicators
12 Chief Executive’s Statement
15 Case Studies
18 Financial Review
20 Principal Risks
Corporate Governance
24 Corporate Governance Report
26 Audit Committee Report
27 Directors’ Remuneration Report
28 Board of Directors
30 Directors’ Report
32 Statement of Directors’ 
Responsibilities
Financial Statements
33 Independent Auditor’s Report
34 Consolidated Statement of 
Profit and Loss and 
Comprehensive Income
35 Consolidated Statement of 
Financial Position
36 Consolidated Statement of 
Changes in Equity
37 Consolidated Statement of 
Cash Flows
38 Notes (Forming Part of the 
Financial Statements)
58 Company Balance Sheet
59 Company Statement of 
Changes in Equity
60 Notes to the Company Financial 
Statements (Forming Part of the 
Financial Statements)
Sales
Profitability
Websites
● ● IPO on AIM on 3rd June 2015 raising £10.3m
● ● Strong sales growth into core UK market (+39%) and excellent progress into 
European markets (+73%)
● ● Over 10 million visitors to the website during the year
● ● Fastest growing retailer of musical instruments and equipment in the world  
(source: Music Trades)
● ● Plan to open smaller satellite distribution centres in mainland Europe
Operational highlights 02
Gear4music (Holdings) plc 
Annual Report and Accounts 2016
02
At a Glance
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2016 2015
Original Gear4music
website launched
Multilingual European
website launched
Bespoke operating
platform launched with
website design upgrades
£3.4m investment by
Key Capital Partners
Moved into new
premises and
website updated
Moved into new 
premises with 
distribution facilities
IPO 
on AIM
Key milestones
Gear4music currently retails over 33,000 SKUs across all major categories of 
musical instruments and music equipment. The products are sourced from over 
670 manufacturers, and range from kazoos costing less than £1, to digital pianos, 
drum kits and guitars costing thousands of pounds.
Guitars
We sell electric, acoustic and  
bass guitars 
32%
of total product 
sales
Keys
Acoustic, digital keyboards,  
grand and stage pianos 
18%
of total product 
sales
Studio
Huge range of essential studio 
equipment 
11%
of total product 
sales
Live & PA
We supply live sound and  
PA equipment 
15%
of total product  
sales
Orchestral
Choose from strings, brass, 
woodwind and percussion 
9%
of total product 
sales
Drums
Electric and acoustic, as well as 
other percussion instruments 
14%
of total product 
sales Strategic 
Report
Corporate 
Governance
03
Gear4music (Holdings) plc 
Annual Report and Accounts 2016
Financial 
Statements
UK
£5.48m £9.47m
£26.02m £18.76m
Europe
FY15 FY16
Own brand Other brand
FY15 FY16
£6.90m £9.16m
£24.84m £16.32m
Turnover by geography Product split
19
Number of websites
15
Languages
81 7 ,000
Total number of customers
226,000
Number of active customers
8
Currencies 04
Gear4music (Holdings) plc 
Annual Report and Accounts 2016
04
Total Revenue (£m)
£35.5m
+46%
2016
2015
2014 £17.7m
£24.2m
£35.5m
Adjusted PBT (£k)
£612k
2016
2015
2014 £(190)k
£(632)k
£612k
Chairman’s Statement
This is our first year-end report since listing in June 2015 
and I am pleased to be able to report good progress against 
the Group’s strategic priorities, and that this has resulted in 
increased sales and improving profitability.
On behalf of the Board I would like to 
begin by thanking the shareholders who 
supported the Group on its Initial Public 
Offering on AIM in June 2015 raising 
£10.3m, and also to welcome new 
shareholders who have subsequently 
acquired shares. Like myself, you will 
have recognised Gear4music’s potential 
to become a leading online retailer in a 
large but fragmented market.
I am very pleased to report that during 
our first year as a public company, we 
achieved many of the objectives we set 
ourselves, and in many ways performed 
ahead of our expectations. Overall sales 
growth was 46% including 73% growth 
in our European markets, and we 
delivered a £519,000 improvement in 
underlying operating profit whilst 
gearing up for continued expansion. 
This was a particularly impressive 
achievement given the efforts required 
to complete a successful IPO, and is a 
reflection of the commitment, drive and 
ambition of our Board and Senior 
Management team. 05
Financial 
Statements
Corporate 
Governance
Strategic 
Report
Gear4music (Holdings) plc 
Annual Report and Accounts 2016
05
During the year we recruited new talent 
into our team, in HR, marketing, 
purchasing, and multilingual customer 
services, and we have further new 
members starting soon to help us  
focus our drive into European markets. 
A number of these recruits have been 
Senior Management appointments to 
support the Executive team.
We remain committed to improving our 
customer proposition, through 
investment in software development to 
accelerate the release of new website 
systems and functionality, and 
expanding our product ranges to provide 
more choice for our customers, as well 
as incorporating new delivery options.
We are confident we have laid the 
foundations for long-term, sustainable, 
profitable growth, and in light of our 
anticipated strengthening position, the 
Board commits to review its dividend 
policy in the financial year ending  
28th February 2017.
On behalf of the whole Board, I would 
like to take this opportunity to extend my 
thanks and appreciation to all 
Gear4music’s employees for their 
commitment and hard work which has 
made our first year as a public company 
such a success.
Ken Ford
Chairman 06
Gear4music (Holdings) plc 
Annual Report and Accounts 2016
Business Model
Buy Merchandise
● ● Well-known brands purchased direct from 
manufacturers and distributors
● ● Own-brand products sourced and developed with 
Far East manufacturers
● ● 15 strong specialist buying team
● ● Over 33,000 SKUs (at June 2016)
● ● 19 websites, 15 languages
● ● Original website content written by in-house content team
● ● In-house photography studio, including 360º images
● ● ‘Broadcast standard’ in-house video studio and team
Gear4music is all about making quality  
music gear more accessible and affordable  
for musicians, from beginners and enthusiasts 
through to professionals. Our mission is to 
become a leading musical instrument and 
equipment retailer in Europe.
Our Products
Branded Products
Gear4music has developed long-term partnerships with 
many well-recognised brands within the music products 
industry, who appreciate the specialist product knowledge 
of Gear4music’s staff, the high standard of customer 
service that Gear4music provides, and the high standard 
of presentation both online and at the showroom in York.
Own-brand Products
The ongoing development of Gear4music’s own-brand 
product range has been a focus since Gear4music.com 
was launched in 2003, and now covers a wide range of 
over 1,600 products sold under nine different brands.
Our Team
Gear4music currently employs over 150 people, and most 
have first-hand musical instrument and music equipment 
knowledge, playing in bands and producing their own 
music. Ongoing product training is routinely undertaken to 
ensure staff have relevant and up-to-date knowledge in 
order to advise customers correctly.
Multilingual support for overseas customers in non-
English speaking countries continues to be a key focus.
We believe we can achieve this by leveraging technology to 
deliver an industry-leading customer experience, providing 
the products our customers want delivered to them quickly 
and efficiently. 
Our specialist market knowledge has already helped us to 
become the largest UK-based retailer, and we are now 
making fast progress into European markets.
A bespoke e-commerce platform allows us to efficiently 
operate 19 websites, in 15 languages and eight 
currencies, and as we develop this platform further, widen 
our product ranges and increase our marketing reach, we 
believe we can continue to grow our share of the £4.3bn 
European market. Strategic 
Report
Corporate 
Governance
07
Gear4music (Holdings) plc 
Annual Report and Accounts 2016
Financial 
Statements
Retail Deliver
● ● Targeted online marketing 
● ● Personalised remarketing platform
● ● Competitive pricing in eight currencies
● ● 150+ payment options
● ● UK Consumer Finance
● ● Multilingual customer advice and support team
● ● Extended warranties
● ● VIP loyalty scheme
● ● 135,000 sq ft premises in York
● ● Efficient in-house logistics with courier integration
● ● Wide range of domestic delivery options including 
Saturday and Sunday
● ● Click and collect
● ● European delivery by road or air
● ● Planning to open European dispatch hubs
International payments platform
● ● Local payment options across Europe
● ● Range of payment types accepted has been 
significantly increased
● ● Assisted in higher European conversion
Fulfilment and logistics
● ● Weekend dispatch and 7-day delivery
● ● Traffic shaping for increased capacity
● ● Courier specific dispatch cut-off times
● ● Click and collect services from over 2,500 locations
Personalisation platform
● ● Rich and responsive transactional emails for 
registrations, orders and review requests
● ● Timeline-based analysis of historical sales data 
provides weighted purchase predictions and 
personalised recommendations by email 08
Gear4music (Holdings) plc 
Annual Report and Accounts 2016
08
0.0m
0.2m
0.4m
0.6m
0.8m
1.0m
1.2m
Gear4music database growth 
People on database
2016 2011 2012 2013 2014 2015
Market Overview
The top ten European retail markets for musical instruments and music equipment (including 
the UK) are worth approximately £4.3 billion, and are undergoing a profound shift towards 
online retail. An estimated £178 million (24%) of the UK market is already online.
Top European Markets
Country Estimated Market Size (£m)*
Germany 1,194
France 863
UK 749
Italy 578
Netherlands 202
Austria 181
Spain 166
Switzerland 142
Sweden 107
Norway 83
Total Size 4,265
* = Management estimate
UK Competitive Landscape
The UK musical instruments and music 
equipment market is highly fragmented 
with no dominant retailer, presenting a 
consolidation opportunity. The top six 
companies account for an estimated 
16% of the UK market, with a long tail of 
small independent shops, pure play 
online retailers, general merchandisers 
and department stores. 
European Competitive Landscape
The company with the highest published 
turnover serving the European musical 
instruments and related equipment and 
accessories market is Thomann.de 
based in Germany, with a 2015 reported 
turnover of approximately $787m.  
Other competitors in overseas  
markets include 4Sound (Sweden),  
Bax Shop (Netherlands), Musicstore.de 
(Germany), and Woodbrass (France). 
Our Customers
Gear4music’s customer base is 
primarily (over 95%) made up of private 
individuals, from beginners and parents 
buying musical instruments and music 
equipment for their children, through to 
professional musicians. Customers tend 
to be the end-users of our products. In 
addition, the Company supplies schools 
and other educational establishments, 
with Gear4music being the preferred 
supplier of the Crescent Purchasing 
Consortium which specialises in 
educational sales and service.
We had 992,000 people registered  
on our database on the 29th February 
2016, of which 226,000 are active 
customers (being customers who have 
purchased from Gear4music during  
the last 12 months). During FY16,  
over 190,000 new customers chose 
Gear4music for their instrument and 
equipment requirements, and the 
average order value was £116,  
up from £109 in FY15.
The chart on the right provides an 
analysis of growth in total registered 
numbers on our database, from  
1st March 2011 to 29th February 2016. 09
Financial 
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Gear4music (Holdings) plc 
Annual Report and Accounts 2016
09
Strategy
Gear4music’s strategy is built around the following pillars of growth:
Our strategic priorities Overview
1. International Expansion
We plan to build on the ‘localisation’ of our current international websites 
to further drive traffic and improve conversion rates, and expand our 
multilingual customer service and marketing teams. We plan to open 
smaller localised distribution hubs to ensure top performing products  
can be delivered as quickly and as competitively as possible.
2.  A c c e l e r a t e d De v e l op m e n t  
of our Bespoke 
E-commerce Platform
Further investment in platform development is expected to grow 
revenues and profitability by driving website traffic, increasing  
conversion rates and maximising operational efficiencies and reliability. 
Examples of recently completed projects include online consumer 
finance, a European payments platform, weekend delivery and dispatch, 
and ‘on-page’ customer comments. 
3. Intelligent Marketing
We plan to accelerate our international marketing initiatives, extending 
our reach and penetration into existing and new international territories. 
New website content is being constantly added, including a wide range  
of broadcast quality product demonstration videos created in 
Gear4music’s in-house studio facilities. 
A new digital personalisation platform has been developed, which will  
be deployed during FY17 to ensure customers receive relevant 
information and offers through all communication channels.
4. Product Range Extension
We will continue to extend the number of products available to our 
customers, including those for next day delivery, and to continue  
the expansion of our own-brand product ranges with new and  
exclusive products.
  10
Gear4music (Holdings) plc 
Annual Report and Accounts 2016
10
Key Strengths
Track record of success –  
long-term sales and market 
share growth
● ● Revenues have increased every 
year since launch in 2003
● ● Momentum stepped up following 
additional investment in 2012, 
and again in 2015
● ● 46% LFL sales growth in FY16, 
building on 37% LFL sales growth 
in FY15
● ● Strong European growth validates 
website roll-out strategy
● ● Database of 992,000 registered 
users, with active customers 
increasing by 34%
Bespoke and proprietary 
e-commerce platform delivers 
competitive advantage
● ● End-to-end solution encompassing 
all aspects of trading operations
● ● Intellectual Property owned 
by Gear4music
● ● Ability to rapidly respond to 
changing customer behaviours 
and expectations
● ● Capability to expand into 
new markets
● ● Capacity to handle significantly 
increased volumes and 
website traffic
● ● Additional functionality 
in development
Specialist knowledge facilitates 
strong relationships with customers 
and suppliers
● ● Strong, committed and experienced 
management team
● ● Employees with in-depth specialist 
knowledge
● ● Expertise means Gear4music is 
trusted by major musical instrument 
and music equipment brands
● ● Offers a wide range of choice to 
customers and provides specialist 
advice during and after the sales 
process 
Well-developed product ranges
● ● Currently over 33,000 products from 
over 670 manufacturers
● ● Reputation for quality and 
value for money
● ● Over 1,600 own-brand SKUs, 
developed over a 13 year period
● ● Provide enhanced margin 
opportunities as volumes increase
Efficient logistics systems
● ● Operates from a modern 135,000  
sq ft building on the outskirts of York
● ● The most appropriate courier delivery 
services are automatically selected 
from more than 1,100 permutations 
depending on the weight, size, value 
and destination of the goods being 
purchased
Gear4music possesses a number of competitive strengths that 
underpin its business model and should help in delivering the 
strategic, commercial and financial ambitions of the Group. 11
Financial 
Statements
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Governance
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Report
Gear4music (Holdings) plc 
Annual Report and Accounts 2016
11
Sales (£m)
£35.5m
+46.4%
2016
2015
2014 £17.7m
£24.2m
£35.5m
Gross margin (%)
25.9%
-2.0ppts
2016
2015
2014 26.7%
27.9%
25.9%
Cash (£k)
£3.5m
2016
2015
2014 £708k
£916k
£3,548k
Marketing costs as % of total sales (%)
8.7%
-1.3ppts
2016
2015
2014 8.1%
10.0%
8.7%
Unique visitors (m)
10.1m
+24.7%
2016
2015
2014 6.4m
8.1m
10.1m
Website Conversion (%)
2.28%
+0.32ppts
2016
2015
2014 1.86%
1.96%
2.28%
Average Order Value (‘AOV’) (£)
£115.74
+6.2%
2016
2015
2014 £105.78
£108.96
£115.74
SKUs listed
31,517
+15.9%
2016
2015
2014 21,863
27,188
31,517
Customer experience – Trustpilot rank
9.5
2016
2015
2014 9.3
9.5
9.5
Total database size
992,000
+31.0%
2016
2015
2014 584,700
757,400
992,000
Proportion of repeat customers (%)
25.5%
+0.7ppts
2016
2015
2014 25.8%
 24.8%
25.5%
Key Performance Indicators
We measure ourselves against a number of KPIs that reflect the 
key trading trends and are linked to the strategic pillars of growth.
Financial
Commercial
Customer 12
Gear4music (Holdings) plc 
Annual Report and Accounts 2016
12
Chief Executive’s Statement
During the last year we took some significant strides forward 
in our mission to become a leading musical instrument and 
equipment retailer in Europe.
Following the Referendum outcome, we are confident that 
we are well configured to continue growing our business 
regardless of how the EU negotiations unwind during the 
coming months and years, and we are looking forward to 
implementing our exciting plans for FY17.
Our IPO in June 2015 put us in a strong 
financial position, enabling us to repay 
historic private equity debt in full and 
providing the financial resource 
necessary to continue to build a 
scalable, market leading business.
Our unique mix of a highly competitive 
own-brand range, products from the 
biggest names in the industry, and our 
bespoke online retail and distribution 
platform has helped us to achieve 
revenue growth of over 46% during the 
year, which was ahead of market 
expectations.
Our business is about making great 
music gear accessible and affordable to 
all musicians, from beginners and 
enthusiasts to professionals, and I am 
very proud of what our specialist and 
talented staff have achieved so far.
However, we want to achieve much, 
much more, and we will continue to 
accelerate the development of our 
systems, websites, logistics, people and 
product ranges to ensure a continually 
improving customer experience, as part 
of our mission to be the best. Financial 
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Corporate 
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Report
13 13
Gear4music (Holdings) plc 
Annual Report and Accounts 2016
These results have been delivered by 
the continued execution of the Group’s 
strategy, and beginning to invest the 
growth capital raised on IPO in our 
platform, people and operations. 
Exceptional costs relating to the  
IPO totalled £606,000 in the year,  
and adjusting the results to remove 
these one-off costs shows a marked 
improvement in adjusted EBITDA  
and PBT.
Strategy update
This time last year we outlined our 
strategy based on five growth pillars, 
with the overall objective of improving 
our customer proposition and increasing 
our market share. Our team has worked 
very hard to implement this strategy, 
and as a result we are making excellent 
progress in achieving our objectives. At 
the same time, we continuously 
reassess and refine our strategic aims 
to ensure we capitalise on our core 
strengths, without taking undue risks.
Platform development
Our bespoke platform has the  
capability to scale significantly. We  
have successfully deployed numerous 
new features during the last year, 
including online consumer finance,  
a European payments platform, 
weekend delivery and dispatch, and 
on-page customer comments, in 
addition to hundreds of smaller  
design and functionality upgrades.
As we expand our development team 
during the next 12 months, we will  
focus on projects to increase  
operational efficiencies, and further 
improve customer convenience, 
engagement and loyalty.
Intelligent marketing
We used the IPO proceeds to increase 
investment in this area, a key driver of 
growth in the business. At the same 
time we have improved our return on 
investment in marketing significantly 
during the last year, with spend as a 
proportion of revenue falling from 10.0% 
in FY15 to 8.7% in FY16, as a result of 
higher website conversion and ever 
more effective targeting of our online 
marketing. 
In June 2015 we completed our in-
house video production facility, which 
has already created over 500 high 
quality product demonstration videos, 
adding a new dimension to our platform 
and own-brand proposition, driving 
customer engagement and conversion.
As planned we have developed a new 
digital personalisation platform that will 
be deployed during the current financial 
year and FY18 to ensure customers 
receive relevant information and offers 
through all our communication channels.
Product range extension
The IPO proceeds allowed us to 
increase the breadth and depth of our 
product range during the last year and 
we plan to accelerate that growth during 
the next 12 months to further improve 
stock availability.
We were very pleased with own-brand 
revenue growth of 33% during the year, 
with growth accelerating during the 
second half of the year as new product 
lines arrived, including our SDP-2 stage 
piano, our range of SubZero studio 
microphones, and a range of 
Gear4music stage lighting. Our own-
brand product pipeline continues to look 
very positive in the current year. 
We were also delighted with strong 
other-brand growth of 52% during the 
year, although this has created a 
temporary sales mix effect, impacting 
on gross margins.
Business Review
We have made solid progress on both our Financial and Commercial KPIs in our 
first year as a listed business:
Financial KPIs FY16 FY15
Total Revenue £35.5m £24.2m (+46%)
European Revenue £9.5m £5.5m (+73%)
Adjusted EBITDA £1.7m £0.8m (+97%)
Underlying operating profit £0.9m £0.4m (+138%)
Adjusted PBT £0.6m (£0.6m)
Cash at year end £3.5m £0.9m
Commercial KPIs FY16 FY15
Website visitors 10.1m 8.1m
Conversion rate 2.28% 1.96%
Average order value £116 £109
Active customers 226,000 169,000
Products listed at year end 31,500 27,200 Gear4music (Holdings) plc 
Annual Report and Accounts 2016
14 14
Chief Executive’s Statement continued
International expansion
European sales growth of 73% clearly 
demonstrates the progress we are 
making internationally, but with an 
estimated annual value of £4.3bn for  
the market we are still at the beginning 
of this journey.
We have continued to invest in our 
multilingual teams, marketing, website 
localisation and fulfilment systems to 
deliver growth. On the back of these 
successes we will turn our attention to 
reducing product delivery timescales 
into mainland Europe, potentially by 
opening a number of small satellite 
distribution hubs. This will allow our 
European customers to enjoy a similar 
level of service to our UK customers 
across a much broader product range, 
whilst at the same time reducing our 
European delivery costs. 
London showroom
Whilst it remains a strategic ambition, 
soaring central London property prices 
during the last two years have resulted 
in a commercially viable deal remaining 
elusive. Whilst we have come close to 
agreeing terms on a number of 
occasions, we have not been prepared 
to make a long-term lease commitment 
that does not make complete financial 
sense, and at this time we see better 
value for shareholders in focusing on 
our European expansion.
Operations
I am pleased to report that our systems 
and infrastructure demonstrated their 
reliability and flexibility throughout the 
year. Our websites served more than  
10 million unique visitors generating 
nearly 300,000 orders, with Black Friday 
2015 being the busiest day in our history.
To adapt to customers’ evolving 
expectations we introduced weekend 
dispatch and delivery in December 
2015, which now covers more than 90% 
of our in-stock product range. We are 
fortunate to have a supportive and 
committed logistics workforce who 
embraced the required change in 
working hours to make this a reality.
As stated at the time of IPO, our existing 
York HQ has the capacity for revenues 
of £50m, and as such we are already 
considering our future requirements and 
options in anticipation of continued 
strong growth.
Trading and outlook
We have seen strong sales momentum 
during the first two months of the new 
financial year, both in the UK and 
internationally, and we therefore remain 
confident for the year ahead. We look 
forward to the business going from 
strength to strength, building on our 
successes to date and delivering  
value for our customers, staff and 
shareholders.
Andrew Wass
Chief Executive Officer 15
Financial 
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Gear4music (Holdings) plc 
Annual Report and Accounts 2016
– 
All instruments
– 
Guitars, Amps, Mixers, 
Speakers & Audio electronics
– 
Woodwind Instruments: Clarinets, 
Flutes, Oboes & Piccolos
– 
String Instruments: Violins, 
Cellos, Violas & Double Bass
– 
Digital Pianos
– 
Brass Instruments: 
Trumpets, Trombones, 
Tubas & French Horns
– 
Bass Guitar Amps & Pedals
– 
Drum Kits
– 
Lightweight Instruments
Case study
Product range
expansion
Own-brand product development and range 
expansion has been a key driver of Gear4music’s 
growth and profitability. It has taken 13 years to 
build a range of high quality, great value products, 
and we are now quickly expanding our in-house 
development team to build on this success, 
working with over 30 manufacturing partners to 
grow and enhance our own-brand offering.
Our own-brand range has increased from 1,400 
to 1,600 products, with the addition of new 
brands, ranges, and products including:
● ● A range of Gear4music stage lighting;
● ● Gear4music ‘playLITE’ – a range of lightweight 
instruments including Trumpets and Trombones 
that are ideal for children learning to play;
● ● SubZero studio microphones – high quality, 
stylish studio microphones at competitive 
price points;
● ● The SDP-2 and SDP-4 Gear4music 
stage pianos;
● ● An extended range of children’s pianos 
including new colours; and
● ● Several new Gear4music digital drum kits.
Our Own-brands Gear4music (Holdings) plc 
Annual Report and Accounts 2016
16
DELIVERY
OPTIONS
PRODUCT
INFORMATION
PRESENTATION
AND RANGE
COMMUNICATION
EASY
RETURNS
FINANCE
OPTIONS
LOCALISED
PAYMENT
CHECKOUT
PUNCTUAL
DELIVERY
REAL-TIME
UPDATES
STOCK
INFORMATION
RATED EXCELLENT
BY OUR CUSTOMERS
Case study
Customer 
proposition
We believe that achieving a very high degree of customer satisfaction is fundamental to 
sustained long-term growth, and we are committed to continually improving the service 
experienced by our customers.
We leverage our technology and empower our specialist staff to ensure key touch 
points deliver a market leading experience, and monitor our progress carefully using 
independent sources such as Trustpilot. Financial 
Statements
Corporate 
Governance
Strategic 
Report
Gear4music (Holdings) plc 
Annual Report and Accounts 2016
17 17 18
Gear4music (Holdings) plc 
Annual Report and Accounts 2016
Financial Review
The Group has delivered another strong 
financial performance, with underlying 
operating profit up by 138% to £895,000  
from the £376,000 achieved last year.
The Group completed its IPO on 3rd June 2015 and used  
the growth capital raised to invest in its people, operations 
and software platform. Year-end cash of £3.5m provides 
significant resources to invest in projects to deliver continuing 
growth in the current year and beyond.
Revenue
FY16 
£000
FY15 
£000
Change 
%
UK Revenue 26,016 18,763 39%
European Revenue 9,473 5,477 73%
Total Revenue 35,489 24,240 46%
Revenue increased by £11.2m (46%) on FY15, and that was 
further to growth of 37% and 44% in the previous two years. 
Growth in the UK of 39% was strong (FY15: 27%) but was 
out-stripped by our European performance which saw 73% 
growth on the back of last year’s 87%. As a result Europe 
contributed 27% of Group revenues in the year (FY15: 23%).
Sales growth was 43% in the first half of the year, but 
accelerated to 49% in the second half as the business started 
to invest the IPO proceeds.
FY16 
£000
FY15 
£000
Change 
%
Other-brand product sales 24,842 16,323 52%
Own-brand product sales 9,164 6,901 33%
Other revenue 1,483 1,016 46%
Total Revenue 35,489 24,240 46%
We are particularly pleased with the good progress made 
in our own-brand operation, reflected in sales increasing by 
33%, building on 27% growth in FY15. However, post-IPO a 
significant investment into other-branded stock enabled sales 
of those products to out-pace own-brand growth. As a result, 
the proportion of total sales that came from own-brand 
products was 25.8% (FY15: 28.5%).
Other revenue comprises carriage income, warranty sales, 
and commissions earned on facilitating point-of-sales credit 
for retail customers.
Gross profit
FY16 FY15 Change 
Gross profit (£000) 9,186 6,757 +36%
Gross margin (%) 25.9% 27.9% -2.0ppts
The strong sales performance led to gross profit increasing by 
£2.4m on last year, with the gross margin decreasing from 
27.9% to 25.9%, due to a combination of particularly 
competitive pricing in the run up to Christmas, a higher 
proportion of sales of lower margin other-branded products, 
and the rapid expansion into Europe that comes with 
associated increased unit delivery costs. 
Various initiatives are underway to focus on improving gross 
margin where possible, and we are confident that this shift 
can start to be reversed as own-brand sales growth catches 
up and increased buying economies boost product margins.
 
Administrative expenses and Operating profit
FY16 
£000
FY15 
£000
Change 
%
Recurring Administrative 
expenses (8,291) (6,381) (30%)
Exceptional Administrative 
expenses (606) (165) (267%)
Reported Operating profit 289 211 37%
Underlying Operating profit 895 376 138%
Increases in recurring administrative expenses were kept to 
30% compared to the 46% increase in sales due to improved 
marketing returns, tight cost control, and the impact of certain 
costs (including rent and rates annual charge of £538,000) 
being fixed.
In FY16, marketing and labour costs totalled £5.8m (FY15: 
£4.5m), and accounted for 70% (FY15: 71%) of total recurring 
administrative expenses. Increases in marketing expenses 
and labour costs were kept to 27% and 30% in the year 
respectively, taking these costs as a percentage of total sales 
down from 10.0% and 8.6% to 8.7% and 7.6% respectively.
Exceptional administrative expenses totalled £606,000 in 
FY16 and £165,000 in FY15, and all relate to costs incurred in 
relation to the IPO. Strategic 
Report
Corporate 
Governance
19
Gear4music (Holdings) plc 
Annual Report and Accounts 2016
Financial 
Statements
PBT performance improved by £803,000 to a £6,000 profit,  
of which £571,000 related to lower finance charges relating  
to the Key Capital loan notes (FY16: £233,000; FY15: 
£804,000). These loan notes were settled in full on IPO and 
as such there will be no related finance costs in the current 
year or beyond.
Cash flow and Net debt
The cash flow statement for the financial year reflects the 
Group raising £4.4m of net cash on IPO, and how this has 
been subsequently invested.
FY16 
£000
FY15 
£000
Opening cash 916 708
Loss post exceptional expenses (43) (686)
Movement in working capital (1,416) 1,046
Depreciation and amortisation 786 466
Financial expense 280 878
Other operating adjustments 58 (154)
Net cash from operating activities (335) 1,550
Net cash from investing activities (1,509) (953)
Net cash from financing activities 4,476 (389)
Increase in cash in the year 2,632 208
Closing cash 3,548 916
These figures reflect movements in year-end positions and  
as such ‘Net cash from operating activities’ reflects, in 
particular, the Group’s active investment in stock to support 
sales growth, and continuing to take all early-payment 
discounts on offer at a time when interest rates on bank 
deposits are negligible. In FY15, management of the stock 
and creditor position generated £1.1m of working capital 
where as in FY16, post-receipt of IPO proceeds, there has 
been an £890,000 net investment in stock and creditors  
within working capital to support the growth during the year.
Net cash from investing activities includes £932,000 of 
investment in the Group’s software platform that forms the 
cornerstone of the business, and £578,000 of capital 
expenditure on warehouse assets and improvements, and 
building of an in-house video studio. Finance leases were 
drawn against £252,000 of this capital expenditure.
On 3rd June 2015, the Group successfully listed on the 
Alternative Investment Market (AIM) of the London Stock 
Exchange, generating £10.3m of gross proceeds and £9.0m 
of net proceeds after expenses and seller sales, of which 
£4.5m was used to repay Key Capital Partners debt in full, 
thereby removing the associated expensive interest costs  
and deleveraging the Group’s balance sheet. Net cash into 
the business (included in ‘Net cash from financing activities’  
in the table above) was £4.4m which, in the absence of any 
meaningful return on cash held on deposit, has been applied 
to the repayment of bank loans, and funding stock purchases 
instead of drawing trade finance loans.
Balance sheet and Net assets
The Group had a strong year-end balance sheet, with net 
assets of £9.36m (FY15: £0.29m net liabilities), and £3.5m 
cash (FY15: £0.9m).
FY16 
£000
FY15 
£000
Software platform 2,483 1,952
Other intangible assets 755 812
Property, plant and equipment 1,239 991
Total non-current assets 4,477 3,755
Stock 6,906 5,326
Cash 3,548 916
Other current assets 740 216
Total current assets 11,194 6,458
Trade payables (3,718) (3,231)
Other current liabilities (2,304) (2,611)
Total current liabilities (6,022) (5,842)
Total non-current liabilities (290) (4,660)
Net assets/(liabilities) 9,359 (289)
The IPO fundamentally changed the capital structure of the 
business – introducing £4.4m of growth capital and settling 
£4.5m of loan notes in full, thereby deleveraging the balance 
sheet. The Group has net cash of £2.6m compared to net 
debt of £5.0m at the last financial year end.
The software platform remains at the centre of everything  
the business does, and £932,000 was invested in the year to 
further develop its functionality and resilience. This takes total 
cumulative spend on the platform to the end of the year to 
£3,367,000.
Year-end stock was just 30% higher than at the previous year 
end and the Board is comfortable with the range and 
composition.
Dividends
The Board is of the view that the ongoing development of  
the business is currently best served by retaining cash 
reserves to support continued growth, and as such does  
not recommend the payment of a dividend. Reflecting the 
increasingly cash generative nature of our operations, the 
Board intends to revisit the shareholder distribution policy 
during the financial year ending 28th February 2017.
Chris Scott 
Chief Financial Officer and Company Secretary  20
Gear4music (Holdings) plc 
Annual Report and Accounts 2016
Principal Risks
The Board recognise that certain risks and uncertainties can have 
significant rewards for the prospects of the business, and as such 
require careful identification, evaluation, and management. 
Operations
The Board takes overall responsibility 
for risk management, with a focus on 
evaluating the nature and extent of 
significant risks, and formulating 
mitigations around the risks required  
to be taken in order to deliver the 
strategic objectives. 
The Audit Committee has  
responsibility for overseeing the 
effectiveness of appropriate risk 
management processes and internal 
control systems. More detail of  
these processes are set out in  
the Governance section.
The purpose of this section is to focus 
on the principal risks and uncertainties 
to our business model that could 
impact on our achieving our strategic 
objectives, and our future performance. 
A more comprehensive list was 
published in our Admission document 
that is available on our investor website. 
Risk Description Mitigation
Rapid growth The Group’s business has grown rapidly. Operations and practices 
adopted at earlier stages of the Group’s development may be 
inappropriate for a business of an increased size and scale.
The Group may need to expand and enhance its infrastructure  
and technology, and improve its operational and financial systems 
and procedures and controls in order to be able to match its 
anticipated growth. The Group may face challenges in matching 
the pace of its expansion with corresponding improvements and 
enhancements in its systems, controls and procedures. The Group 
will also need to expand, train and manage its growing employee 
base.
As detailed in the governance section 
on pages 24 to 27, the Executive team 
and the Board actively monitor and 
respond, so as to maintain systems 
and practices that are appropriate for 
the operations and scale of the Group.
As communicated on IPO, the Group 
has allocated funds to expand its 
management team with relevant skills 
and experience to deliver continuing 
growth.
New 
jurisdictions
The Group’s expansion into new jurisdictions may not be 
successful. Further expansion into markets outside the UK 
would expose the Group to a variety of risks, including different 
regulatory requirements, complications with staffing and managing 
foreign operations, variations in consumer behaviour, fluctuations 
in currency exchange rates, potential political and economic 
instability, potential difficulties in enforcing contracts and 
intellectual property rights, the potential for higher rates of 
fraud and adverse tax consequences. 
The Directors have limited experience of the legal and regulatory 
regimes of jurisdictions outside the UK and their consequences for 
the Group’s business.
In addition, the Group will likely have to compete in new jurisdictions 
with companies already operating in the relevant market, which may 
understand the local market better than the Group.
To the extent that the Group overestimates the potential of a 
new geographic market, incorrectly judges the timing of the 
development of a new geographic market or fails to anticipate the 
differences between a new geographic market and the UK, the 
Group’s attempt to expand into new geographic markets may 
be unsuccessful.
The Board will direct Management to 
seek professional input into any major 
developments.
Advances into Europe will be in a 
measured and capital efficient 
manner. Strategic 
Report
Corporate 
Governance
21
Gear4music (Holdings) plc 
Annual Report and Accounts 2016
Financial 
Statements
Risk Description Mitigation
Technological 
changes
Unless the Group is able to respond to technological advances, 
e.g. through adapting and optimising Gear4music’s websites, on a 
cost-effective and timely basis, it may not be able to effectively 
build and/or maintain a competitive advantage.
The Group continues to allocate a 
significant ongoing annual 
development budget.
Distribution  
centre
The Group’s business depends entirely on a single distribution 
centre and warehouse located in York. This holds the Group’s 
stock for delivery directly to customers. 
Any disruption to the distribution centre’s efficient operation may 
therefore have an effect on the Group’s business.
The distribution centre may suffer prolonged power or equipment 
failures, failures in its information technology systems or networks 
or damage from fires, floods, other disasters or other unforeseen 
events which may not be covered by or may exceed the Group’s 
insurance coverage.
The Group, in conjunction with its 
insurance broker, ensures sufficient 
and appropriate cover is in place.  
This includes business interruption 
cover.
The Group has a formal disaster 
recovery plan in place that details 
actions in specific situations.
Warehousing, 
onward 
distribution to 
customers and 
logistics
The supply of product to customers in a timely manner is critical to 
the success of the Group. The Group therefore operates its own 
warehouse, run by senior management that have many years of 
experience in the sector.
Any rapid increase in sales may require further expansion of 
current warehouse space.
There is a risk that the Group may experience interruptions to the 
operation of these logistics and distribution networks that could 
prevent the timely or proper delivery of products, which could 
damage the Group’s reputation, deter customers, prospective 
customers, suppliers and/or prospective suppliers.
There is a continuous monitoring of 
capacity at the warehouse and there 
is a step plan in place that the Board 
believes should allow the Group to 
fulfil an increasing number of orders 
from the existing site.
The Group has multiple delivery 
service providers to reduce the 
dependency on any single provider, 
and tracks service level agreements 
on an ongoing basis. This provides 
system flexibility to switch providers 
within a matter of days if required.
Change to 
search 
engines’ 
algorithms
Changes to search engines algorithms or terms of service could 
cause the Group’s websites to be excluded from or ranked lower in 
natural search results.
Search engines frequently modify their algorithms and ranking 
criteria to prevent their natural listings from being manipulated, 
which could impair the Group’s ‘Search Engine Optimisation’ 
(‘SEO’) activities. If the Group is unable to recognise and adapt 
quickly to such modifications in search engine algorithms, the 
Group could suffer a significant decrease in traffic and revenue.
The Group will continue to operate 
SEO activities that adhere to search 
engine guidelines.
Data security 
and IT 
reliability
The Company relies heavily on its IT infrastructure and 
e-commerce system, and in particular its websites. If any one or 
more of its websites were to fail or be damaged this could impact 
the Group’s ability to trade.
If the Group’s IT and data security systems do not function 
properly there could be website slowdown or unavailability, loss of 
data, a failure by the Group to protect the confidential information 
of its customers from security breaches, delays in transaction 
processing, the inability to accept and fulfil customer orders which 
could affect the Group’s business.
The Group seeks to mitigate this risk 
by investing significant sums in IT 
infrastructure including robust backup 
systems.
The Group has a disaster recovery 
plan in place which has been 
designed to minimise the impact of 
data loss or corruption from hardware 
failure, human error, hacking or 
malware. 22
Gear4music (Holdings) plc 
Annual Report and Accounts 2016
Principal Risks continued
Risk Description Mitigation
Market 
recognition
Developing and maintaining the reputation of, and value 
associated with, the Group’s brands is of central importance to 
the success of the Group. Brand identity is a critical factor in 
retaining existing and attracting new customers. The Group is 
reliant on its natural search result rankings and paid advertising 
as it seeks to build market share and attract new customers. 
Any failure by the Group to offer high quality products across a 
range of instruments, manufacturers and price points, excellent 
customer service, and efficient and reliable delivery could 
damage its reputation and brands, and could result in the loss 
of customer confidence and a reduction in purchases.
Unfavourable publicity concerning the Group could also 
damage the Group’s brands and its business. If the Group fails 
to maintain its brands or if excessive expenses are incurred in 
this effort, the Group’s business may be affected.
Rigorous monitoring of customer 
feedback helps ensure issues are 
identified and rectified on a timely 
basis.
Competition 
in its target 
market
The UK and European retail market for musical instruments 
and music equipment is competitive. A number of competitors 
may have financial resources greater than those of the Group.
Both Amazon and eBay sell musical instruments and music 
equipment.
The Group has a track record of 
successfully competing on a wide 
range of factors including quality 
and range of products, price, 
product availability, product 
information, convenience, delivery 
options and service.
Brand and Proposition Strategic 
Report
Corporate 
Governance
23
Gear4music (Holdings) plc 
Annual Report and Accounts 2016
Financial 
Statements
Resources and Relationships
Risk Description Mitigation
Supply and 
sale of 
third‑party 
branded 
products 
The Group purchases products from a number of large global 
musical instrument and music equipment brand owners, and 
the Group’s business depends on its ability to source a range 
of products from well-recognised brands on commercially 
reasonable terms. 
The relationships between the Group and the third-party  
brand owners are generally based on annual contracts that  
the Group seeks to renew each year. The third-party brand 
owners may cease selling products to the Group on terms 
acceptable to it, fail to deliver sufficient quantities of products  
in a timely manner, terminate their relationship with the Group 
and enter into agreements with the Group’s competitors or 
experience raw material or labour shortages or increases in 
raw material or labour costs. Any disruption to the availability  
or supply of products to the Group or any deterioration to the 
terms on which products are supplied to the Group could  
affect its business.
Whilst sales of third-party 
branded products accounted for 
approximately 71% of the Group’s 
turnover in FY16, the Directors 
do not consider that the Group is 
significantly reliant on any one or 
more major brand/brand owner.
The Directors believe that the 
relative size of the Group, its 
purchase volumes and the strength 
of its relationship with the brand 
owners, built over a prolonged 
period in many cases, make it 
unlikely that any such arrangements 
would be terminated.
Reliance on 
subcontract 
manufacturers
The Group subcontracts manufacture of its own-brand musical 
instruments and equipment to independent third-party 
businesses in South-East Asia. Any disruption to supply or 
issues such as poor product quality could have an adverse 
impact on the Group’s reputation.
The impact of any issues arising with subcontractors products 
is exacerbated by the long lead times involved (12-14 weeks).
The Group has been successfully 
importing for over 13 years and  
has relationships with over  
30 manufacturers providing 
resourcing options.
The Board believes that the Group 
has established robust take-on and 
ongoing monitoring procedures 
covering areas such as quality 
control and delivery performance 
for new and existing subcontract 
manufacturers that the Group seeks 
to adhere to rigidly. 
Dependence 
on key 
personnel
The Group has a relatively small senior management team  
and the loss of any key individual or the inability to attract 
appropriate personnel could impact upon the Group’s future 
performance. 
Should the Group fail to retain or attract suitably qualified and 
experienced personnel, it may not be able to compete 
successfully.
The senior management team is 
compensated through a combination 
of market-rate salary and longer-
term share-based incentives to align 
key people’s remuneration with the 
continued success of the Group.
  24
Gear4music (Holdings) plc 
Annual Report and Accounts 2016
Corporate Governance Report
The UK Corporate Governance Code
Whilst the Group is listed on AIM, it is not required to adopt 
the provisions of the UK Corporate Governance Code (‘the 
Code’). The Board, however, recognises the value and 
importance of high standards of corporate governance, and 
has adopted many aspects of the Code so far as the Board 
considers them appropriate and practical for a group of 
Gear4music’s size.
The Board of Directors and Committees of the Board of 
Directors
The Board, which is headed by the Chairman, comprises 
six Directors of which three are executive and three are 
non-executive, providing a broad range of relevant skills 
and experiences. The Board considers Ken Ford and Dean 
Murray to be ‘independent’ non-executives under the criteria 
identified in the code. Directors’ profiles are detailed on pages 
28–29. 
The Board met regularly throughout the year, with further  
ad hoc meetings held when required.
The Role of the Board
The role of the Board is to provide leadership to the Group 
and to ensure the obligations of being a public company are 
adhered to. The Board bears collective responsibility for 
delivering ongoing success through the development of 
appropriate strategies that are aligned to the Group’s 
objectives, and deliverable with due consideration of risk and 
the resources available. The Board is also responsible for 
ensuring that a framework of effective controls is in place.
The division of responsibilities between the Chairman and the 
Chief Executive Officer is clearly defined. The Chairman is 
responsible for ensuring the effectiveness of the Board and 
setting its agenda. The Chairman has no involvement in the 
day-to-day running of the business. The Chief Executive 
Officer has direct charge of the Group on a day-to-day basis, 
and the Executive team has collective responsibility for the 
implementation of the Group’s strategies, and is accountable 
to the Board for the financial and operational performance of 
the Group.
There are certain matters that are reserved for the Board’s 
consideration and these include, but are not limited to matters 
of strategy, key commercial developments, risk management, 
the consideration and approval of budgets, significant capital 
expenditure and recruitment, acquisitions and disposals, and 
the approval of financial statements.
The formal Board agenda includes reports from the CEO, 
CCO and CFO detailing the operational, commercial and 
financial performance of the Group. Further to formal Board 
meetings, the Board receives weekly key trend information 
covering all trading aspects of the business.
The Board determines the fees paid to Non-Executive 
Directors.
The performance of the Board is evaluated informally on an 
ongoing basis with reference to all aspects of its operation 
including but not limited to, the appropriateness of its skill 
level, the way its meetings are conducted and administered 
(including the content of those meetings), the effectiveness of 
the various Committees, whether corporate governance 
issues are handled in a satisfactory manner, and whether 
there is a clear strategy and objectives.
A new Director, on appointment, is briefed on the activities of 
the Group. Professional induction training is also given as 
appropriate. The Chairman briefs Non-Executive Directors on 
issues arising at Board meetings if required, and Non-
Executive Directors have access to the Chairman at any time. 
Ongoing training is provided as needed. Directors are 
continually updated on the Group’s business, insurance and 
on issues covering pensions, social, ethical, environmental, 
and health and safety by means of Board presentations.
In the furtherance of his duties or in relation to acts carried 
out by the Board or the Group, each Director has been 
informed that he is entitled to seek independent professional 
advice at the expense of the Group. The Group maintains 
cover under a Directors and Officers insurance policy in the 
event of legal action being taken against any Director.
Each Director is appraised through the normal appraisal 
process. The Chief Executive Officer is appraised by the 
Chairman, the executive Board members by the Chief 
Executive Officer, and the Non-Executive Board members by 
the Chairman. Each Director has access to the services of the 
Company Secretary if required.
The Non-Executive Directors are considered by the Board to 
be independent of management and are free to exercise 
independence of judgement. They receive no other 
remuneration from the Group other than the directors’ fees.
The Board is supported by and receives recommendations 
from two Committees – an Audit Committee and a 
Remuneration Committee.
It is recognised that the Code does not treat the Chairman as 
independent after appointment and it is considered best 
practice that he should not sit on the Audit or Remuneration 
Committees. The Board, however, takes the view that as the 
number of Non-Executive Directors is only three, including the 
Chairman, his participation will continue as the Committees 
gain the benefit of his external expertise and experience in 
areas which the Group considers important. 25
Financial 
Statements
Corporate 
Governance
Strategic 
Report
Gear4music (Holdings) plc 
Annual Report and Accounts 2016
The table below shows the number of Board and Audit 
Committee and Remuneration Committee meetings held in 
the period since IPO and the formation of the Committees, 
and the date of approval of the Annual Report & Accounts. 
The table also show the attendance of each Director:
Director Role
Board 
meetings
Audit 
Committee 
meetings
Remuneration 
Committee 
meetings
Ken Ford Non-Executive  
Chairman 9/9 3/3 2/2
Andrew Wass CEO 9/9
Chris Scott CFO 9/9
Gareth Bevan CCO 9/9
Dean Murray NED 9/9 3/3 2/2
Peter Armitage NED 8/9
Re-election
At each Annual General Meeting one-third (or whole number 
less than one third) of the directors will retire by rotation. In 
addition, Directors are subject to re-election at the Annual 
General Meeting following their appointment.
Shareholder communications
The Chairman, Chief Executive Officer and Chief Financial 
Officer regularly meet with institutional shareholders to  
foster a mutual understanding of objectives. The Directors 
encourage the participation of all shareholders, including 
private investors, at the Annual General Meeting and as  
a matter of policy the level of proxy votes (for, against and 
vote withheld) lodged on each resolution is declared at  
the meeting.
The Annual Report and Accounts is published on the 
Company’s investor website and can be accessed by 
shareholders.
Internal controls
The Board is responsible for the Group’s system of internal 
controls and for reviewing its effectiveness. Such a system is 
designed to manage rather than eliminate the risk of failure to 
achieve business objectives, and can only provide reasonable 
and not absolute assurance against material misstatement  
or loss.
The Group highlights potential financial and non-financial 
risks which may impact on the business as part of the monthly 
management reporting procedures. The Board receives these 
monthly management reports and monitors the position at 
Board meetings.
The Board confirms that there are ongoing processes for 
identifying, evaluating and mitigating the significant risks 
faced by the Group. The processes have been in place from 
the date of admission to AIM up to the date of approval of the 
Annual Report & Accounts, and is consistent with the 
guidance for Directors on internal control issued by the 
Turnbull Committee.
The Group’s internal financial control and monitoring 
procedures include:
• clear responsibility on the part of line and financial 
management for the maintenance of good financial 
controls and the production of accurate and timely financial 
management information;
• the control of key financial risks through appropriate 
authorisation levels and segregation of accounting duties;
• detailed monthly budgeting and reporting of trading results, 
balance sheets and cash flows, with regular review by 
management of variances from budget;
• reporting on any non-compliance with internal financial 
controls and procedures; and
• review of reports issued by the external auditor.
The Audit Committee on behalf of the Board reviews reports 
from the external auditor together with management’s 
response regarding proposed actions. In this manner they 
have reviewed the effectiveness of the system of internal 
controls for the period covered by the accounts. 26
Gear4music (Holdings) plc 
Annual Report and Accounts 2016
Corporate Governance Report continued
Audit Committee Report
Overview
The Audit Committee is established by and is responsible to 
the Board. It has formally delegated duties and responsibilities, 
and has written terms of reference. Its main responsibilities are:
• to monitor and be satisfied with the truth and fairness of 
the Group’s financial statements before submission to the 
Board for approval, ensuring their compliance with the 
appropriate accounting standards, the law, and the 
AIM Rules;
• to monitor and review the effectiveness of the Group’s 
system of internal control;
• to make recommendations to the Board in relation to the 
appointment of the external auditor and their remuneration, 
following appointment by the shareholders in general 
meeting, and to review and be satisfied with the auditor’s 
independence, objectivity and effectiveness on an ongoing 
basis; and
• to implement the policy relating to any non-audit services 
performed by the external auditor.
Membership of the Audit Committee
Dean Murray is the Chairperson of the Committee and the 
other member is Ken Ford, both of whom are Non-Executive 
Directors and have wide experience in regulatory and risk 
issues.
Role and Operation of the Audit Committee
The Committee is authorised by the Board to seek and obtain 
any information it requires from any officer or employee of the 
Group, and to obtain external legal or other independent 
professional advice as is deemed necessary by it.
Meetings of the Committee are held at least twice per year 
and the auditor is invited to these meetings. The Committee 
meets once (usually during January) to discuss and agree the 
scope for the forthcoming external audit, and again (usually 
during May) to review the findings of the external audit in 
relation to internal control and the financial statements. At this 
meeting, the Committee carries out a full review of the 
year-end financial statements and of the audit, using as a 
basis an Audit Committee Report prepared by the external 
auditor and taking into account any significant accounting 
policies, any changes to them and any significant estimates or 
judgements. Questions are asked of management of any 
significant or unusual transactions where the accounting 
treatment could be open to different interpretations.
The Committee receives reports from management on the 
effectiveness of the system of internal controls. It also 
receives from the external auditor a report of matters arising 
during the course of the audit which the auditor deems to be 
of significance for the Committee’s attention. The statement 
on internal controls and the management of risk, which is 
included in the Annual Report, is approved by the Committee.
The 1998 Public Interest Disclosure Act (‘the Act’) aims to 
promote greater openness in the workplace and ensures 
‘whistle blowers’ are protected. The Group maintains a policy 
in accordance with the Act which allows employees to raise 
concerns on a confidential basis if they have reasonable 
grounds in believing that there is serious malpractice within 
the Group. The policy is designed to deal with concerns, 
which must be raised without malice and in good faith, in 
relation to specific issues which are in the public interest and 
which fall outside the scope of other Group policies and 
procedures. There is a specific complaints procedure laid 
down and action will be taken in those cases where the 
complaint is shown to be justified. The individual making  
the disclosure will be informed of what action is to be taken 
and a formal written record will be kept of each stage of  
the procedure.
The external auditor is required to give the Committee 
information about policies and processes for maintaining  
their independence and compliance regarding the rotation  
of audit partners and staff. The Committee considers all 
relationships between the external auditor and the Group  
to ensure that they do not compromise the auditor’s 
judgement or independence particularly with the provision  
of non-audit services.
External auditor and non-audit services
Fees in relation to services provided by the external auditor in 
FY15 and FY16 were:
FY16
£000
FY15
£000
Audit fee 28 25
IPO-related fees 137 115
Tax fees 3 3
Total fees 168 143
Given the one-off nature of the IPO fees, the Committee is 
satisfied that the external auditor did not have a self-interest 
threat.
Remuneration Committee Report
As an AIM listed Company, Gear4music (Holdings) plc is not 
required to comply with Schedule 8 to the Large and Medium-
sized Companies and Groups (Accounts and Reports) 
Regulations 2008. The content of this report is unaudited 
unless stated. 27
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Gear4music (Holdings) plc 
Annual Report and Accounts 2016
Membership of the Remuneration Committee
During the year, the Remuneration Committee comprised 
Ken Ford and Dean Murray. They have no personal financial 
interest in the Group except for fees in relation to their holding of 
office and their shareholding as disclosed, with no potential 
conflict of interests and no day-to-day involvement of the Group.
The Remuneration Committee reviews the performance of 
the Executive Directors and makes recommendations to the 
Board on matters relating to remuneration, terms of service, 
granting of share options and other equity incentives. 
The Remuneration Committee meets at least twice a year.
Remuneration policy
The remuneration policy is designed to attract, retain and 
motivate high calibre executives to ensure the Group is 
managed successfully to the benefit of shareholders.
Share ownership is encouraged and all the executives are 
interested in the share capital.
In setting remuneration levels the Committee takes into 
consideration remuneration levels and practices in other 
companies of a similar size and in similar sectors.
Non-Executive Directors
Remuneration of the Non-Executive Directors is determined 
by the Executive Directors. Non-Executive Directors are not 
entitled to pensions, annual bonuses or employee benefits, 
nor are they entitled to participate in share option 
arrangements relating to the Company’s shares.
Each of the Non-Executive Directors has a letter of 
appointment stating his annual fee and that his appointment 
is initially for a term of three years. Their appointment may be 
terminated with one month’s notice, except for Peter Armitage 
whose appointment may only be terminated after Key Capital 
Partners shareholding in the Company falls to below 3% of 
the entire issued share capital.
Their fees are reviewed annually and set in line with prevailing 
market conditions and at a level which will attract and retain 
individuals with the necessary experience and expertise to 
make a significant contribution to the Group’s affairs.
Directors’ remuneration
The normal remuneration arrangements for Executive 
Directors consist of basic salary. The CEO is also entitled to 
a car allowance, a pension allowance, and private medical 
insurance. Four Directors including the CEO are enrolled in 
the Group workplace pension scheme.
All Executive Directors have service agreements terminable 
by the Company with six months’ notice.
Directors’ interests
Details of the Directors’ shareholdings are included in the 
Directors’ Report on page 30.
Directors’ share options
There is a Directors EMI share incentive plan in place to 
reward Executives for delivering success to the mutual  
benefit of shareholders, and specifically promote continuing 
earnings growth. There have been no awards made before 
29th February 2016. The first awards are eligible to be made 
within 42 days following the announcement of the Company’s 
FY16 annual trading results.
Share option awards are made at the discretion of the 
Remuneration Committee and are subject to performance 
conditions in a two-year vest period from the date of award.
A discretionary cash bonus plan is in place to incentivise 
major shareholding directors on a comparable basis.
Share awards will be made following the announcement of the 
FY16 results.
Total remuneration
The remuneration of each of the Directors of the Group for  
the year ended 29th February 2016 is set out below. These 
values are included within the audited accounts:
Basic salary 
£000
Fees 
£000
Benefits 
£000
Pensions 
£000
Total FY16 
£000
Total FY15 
£000
Executive 
Andrew Wass 175 – 2 2 179 157
Chris Scott 126 – – 1 127 98
Gareth Bevan 94 – – 1 95 76
Non–Executive 
Ken Ford (appointed 3rd June 2015) 24 – – – 24 –
Dean Murray 30 – – – 30 30
Peter Armitage
1
 (appointed 30th April 2015) – 23 – – 23 –
Mark Buttler
1
 (resigned 30th April 2015) – 9 – – 9 36
Total 449 32 2 4 487 397
1 Mark Buttler was KCP’s appointed Investment Director and was replaced on 30th April 2015 by Peter Armitage 28
Gear4music (Holdings) plc 
Annual Report and Accounts 2016
Board of Directors
Eric (Ken) Ford
Chairman and Non-Executive Director 
(age 66)
Ken was previously Chief Executive of 
Teather & Greenwood, the investment 
bank, becoming Deputy Chairman and 
Chairman of Corporate Finance. Ken 
brings a strong understanding of 
shareholder value, strategic planning 
and corporate transactions. Ken is a 
former Chairman of the Quoted 
Companies Alliance (‘QCA’) and 
member of the EU Advisory Committee 
to the Corporation of London. Ken’s 
previous directorships include  
Aberdeen Asset Management and 
Morgan Grenfell. Ken is currently 
Chairman of AIM-quoted companies 
BrainJuicer Group PLC, Nakama Group 
plc and Scientific Digital Imaging plc. 
Ken is a Fellow of the Chartered 
Securities Institute. 
Ken is Chairperson of the Remuneration 
Committee and a member of the Audit 
Committee.
Andrew has over 20 years’ business 
management experience, having 
founded Gear4music Limited (then 
called Soundpro Limited) in 1995.  
In 1998 he began selling IT systems  
for the audio recording market before 
launching ‘Gear4music’ in 2003.  
Since then Andrew has retained  
overall responsibility for driving the 
Group’s growth. 
 
Between 1992 and 1998, Andrew set  
up and ran his own recording studio 
business, having studied Popular Music 
and Sound Recording at the University 
of Salford. Andrew is a keen pianist.
Before joining Gear4music in October 
2012, Chris was the Finance Director at 
Officers Club, overseeing the sale of the 
business to Blue Inc.  
 
Chris joined the audit team of KPMG 
LLP in Leeds in 1997, qualified as a 
Chartered Accountant in 2000 and went 
on to spend nine further years in their 
advisory practice including a year on 
secondment at Barclays Bank. He holds 
an Executive Masters of Business 
Administration.
Andrew Wass
Chief Executive Officer 
(age 45)
Christopher (Chris) Scott 
Chief Financial Officer and  
Company Secretary
(age 40)
The Directors of Gear4music (Holdings) plc are responsible 
for preparing the financial information on the basis of 
preparation and in accordance with International Financial 
Reporting Standards as adopted by the European Union. 29
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Gear4music (Holdings) plc 
Annual Report and Accounts 2016
Gareth joined Gear4music in July 2012. 
He was previously at DV247, a £36m 
turnover musical equipment retailer, 
where he was responsible for 
purchasing, sales and marketing.  
He has 17 years’ experience in musical 
equipment retail.
Dean joined the Board of Gear4music  
in March 2012 as a Non-Executive 
Director and originally as Chairman. 
Dean is a Chartered Accountant,  
former Chief Financial Officer and  
Chief Operating Officer of Myriad 
Childrenswear Group, and is currently  
a Non-Executive Director of French 
Connection, and Chairman of Neville 
Johnson Limited and Yumi International 
Limited. 
 
Peter is a Chartered Accountant, 
qualifying with Price Waterhouse (now 
part of PricewaterhouseCoopers LLP) 
and has an MBA from the Manchester 
Business School. He has spent most of 
his career in private equity, initially with 
NatWest Ventures (now Bridgepoint) 
and subsequently as a Partner with 
Apax Partners and Director of YFM 
Ventures Limited. He is a Founding 
Partner of Key Capital Partners.
Gareth Bevan 
Chief Commercial Officer 
(age 38)
Dean Murray
Non-Executive Director 
(age 53)
Peter Armitage
Non-Executive Director 
(age 59)
Dean is Chairperson of the Audit 
Committee and a member of the 
Remuneration Committee.  30
Gear4music (Holdings) plc 
Annual Report and Accounts 2016
Directors’ Report
Principal activity
The principal activity of the Group is the retail of musical 
instruments and equipment, through 19 Gear4music-branded 
websites across Europe in 15 languages and a showroom in 
York. It retails own and other-branded products.
Business review and future developments
An overview of the Group’s operation is included in the 
Strategic Report section of the Annual Report and Accounts 
on pages 1–23. This report includes sections on strategy and 
markets, and considers key risks and key performance 
indicators.
A review of the Group’s current operations and future 
developments is covered in the Chief Executive Officer’s 
Statement and the Financial Review.
Financial results
Details of the Group’s financial results and position are set  
out in the Consolidated Statement of Profit and Loss and 
Comprehensive Income, other primary statements and  
notes to the accounts on pages 34–57.
Dividends
The Directors do not recommend the payment of a dividend 
(FY15: nil).
Going concern
After making enquiries, the Directors have confidence that 
the Group has adequate resources to continue in operational 
existence for the foreseeable future. For this reason they 
continue to adopt the going concern basis in preparing the 
annual report and accounts. This is described in more detail 
in note 1 on page 38.
The Directors present their report and the audited financial 
statements for the year ended 29th February 2016.
Directors
The six Directors who served on the Board and on Board 
Committees during the year are set out on pages 28–29. 
One-third of the Directors are required to retire at the Annual 
General Meeting and can offer themselves for re-election.
There is a £1m keyperson insurance policy in place pertaining 
to Andrew Wass.
Information on Directors’ remuneration and share option 
rights is given in the Remuneration Committee report on 
pages 26–27.
Significant shareholders
The Company is informed that at 10th May 2016, individual 
registered shareholdings of more than 3% of the Company’s 
issued share capital were as follows:
Number of  
shares
% of issued  
share capital
Andrew Wass 8,286,593 41.1
Key Capital Partners 4,829,482 24.0
Octopus Investments 1,027,456 5.1
Artemis Investment Mgt 935,252 4.6
Seneca Investment Mgrs 899,463 4.5
Panmure Gordon & Co 765,074 3.8
City Financial 665,467 3.3
Directors’ shareholdings
The beneficial interests of the Directors in the share capital of 
the Company at 29th February 2016 were as follows:
Executive Directors
Number of  
shares
% of issued  
share capital
Andrew Wass 8,286,593 41.1%
Gareth Bevan 134,382 0.7%
Chris Scott 120,462 0.6%
Non-Executive Directors
Number of  
shares
% of issued  
share capital
Dean Murray 324,520 1.6%
Ken Ford 35,971 0.2%
Peter Armitage as a Partner in Key Capital Partners, indirectly 
has a beneficial interest in their 24.0%.
No Director holds any share options but the Director EMI plan 
is outlined in the Remuneration Committee Report on pages 
26–27.
The middle market price of the Company’s Ordinary shares 
on 29th February 2016 was 131.5 pence and the range since 
IPO was 131.5 pence to 147.0 pence, with an average price of 
142.0 pence. 31
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Gear4music (Holdings) plc 
Annual Report and Accounts 2016
Research and development
The Group capitalised £932,000 during the year (FY15: 
£551,000) of software development costs relating to the 
in-house e-commerce software platform.
Financial instruments
The Group’s policy and exposure to financial instruments is 
set out in note 17.
Qualifying third-party indemnity
The Company has provided an indemnity for the benefit of its 
current Directors which is a qualifying third-party indemnity 
provision for the purpose of the Companies Act 2006.
Employee involvement
It is the Group’s policy to involve employees in its progress, 
development and performance. Applications for employment 
by disabled persons are fully considered, bearing in mind the 
respective aptitudes and abilities of the applicants concerned. 
The Group is a committed equal opportunities employer and 
has engaged employees with broad backgrounds and skills. It 
is the policy of the Group that the training, career 
development and promotion of a disabled person should, as 
far as possible, be identical to that of a person who is 
fortunate enough not to suffer from a disability. In the event of 
members of staff becoming disabled, every effort is made to 
ensure that their employment with the Group continues.
Donations
During the year ended 29th February 2016 the Group made 
donations of £nil (FY15: £nil).
Supplier payment policy and practice
The Group does not operate a standard code in respect of 
payments to suppliers. The Group agrees terms of payment 
with suppliers at the start of business and then makes 
payments in accordance with contractual and other legal 
obligations.
The number of creditor days outstanding at 29th February 
2016 was 30 days (FY15: 33 days). This is a weighted 
average by invoice value, with reference to actual invoice and 
payment dates.
Disclosure of information to auditor
The Directors who held office at the date of approval of this 
Directors’ Report confirm that, so far as they are aware, there 
is no relevant audit information of which the Company’s 
auditor is unaware and each Director has taken all the steps 
that he or she ought to have taken to make himself or herself 
aware of any relevant audit information and to establish that 
the Company’s auditor is aware of that information.
Auditor
A resolution for the reappointment of KPMG LLP as auditor of 
the Company is to be proposed at the forthcoming Annual 
General Meeting.
By order of the Board
Chris Scott 
Chief Financial Officer
5th July 2016 32
Gear4music (Holdings) plc 
Annual Report and Accounts 2016
Statement of Directors’ Responsibilities
The directors are responsible for preparing the Strategic 
Report, the Directors’ Report and the Group and parent 
company financial statements in accordance with applicable 
law and regulations. 
Company law requires the directors to prepare group and 
parent company financial statements for each financial year. 
As required by the AIM Rules of the London Stock Exchange 
they are required to prepare the Group financial statements in 
accordance with IFRSs as adopted by the EU and applicable 
law and have elected to prepare the parent company financial 
statements in accordance with UK Accounting Standards and 
applicable law (UK Generally Accepted Accounting Practice), 
FRS 102 The Financial Reporting Standard applicable in the 
UK and Republic of Ireland. 
Under company law the directors must not approve the 
financial statements unless they are satisfied that they give a 
true and fair view of the state of affairs of the Group and 
parent company and of their profit or loss for that period. In 
preparing each of the Group and parent company financial 
statements, the directors are required to: 
• select suitable accounting policies and then apply them 
consistently; 
• make judgements and estimates that are reasonable and 
prudent; 
• for the group financial statements, state whether they have 
been prepared in accordance with IFRSs as adopted by 
the EU; 
• for the parent company financial statements, state whether 
applicable UK Accounting Standards have been followed, 
subject to any material departures disclosed and explained 
in the financial statements; and 
• prepare the financial statements on the going concern 
basis unless it is inappropriate to presume that the Group 
and the parent company will continue in business.
Statement of Directors’ Responsibilities in respect of the  
Strategic Report, the Directors’ Report and the Financial Statements.
The directors are responsible for keeping adequate 
accounting records that are sufficient to show and explain the 
parent company’s transactions and disclose with reasonable 
accuracy at any time the financial position of the parent 
company and enable them to ensure that its financial 
statements comply with the Companies Act 2006. They have 
general responsibility for taking such steps as are reasonably 
open to them to safeguard the assets of the Group and to 
prevent and detect fraud and other irregularities. 
The directors are responsible for the maintenance and 
integrity of the corporate and financial information included on 
the company’s website. Legislation in the UK governing the 
preparation and dissemination of financial statements may 
differ from legislation in other jurisdictions. 33
Financial 
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Corporate 
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Report
Gear4music (Holdings) plc 
Annual Report and Accounts 2016
We have audited the financial statements of Gear4music (Holdings) plc for the year ended 29th February 2016 set out on 
pages 34 to 67. The financial reporting framework that has been applied in the preparation of the group financial statements is 
applicable law and International Financial Reporting Standards (IFRSs) as adopted by the EU. The financial reporting 
framework that has been applied in the preparation of the parent company financial statements is applicable law and UK 
Accounting Standards (UK Generally Accepted Accounting Practice) including FRS 102 The Financial Reporting Standard 
applicable in the UK and Republic of Ireland. 
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies 
Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are 
required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not 
accept or assume responsibility to anyone other than the company and the company’s members, as a body, for our audit work, 
for this report, or for the opinions we have formed. 
Respective responsibilities of directors and auditor 
As explained more fully in the Directors’ Responsibilities Statement set out on page 32, the directors are responsible for the 
preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit, 
and express an opinion on, the financial statements in accordance with applicable law and International Standards on Auditing 
(UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditor. 
Scope of the audit of the financial statements 
A description of the scope of an audit of financial statements is provided on the Financial Reporting Council’s website at  
www.frc.org.uk/auditscopeukprivate. 
Opinion on financial statements 
In our opinion: 
• the financial statements give a true and fair view of the state of the Group’s and of the parent company’s affairs as at 
29th February 2016 and of the Group’s loss for the year then ended; 
• the group financial statements have been properly prepared in accordance with IFRSs as adopted by the EU; 
• the parent company financial statements have been properly prepared in accordance with UK Generally Accepted 
Accounting Practice; 
• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006. 
 
Opinion on other matter prescribed by the Companies Act 2006 
In our opinion the information given in the Strategic Report and the Directors’ Report for the financial year for which the 
financial statements are prepared is consistent with the financial statements. 
Matters on which we are required to report by exception 
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in 
our opinion: 
• adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been 
received from branches not visited by us; or 
• the parent company financial statements are not in agreement with the accounting records and returns; or 
• certain disclosures of directors’ remuneration specified by law are not made; or 
• we have not received all the information and explanations we require for our audit. 
John Pass 
(Senior Statutory Auditor) 
for and on behalf of KPMG LLP, Statutory Auditor 
Chartered Accountants 
1 Sovereign Square
Sovereign Street
Leeds
LS1 4DA
5th July 2016
 
Independent Auditor’s Report to the Members of Gear4music 34
Gear4music (Holdings) plc 
Annual Report and Accounts 2016
Consolidated Statement of Profit and Loss and Comprehensive Income
For the year ended 29th February 2016
Note
Year ended 
29 February 
2016 
£000
Year ended 
28 February 
2015 
£000
Revenue 35,489 24,240
Cost of sales (26,303) (17,483)
Gross profit 9,186 6,757
Administrative expenses before exceptional items 3,4 (8,291) (6,381)
Administrative expenses – exceptional items 3,4 (606) (165)
Administrative expenses 3,4 (8,897) (6,546)
Operating profit 3 289 211
Financial expenses 6 (283) (1,008)
Profit/(loss) before tax 6 (797)
Taxation 7 (49) 111
Loss and other comprehensive income for the year (43) (686)
Basic and diluted loss per share 5 (0.2p)    (5.4p)
The Group has no recognised gains or losses other than those included in the profit and loss account above.
The accompanying notes form an integral part of the financial statements.  35
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Gear4music (Holdings) plc 
Annual Report and Accounts 2016
 Note 
Year ended 
29 February 
2016 
£000
Year ended 
28 February 
2015 
£000
Non-current assets
Property, Plant and Equipment 8 1,239 991
Intangible assets 9 3,238 2,764
4,477 3,755
Current assets
Inventories 12 6,906 5,326
Trade and other receivables 13 740 216
Cash and cash equivalents 14 3,548 916
11,194 6,458
Total assets 15,671 10,213
Current liabilities
Other interest-bearing loans and borrowings 15 (834) (1,320)
Trade and other payables 16 (5,188) (4,522)
(6,022) (5,842)
Non-current liabilities
Other interest-bearing loans and borrowings 15 (127) (4,570)
Other payables 16 (59) (35)
Deferred tax liability 11 (104) (55)
(290) (4,660)
Total liabilities (6,312) (10,502)
Net assets/(liabilities) 9,359 (289)
Equity
Share capital 18 2,016 1,266
Share premium 18 8,933 –
Retained earnings 18 (1,590) (1,555)
Total equity 9,359 (289)
The notes 1 to 22 form part of these financial statements.
These financial statements were approved by the Board of Directors on 5th July 2016 and were signed on its behalf by:
Andrew Wass 5th July 2016
Director
Chris Scott 5th July 2016
Director
Company registered number: 07786708 
Consolidated Statement of Financial Position 
As at 29th February 2016 36
Gear4music (Holdings) plc 
Annual Report and Accounts 2016
Consolidated Statement of Changes in Equity 
For the year ended 29th February 2016
Note
Year ended 
29 February 
2016 
£000
Year ended 
28 February 
2015 
£000
Share capital
Opening 1,266 1,266
Issue of share capital 750 –
At 29 February 2016 18 2,016 1,266
Share premium
Opening – –
Issue of shares 9,255 –
Share issue costs (322) –
At 29 February 2016 18 8,933 –
Retained earnings
Previous periods (1,555) (869)
Share based payment charge 8 –
Loss for the year (43) (686)
At 29 February 2016 18 (1,590) (1,555)
Total equity 18 9,359 (289) 37
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Corporate 
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Strategic 
Report
Gear4music (Holdings) plc 
Annual Report and Accounts 2016
 Note 
Year ended 
29 February 
2016 
£000
Year ended 
28 February 
2015 
£000
Cash flows from operating activities
Loss for the year (43) (686)
Adjustments for:
Depreciation and amortisation 3,8,9 786 466
Financial expense 6 280 878
Loss/(profit) on sales of property, plant and equipment 3 1 (9)
Taxation 7 49 (111)
1,073 538
Increase in trade and other receivables (524) (59)
Increase in inventories (1,581) (1,104)
Increase in trade and other payables 689 2,209
Decrease in provisions – (34)
Share-based payment charge 8 –
(335) 1,550
Tax paid – –
Net cash from operating activities (335) 1,550
Cash flows from investing activities
Proceeds from sale of property, plant and equipment 1 10
Acquisition of property, plant and equipment (578) (412)
Capitalised development expenditure (932) (551)
Net cash from investing activities (1,509) (953)
Cash flows from financing activities
Proceeds from pre-IPO issue of shares 32 –
Net proceeds from IPO 8,351 –
Proceeds from new borrowings 17 253 213
Interest paid (130) (185)
Repayment of redemption premium on loan notes (602) –
Repayment of loan notes (2,484) –
Repayment of other borrowings (755) (300)
Payment of finance lease liabilities (189) (117)
Net cash from financing activities 4,476 (389)
Net increase in cash and cash equivalents 2,632 208
Cash and cash equivalents at beginning of year 916 708
Cash and cash equivalents at end of year 14 3,548 916
Consolidated Statement of Cash Flows 
For the year ended 29th February 2016 38
Gear4music (Holdings) plc 
Annual Report and Accounts 2016
Notes (Forming Part of the Financial Statements)
For the year ended 29th February 2016
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 subsidiary (together referred to as the ‘Group’). The 
parent company financial statements present information about the Company as a separate entity and not about its group.
The principal activity of the Group is the retail of musical instruments and equipment. The registered office of the Company 
and all subsidiaries is Kettlestring Lane, Clifton Moor, York, YO30 4XF. The registered number of the Company is 07786708.
1 Accounting policies
1.1 Basis of preparation 
The financial statements have been prepared in accordance with the AIM rules for Companies, and apply the recognition, 
measurement and disclosure requirements of International Financial Reporting Standards as adopted by the EU (‘Adopted 
IFRSs’), and make amendments where necessary in order to comply with Companies Act 2006. The Company has elected to 
prepare its parent company financial statements in accordance with FRS 102; these are presented on pages 58 to 67. 
The Group’s accounting policies are set out below and have, unless otherwise stated, been applied consistently in the 
consolidated financial statements. Subjective judgements made by the Directors in the application of these accounting policies 
that have significant effect on the financial statements are considered in note 22. 
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 since the last annual consolidated financial statements as 
presented in the Admission document which is available on the Group’s investor website.
Accounting period
The financial statements presented cover the years ended 29th February 2016 and 28th February 2015.
Measurement convention
The financial statements have been prepared on the historical cost basis.
1.2 Adoption of new and revised standards
The following Adopted IFRSs have been issued but have not been applied by the Group in this financial information. Their 
adoption is not expected to have a material effect on the financial information unless otherwise indicated:
• IFRS 9 Financial Instruments (effective for periods beginning on or after 1st January 2018, not yet endorsed by the EU);
• IFRS 15 Revenue from Contracts with Customers (effective date 31st December 2017, not yet endorsed by the EU). 
Management are currently assessing the impact of the standard in relation to commission income;
• Clarification of Acceptable Methods of Depreciation and Amortisation (Amendments to IAS 16 and IAS 38) (effective date 
31st December 2016);
• Accounting for Acquisitions of Interests in Joint Operations (Amendments to IFRS 11) (effective date 31st December 2016);
• IFRS 14 Regulatory Deferral Accounts (effective date 31st December 2016); and
• IFRS 16 changes fundamentally the accounting for leases by lessees. It eliminates the current IAS 17 dual accounting 
model, which distinguishes between on-balance sheet finance leases and off-balance sheet operating leases and, instead, 
introduces a single, on-balance sheet accounting model that is similar to current finance lease accounting. Operating leases 
disclosed in note 20 are expected to come on balance sheet once this standard is adopted.
Transition to FRS 102
The Board considers that it’s in the best interests of the Group to adopt FRS 102, the financial reporting standard applicable in 
the UK and Ireland, in the Company financial statements for its financial year commencing 1st March 2015.
1.3 Going concern
The Group’s business activities and position in the market are described in the Strategic Report. The Directors believe that 
given the Group has significant financial resources, and has demonstrated good growth in revenue and underlying profitability 
from operating activities, the Group is well placed to manage its business risks. Having duly considered 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. Further relevant details are contained in the Strategic Report on pages 1 to 23. 39
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Gear4music (Holdings) plc 
Annual Report and Accounts 2016
1 Accounting policies continued
1.4 Basis of consolidation
Subsidiaries
Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to, variable 
returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. In 
assessing control, the Group takes into consideration potential voting rights that are currently exercisable. The acquisition date 
is the date on which control is transferred to the acquirer. The financial statements of subsidiaries are included in the 
consolidated financial statements from the date that control commences until the date that control ceases.
Transactions eliminated on consolidation
Intra-Group balances and transactions, and any unrealised income and expenses arising from intra-Group transactions,  
are eliminated.
1.5 Foreign currency
International transactions that are denominated in foreign currencies are recorded in the respective foreign currencies, and 
translated into the functional currency of the Group, Sterling, at the exchange rate ruling at the date of the transaction. 
Translational accounting gains and losses are recognised in the income statement in the period they arise.
Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are retranslated to the functional 
currency at the exchange rate ruling at that date. Foreign exchange differences arising on translation are recognised in the 
income statement. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are 
translated using the exchange rate at the date of the transaction. 
Functional currency
The consolidated financial statements are presented in Sterling which is the Group’s functional currency.
1.6 Classification of financial instruments issued by the Group
Following the adoption of IAS 32, financial instruments issued by the Group are treated as equity only to the extent that they 
meet the following two conditions: 
(a) they include no contractual obligations upon the Company (or Group as the case may be) to deliver cash or other financial 
assets or to exchange financial assets or financial liabilities with another party under conditions that are potentially 
unfavourable to the Company (or Group); and 
(b) where the instrument will or may be settled in the Company’s own equity instruments, it is either a non-derivative that includes 
no obligation to deliver a variable number of the Company’s own equity instruments or is a derivative that will be settled by the 
Company exchanging a fixed amount of cash or other financial assets for a fixed number of its own equity instruments.
To the extent that this definition is not met, the proceeds of issue are classified as a financial liability. Where the instrument so 
classified takes the legal form of the Company’s own shares, the amounts presented in this financial information for called up 
share capital and share premium account exclude amounts in relation to those shares. 
1.7 Non-derivative financial instruments
Non-derivative financial instruments comprise investments in trade and other receivables, cash and cash equivalents, loans 
and borrowings, and trade and other payables.
Trade and other receivables
Trade and other receivables are recognised initially at fair value. Subsequent to initial recognition they are measured at 
amortised cost using the effective interest method, less any impairment losses.
Trade and other payables
Trade and other payables are recognised initially at fair value. Subsequent to initial recognition they are measured at amortised 
cost using the effective interest method.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits. Bank overdrafts that are repayable on demand and 
form an integral part of the Group’s cash management are included as a component of cash and cash equivalents for the 
purpose only of the cash flow statement.
Interest-bearing borrowings
Interest-bearing borrowings are recognised initially at fair value less attributed transaction costs. Subsequent to initial 
recognition, interest-bearing borrowings are stated at amortised cost using the effective interest method.  40
Gear4music (Holdings) plc 
Annual Report and Accounts 2016
Notes (Forming Part of the Financial Statements) continued
For the year ended 29th February 2016
1 Accounting policies continued
1.8 Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses.
Where parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of 
property, plant and equipment.
Depreciation is charged to the income statement on either a straight-line basis or a reducing balance basis over the estimated 
useful lives of each part of an item of property, plant and equipment. The estimated useful lives are as follows:
• Plant and equipment 20-25% on reducing balance
• Fixtures and fittings 20-25% on reducing balance
• Motor vehicles  25% on reducing balance
• Computer equipment 3-5 years straight line
Depreciation methods, useful lives and residual values are reviewed at each balance sheet date. 
Leases in which the Group assumes substantially all the risks and rewards of ownership of the leased asset are classified as 
finance leases. Leased assets acquired by way of finance lease are stated at an amount equal to the lower of their fair value 
and the present value of the minimum lease payments at inception of the lease, less accumulated depreciation and less 
accumulated impairment losses. Lease payments are accounted for as described below in 1.16.
1.9 Business combinations
All business combinations are accounted for by applying the acquisition method. Business combinations are accounted for 
using the acquisition method as at the acquisition date, which is the date on which control is transferred to the Group. 
The Group measures goodwill at the acquisition date as:
• the fair value of the consideration transferred; plus 
• the fair value of the existing equity interest in the acquiree; less
• the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed. 
Costs related to the acquisition are expensed as incurred.
Any contingent consideration payable is recognised at fair value at the acquisition date. Subsequent changes to the fair value 
of the contingent consideration are recognised in profit or loss.
Goodwill impairment testing
Goodwill is not amortised but tested annually for impairment. For the purpose of impairment testing, the Goodwill is allocated 
to cash-generating units, or (‘CGU’). Subject to an operating segment ceiling test, for the purposes of Goodwill impairment 
testing, CGUs to which Goodwill has been allocated are aggregated so that the level at which impairment is tested reflects the 
lowest level at which Goodwill is monitored for internal reporting purposes. 
1.10 Intangible assets 
Software platform
Costs that are directly attributable to the creation of identifiable software, which meet the development asset recognition 
criteria as laid out in IAS 38 ‘Intangible Assets’ are recognised as intangible assets.
Direct costs include consultancy and development costs, and exclude maintenance costs that are recognised as an expense 
as incurred.
Software development assets are held at historic cost less accumulated amortisation and impairment, and are amortised over 
their useful economic life.
 
Other intangible assets
Expenditure on internally generated Goodwill and brands is recognised in the income statement as an expense as incurred.
Other intangible assets that are acquired by the Group are stated at cost less accumulated amortisation and less accumulated 
impairment losses. 41
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Gear4music (Holdings) plc 
Annual Report and Accounts 2016
1 Accounting policies continued
1.10 Intangible assets continued
Amortisation
Amortisation is charged to the income statement on a straight-line basis over the estimated useful lives of intangible assets 
from the date they are available for use. The estimated useful lives are as follows:
• Brand   10 years; and
• Software Platform  3-8 years
1.11 Inventories
Inventories are stated at the lower of cost and net realisable value (‘NRV’). Cost is based on the first-in first-out principle and 
includes expenditure incurred in acquiring the inventories and other costs in bringing them to their existing location and 
condition. Stock is neither fashionable nor perishable.
A provision is made in respect of inventories as follows:
• 100% against returns stock 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 for the expected product loss on dealing with returns stock.
1.12 Impairment excluding inventories and deferred tax assets
Financial assets (including receivables)
A financial asset not carried at fair value through profit or loss is assessed at each reporting date to determine whether there is 
objective evidence that it is impaired. A financial asset is impaired if objective evidence indicates that a loss event has 
occurred after the initial recognition of the asset, and that the loss event had a negative effect on the estimated future cash 
flows of that asset that can be estimated reliably.
An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its 
carrying amount and the present value of the estimated future cash flows. The effect of discounting is not material. When a 
subsequent event causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed through 
profit or loss.
Non-financial assets
The carrying amounts of the Group’s non-financial assets, other than inventories and deferred tax assets, are reviewed at each 
reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s 
recoverable amount is estimated. For Goodwill, the recoverable amount is estimated each year at the same time.
The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. 
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate 
that reflects current market assessments of the time value of money and the risks specific to the asset. 
For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of 
assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or 
groups of assets (the “cash-generating unit”). The Goodwill acquired in a business combination, for the purpose of impairment 
testing, is allocated to cash-generating units, or (‘CGU’). Subject to an operating segment ceiling test, for the purposes of 
Goodwill impairment testing, CGUs to which Goodwill has been allocated are aggregated so that the level at which impairment 
is tested reflects the lowest level at which Goodwill is monitored for internal reporting purposes. Goodwill acquired in a 
business combination is allocated to groups of CGUs that are expected to benefit from the synergies of the combination.
An impairment loss would be recognised if the carrying amount of an asset or its CGU exceeds its estimated recoverable 
amount. No impairments have been recognised in the periods presented.
1.13 Employee benefits
Defined contribution plans
A defined contribution pension plan is a post-employment benefit plan under which the Group pays fixed contributions into a 
separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined 
contribution pension plans are recognised as an expense in the income statement in the periods during which services are 
rendered by employees.  42
Gear4music (Holdings) plc 
Annual Report and Accounts 2016
Notes (Forming Part of the Financial Statements) continued
For the year ended 29th February 2016
1 Accounting policies continued
1.13 Employee benefits continued
Share-based payments
The Group operates share option plans for qualifying employees of the Group. The fair value of these shares is determined 
using the Black-Scholes option pricing model and is expensed in the Statement of Profit and Loss and Comprehensive Income 
as an employee expense on a straight-line basis over the vesting period after allowing for an estimate of the number of shares 
that are expected to vest with a corresponding increase in equity. The level of vesting is reviewed annually and the expense 
adjusted to reflect any changes in estimates.
1.14 Provisions
A provision is recognised in the balance sheet when the Group has a present legal or constructive obligation as a result of a 
past event, that can be reliably measured and it is probable that an outflow of economic benefits will be required to settle the 
obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects risks specific 
to the liability.
1.15 Revenue
Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed 
to the buyer, usually on dispatch of the goods. Revenue is measured at the fair value of the consideration received, including 
freight charges and duty where applicable, excluding discounts, rebates, VAT and other sales taxes or duty. Carriage income 
and warranty sales are recognised on recognition of the related product sales. Returns are dealt with on receipt of the product 
into the warehouse, which triggers an automatic credit.
In the year ended 29th February 2016 the Group started to offer retail point of sale credit on orders over £250, through an 
agreement with an external credit provider. The Group does not retain any credit risk and commissions are recognised on 
recognition of the credit sale. In the year ended 29th February 2016 this income totalled £37,900.
1.16 Expenses
Operating lease payments
Payments made under operating leases are recognised in the income statement on a straight-line basis over the term of the 
lease. Lease incentives received are recognised in the income statement as an integral part of the total lease expense. 
Finance lease payments
Minimum lease payments are apportioned between the finance charge and the reduction of the outstanding liability. The 
finance charge is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the 
remaining balance of the liability.
Exceptional items
Items which are significant by virtue of their size or nature and which are considered to be non-recurring are classified as 
exceptional operating items. Such items, which include for instance the costs of closing or opening premises, costs of 
significant restructurings and profits or losses or impairments made, are included within the appropriate consolidated income 
statement category but are highlighted separately in the notes to the financial information. Exceptional operating items are 
excluded from the profit measures used by the Board to monitor and measure the underlying performance of the Group.
Government and other forms of grant
Government and other grants from third parties are recognised where there is reasonable assurance that the grant will be 
received and all attached conditions will be complied with. When the grant relates to an expense item, it is recognised as a 
reduction in the costs incurred, on a systematic basis over the periods that the costs, for which it is intended to compensate, 
are expensed. Where the grant relates to an asset, it is recognised on a systematic basis over the UEL of the related asset.
Financing income and expenses
Financing expenses comprise interest payable and finance leases recognised in profit or loss using the effective interest 
method, unwinding of the discount on provisions, and net foreign exchange losses that are recognised in the income statement 
(see foreign currency accounting policy). Financing income comprises interest receivable on funds invested and net foreign 
exchange gains. 
Interest income and interest payable is recognised in profit or loss as it accrues, using the effective interest method.  43
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Gear4music (Holdings) plc 
Annual Report and Accounts 2016
1 Accounting policies continued
1.17 Taxation
Tax on the profit or loss for the year comprises current and deferred tax.
Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or 
substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.
Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for financial reporting 
purposes and the amounts used for taxation purposes. A temporary difference on the initial recognition of goodwill is not 
provided for. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying 
amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which 
the temporary difference can be utilised.
 
1.18 Segmental Reporting
An operating segment is a component of the Group that engages in business activities from which it may earn revenues and 
incur expenses, including revenues and expenses that relate to transactions with any of the Group’s other components. The 
Group’s Chief Operating Decision Maker has been identified as the Board of Directors. 
2 Segmental reporting
The Group’s revenue and profit was derived from its principal activity which is the sale of musical instruments and equipment. 
The Group operates from a single location in York, all sales and marketing activities and warehouse and distribution activities 
occur here. Sales made outside the UK are dispatched from a single warehouse. 
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 
29 February 
2016 
£000
Year ended 
28 February 
2015 
£000
UK 26,016 18,763
Europe 9,473 5,477
35,489 24,240
Revenue by Product category
 
Year ended 
29 February 
2016 
£000
Year ended 
28 February 
2015 
£000
Other-brand products 24,842 16,323
Own-brand products 9,164 6,901
Other 1,483 1,106
35,489 24,240 44
Gear4music (Holdings) plc 
Annual Report and Accounts 2016
Notes (Forming Part of the Financial Statements) continued
For the year ended 29th February 2016
3 Expenses 
Included in profit/loss are the following:
 
Year ended 
29 February 
2016 
£000
Year ended 
28 February 
2015 
£000
Depreciation of tangible fixed assets 328 222
Amortisation of intangible assets 458 244
Amortisation of government grants 35 15
Loss/(profit) on disposal of property, plant and equipment 1 (9)
Rentals under operating leases – land and buildings 262 291
Rentals under operating leases – plant and machinery 16 18
Auditor remuneration – audit of financial statements 28 16
Auditor remuneration – other 140 119
Exceptional items:
Exceptional deal costs 606 165
Exceptional costs in both years relate to professional fees incurred in relation to the Group’s admission to the Alternative 
Investment Market (‘AIM’) on 3rd June 2015.
Reconciliation of operating profit to adjusted earnings before interest, taxation, depreciation and amortisation (‘EBITDA’) and 
adjusted profit before tax:
 
Year ended 
29 February 
2016 
£000
Year ended 
28 February 
2015 
£000
Operating profit 289 211
Adjusted for: Exceptional costs within operating expenses 606 165
Underlying Operating profit 895 376
Adjusted for: Amortisation and depreciation 786 466
Adjusted EBITDA 1,681 842
Adjusted for:
Amortisation and depreciation (786) (466)
Finance expenses (283) (1,008)
Adjusted PBT 612 (632)
4 Staff numbers and costs
The average number of persons employed (full time equivalents) by the Group (including Directors) during the period,  
analysed by category, was as follows: 
 
Year ended 
29 February 
2016 
Number
Year ended 
28 February 
2015 
Number
Administration 59 42
Selling and Distribution 79 61
138 103
The aggregate payroll costs of these persons were as follows:
 
Year ended 
29 February 
2016 
£000
Year ended 
28 February 
2015 
£000
Wages and salaries 2,546 1,969
Share-based payments (see note 19) 8 –
Social security costs 198 161
Contributions to defined contribution plans 13 2
Amounts paid to third parties in respect of Director’s service 32 –
2,797 2,132 45
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Gear4music (Holdings) plc 
Annual Report and Accounts 2016
4 Staff numbers and costs continued
Directors’ remuneration
 
Year ended 
29 February 
2016 
£000
Year ended 
28 February 
2015 
£000
Directors remuneration 451 395
Company contributions to money purchase pension schemes 4 2
Amounts paid to third parties in respect of Directors’ service 32 –
487 397
There are four directors (2015: 1) for whom retirement benefits are accruing under a money purchase pension scheme.
The aggregate remuneration of the highest paid director was £179,000 (2015: £157,000), including Company pension 
contributions of £1,680 (2015: £1,680) were made to a money purchase scheme on their behalf.
5 Earnings per share
Diluted loss 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 all dilutive potential Ordinary shares into Ordinary shares.
 
Year ended 
29 February 
2016 
Year ended 
28 February 
2015
Loss attributable to equity shareholders of the parent (£000) (43) (686)
Basic weighted average number of shares 18,236,293 12,656,250
Dilutive potential Ordinary shares 25,226    25,960
Diluted weighted average number of shares 18,261,519 12,682,210
Basic loss per share (0.2p) (5.4p)
Diluted loss per share (0.2p) (5.4p)
6 Finance expense
 
Year ended 
29 February 
2016 
£000
Year ended 
28 February 
2015 
£000
Finance expense
Bank interest 26 52
Loan note interest measured at amortised cost 233 804
Finance leases 21 21
Net foreign exchange loss 3 131
Total finance expense 283 1,008
Loan note interest comprised £233,000 (2015: £792,000) due to Key Capital Partners, the Company’s private equity investor, 
and in 2015 included £12,000 due to Andrew Wass on loan notes that were later repaid in full in that financial year.
On 8th June 2015 the Group paid £4,469,477 to Key Capital Partners, of which £3,169,477 was settled in cash and £1,300,000 
in equity, in full and final settlement of the loan notes and accumulated interest due. The fair value of the equity is considered 
to be equal to the value of the loan and therefore no gain or loss arose on this transaction.
  46
Gear4music (Holdings) plc 
Annual Report and Accounts 2016
Notes (Forming Part of the Financial Statements) continued
For the year ended 29th February 2016
7 Taxation
Recognised in the income statement
 
Year ended 
29 February 
2016 
£000
Year ended 
28 February 
2015 
£000
Current tax expense
UK corporation tax – –
Adjustments for prior periods – –
Current tax expense/(credit) – –
Deferred tax expense
Origination and reversal of temporary differences 188 (124)
Deferred tax rate change impact (13) 6
Adjustments for prior periods (126) 7
Deferred tax expense/(credit) 49 (111)
Total tax expense/(credit) 49 (111)
The corporation tax rate applicable to the Company was 20% in the years ending 29th February 2016 and 28th February 2015. 
Reductions in the UK corporation tax rate from 23% to 21% (effective from 1st April 2014) and 20% (effective from 1st April 
2015) were substantively enacted on 2nd July 2013. Further reductions to 19% (effective from 1st April 2017) and to 18% 
(effective 1st April 2020) were substantively enacted on 26th October 2015. This will reduce the Company’s future current tax 
charge accordingly. The deferred tax asset at 29th February 2016 has been calculated based on these rates.
Reconciliation of effective tax rate
 
Year ended 
29 February 
2016 
£000
Year ended 
28 February 
2015 
£000
Loss for the period (43) (686)
Total tax (charge)/credit (49) 111
Profit/(loss) excluding taxation 6 (797)
Current tax at 20.00% (2015: 21.17%)
Tax using the UK corporation tax rate for the relevant period: 1 (168)
Non-deductible expenses 115 44
Rate change   59 6
Adjustments relating to prior year – deferred tax (126) 7
Total tax charge/(credit) 49 (111) 47
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Gear4music (Holdings) plc 
Annual Report and Accounts 2016
8 Property, plant and equipment 
Plant and 
equipment 
£000
Fixtures and 
fittings 
£000
Motor 
vehicles 
£000
Computer 
equipment 
£000
Total 
£000
Cost
At 1 March 2014 205 886 8 202 1,301
Additions 8 366 – 37 411
Disposals (20) – (8) – (28)
Balance at 28 February 2015 and 1 March 2015 193 1,252 – 239 1,684
Additions 270 218 – 90 578
Disposals – (6) – – (6)
Balance at 29 February 2016 463 1,464 – 329 2,256
Depreciation and impairment
At 1 March 2014 64 282 7 145 498
Depreciation charge for the year 38 155 – 29 222
Disposals (20) – (7) – (27)
Balance at 28 February 2015 and 1 March 2015 82 437 – 174 693
Depreciation charge for the period 98 185 – 45 328
Disposals – (4) – – (4)
Balance at 29 February 2016 180 618 – 219 1,017
Net book value as at 29 February 2016 283 846 – 110 1,239
Net book value as at 28 February 2015 111 815 – 65 991
Leased assets
At 29th February 2016 the net carrying amount of leased tangible fixed assets was £423,000 (2015: £269,000), and the 
accumulated depreciation against leased assets was £284,000 (2015: £172,000).
Security
The Group’s bank borrowings are secured by fixed and floating charges over the Group’s assets.
9 Intangible assets
Goodwill 
£000
Software 
platform 
£000
Brand 
£000
Total 
£000
Cost
At 1 March 2014 417 1,884 564 2,865
Additions – 551 – 551
Balance at 28 February 2015 and 1 March 2015 417 2,435 564 3,416
Additions – 932 – 932
Balance at 29 February 2016 417 3,367 564 4,348
Amortisation
At 1 March 2014 – 295 113 408
Amortisation for the year – 188 56 244
Balance at 28 February 2015 and 1 March 2015 – 483 169 652
Amortisation for the year – 401 57 458
Balance at 29 February 2016 – 884 226 1,110
Net book value as at 29 February 2016 417 2,483 338 3,238
Net book value as at 28 February 2015 417 1,952 395 2,764
The amortisation charge is recognised in Administrative expenses in the profit and loss account. 48
Gear4music (Holdings) plc 
Annual Report and Accounts 2016
Notes (Forming Part of the Financial Statements) continued
For the year ended 29th February 2016
9 Intangible assets continued
Impairment testing
Goodwill arose on the acquisition of the entire share capital of Gear4music Limited (formerly known as Red Submarine 
Limited) on 19th March 2012. The Goodwill balance is denominated in Sterling: 
 
Year ended 
29 February
 2016 
£000
Year ended 
28 February 
2015 
£000
Gear4music Limited (formerly known as Red Submarine Limited) 417 417
Other intangible assets comprise the Gear4music brand name, and the proprietary software platform. 
A 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. 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 four-year forecast 
to 29th February 2020 was used to provide cash-flow projections that have been discounted at a pre-tax discount rate of 15%. 
The cash flow projections are subject to key assumptions in respect of sales growth, gross margin performance and overhead 
expenditure. Management has reviewed and approved the assumptions inherent in the model:
• Sales forecasts based on growth by geographical market, at a range of growth levels based on trends, in-house projects 
under way, and Management’s expectation, achieving overall growth comparable to the previous years.
• Product costs are assumed to nominally decrease and gross margins are forecast to nominally increase, from their 2016 
level over the four-year management forecast period.
• Wage increases are a function of recruitment and a person-by-person review of current staff, with a range of % increases. 
The return on marketing costs is expected to improve year on year.
No impairment loss was identified in the current year (2015: £nil). The valuations indicate significant headroom such that a 
terminal growth rate assumption has not been applied, and that any reasonably possible change in other key assumptions, 
including the discount rate, would not result in an impairment of the related goodwill or other intangible assets.
10 Investments in subsidiaries
The Company has the following investments in subsidiaries which are included in the consolidated results of the Group:
Subsidiaries
Country of 
incorporation
Registered 
number Year-end
Class of 
shares held Ownership
Gear4music Limited (formerly known as Red Submarine Limited) UK 03113256 28 February Ordinary 100%
Cagney Limited (formerly known as Gear4music Limited) UK 04493300 28 February Ordinary 100% via 
G4M Limited
Cagney Limited is a dormant company. 
11 Deferred tax assets and liabilities
Movement in deferred tax during the year 
 At 
 1 March 
2015 
£000
Recognised 
in income 
£000
 At 
29 February 
2016 
£000
Property, Plant and Equipment (345) (5) (350)
Short-term timing differences 290 (44) 246
(55) (49) (104)
Movement in deferred tax during the prior year 
At 
1 March 
2014 
£000
Recognised 
in income 
£000
At 
28 February 
2015 
£000
Property, Plant and Equipment (300) (45) (345)
Short-term timing differences 134 156 290
(166) 111 (55) 49
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Corporate 
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Gear4music (Holdings) plc 
Annual Report and Accounts 2016
12  Inventories
 
Year ended 
29 February 
2016 
£000
Year ended 
28 February 
2015 
£000
Finished goods 6,906 5,326
The cost of inventories recognised as an expense and included in cost of sales in the period amounted to £24.7m (£16.4m in 
the year ended 28th February 2015). 
Management has included a provision of £15,000 (28th February 2015: £8,200), 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.
13 Trade and other receivables
 
Year ended 
29 February 
2016 
£000
Year ended 
28 February 
2015 
£000
Trade receivables 581 84
Prepayments 159 132
740 216
Trade receivables includes cash lodged with payment providers and UK and international education and trade accounts. 
Standard terms are 30 days and over 90% of the ledger is within terms.
14 Cash and cash equivalents
 
Year ended 
29 February 
2016 
£000
Year ended 
28 February 
2015 
£000
Cash and cash equivalents per balance sheet 3,548 916
Cash and cash equivalents per cash flow statements 3,548 916
15 Other 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 
29 February 
2016 
£000
Year ended 
28 February 
2015 
£000
Non-current liabilities
Bank loans – 195
Finance lease liabilities 127 138
Loan notes – 4,237
127 4,570
Current liabilities 
Bank loans 642 1,202
Finance lease liabilities 192 118
834 1,320
Total liabilities 
Bank loans 642 1,397
Finance lease liabilities 319 256
Loan notes – 4,237
961 5,890 50
Gear4music (Holdings) plc 
Annual Report and Accounts 2016
Notes (Forming Part of the Financial Statements) continued
For the year ended 29th February 2016
15 Other interest-bearing loans and borrowings continued
Bank loans comprise a Trade Finance facility provided by the Group’s bankers, HSBC, and are secured by fixed and floating 
charges over the Group’s assets. The interest rate on import loans drawn under the Trade Finance agreement is 2.45% per 
annum over HSBC’s Sterling base rate, and on an overdraft if and when drawn, is 3.25% over base. Interest on import loans is 
paid at the maturity of the relevant loan. Interest on an overdraft would be paid monthly in arrears. The Trade Finance facilities 
are due for review and renewal on or before 18th July 2016. 
In the year ended 28th February 2015 ‘bank loans’ included a term loan made under the Enterprise Finance Guarantee 
Scheme (‘EFG’). This loan was settled in full in June 2015.
On 8th June 2015 the Group paid £4,469,477 to KCP the Group’s private equity investor, of which £3,169,477 was settled in 
cash and £1,300,000 in equity, in full and final settlement of the loan notes and accumulated interest due.
All borrowings are denominated in Sterling.
Finance lease liabilities
Finance lease liabilities are payable as follows:
Minimum lease 
payments at  
29 February  
2016  
£000
Interest at  
29 February  
2016  
£000
Principal at  
29 February  
2016  
£000
Less than one year 205 13 192
Between one and five years 132 5 127
337 18 319
Minimum lease 
payments at  
28 February  
2015  
£000
Interest at  
28 February  
2015  
£000
Principal at  
28 February  
2015  
£000
Less than one year 122 4 118
Between one and five years 145 7 138
267 11 256
Finance leases relate to assets located at the Head Office site in York, with net book values of £423,000 (2015: £262,000).
16 Trade and other payables
 
Year ended 
29 February 
2016 
£000
Year ended 
28 February 
2015 
£000
Current
Trade payables 3,718 3,231
Accruals and deferred income 956 1,072
Government grants 28 15
Other taxation and social security 486 204
5,188 4,522
Non-current
Government grants 59 35
                
Accruals at 29th February 2016 include £672,000 (2015: £585,000) of rent accrued but not payable as per the commercial 
agreement reached with the landlord and the legal form of the property lease. This accrual will unwind in future financial years, 
with £37,000 unwinding within one year as the cash paid begins to exceed the expense, and £635,000 will unwind in 
subsequent years to the end of the lease in June 2020.
Government grants being spread over the useful economic life of the associated asset, relate to Regional Growth Fund Grants 
towards the acquisition of various capital items. Grant conditions exist linked to job creation, and these criteria have been satisfied.
The Directors consider the carrying amount of trade and other payables approximates their fair value. 51
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17 Financial instruments 
Financial risk management
The Group’s activities expose it to a variety of financial risks: market risk (including foreign exchange risk and interest rate risk), 
credit risk and liquidity risk. The Group’s policies on the management of liquidity, credit, interest rate and foreign currency risks 
are set out below. 
The main purpose of the Group’s financial instruments which comprise of term loans, hire purchase, finance leases, cash and 
liquid resources, and various items arising directly from its operations, such as trade receivables and trade payables, is to 
finance the Group’s operations. 
Risk management framework
Regular reviews of strategic risks are performed by the Board.
Exposure to foreign currency exchange rates is considered during the budgeting and forecasting processes, and throughout 
the year.
General commercial risk is considered at an annual insurance review in conjunction with an independent broker, and the 
appropriate insurance policies put in place.
(a) Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due.
The Group’s policy is to ensure that it has sufficient facilities to cover its future funding requirements. Short-term flexibility is 
available through the existing trade and overdraft facilities and, at certain times of the year, the netting off of surplus funds.  
The carrying amounts are the amounts due if settled at the period end date. The contractual undiscounted cash flows include 
estimated interest payments over the life of these facilities. 
At 29th February 2016 the Group had £3.5m of cash and bank balances.
Contractual cash flows
Effective 
interest rate 
%
Face 
value and 
Carrying 
amount 
Year ended 
29 February 
2016 
£000
Total 
Year ended 
29 February 
2016 
£000
Within 
1 year 
£000
1-2 years 
£000 
2-5 years 
£000 
Over 5 years 
£000
Secured loans 3.0 642 645 645 – – –
Trade payables – 3,718 3,718 3,718 – – –
– 4,360 4,363 4,363 – – –
Contractual cash-flows
Effective 
interest rate 
%
Face value 
and Carrying 
amount 
Year ended 
28 February 
2015 
£000
Total 
Year ended 
28 February 
2015 
£000
Within 
1 year 
£000
1-2 years 
£000 
2-5 years 
£000 
Over 5 years 
£000
Secured loans 4.5 1,397 1,425 1,218 82 125 –
Trade payables – 3,231 3,231 3,231 – – –
Loan notes 6-20 4,237 5,357 5,357 – – –
– 8,865 10,013 9,806 82 125 – 52
Gear4music (Holdings) plc 
Annual Report and Accounts 2016
Notes (Forming Part of the Financial Statements) continued
For the year ended 29th February 2016
17 Financial instruments continued
(b) Credit risk
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 Group faces low credit risk as customers typically pay for their orders in full on shipment of the product. There are a small 
number of education accounts with schools and colleges that have 30-day terms (less than 2.3% of 2016 sales), and trade 
accounts (0.9% of 2016 sales). 
Trade debtors, including funds lodged with Amazon, PayPal and Digital River, totalled £175,000 on 29th February 2016  
(28th February 2015: £84,000). 
Credit risk in relation to cash held with financial institutions is considered low risk, given the credit rating of these organisations.
(c) Interest rate risk
The Group’s borrowings incur interest at variables rates of between 2.45% and 4.00% above base which exposes the Group to 
interest rate risk. Loans are with UK-based institutions, denominated in Sterling, and linked to the UK base rate.
At 29th February 2016 the Group had cash reserves of £3.5m and could utilise these funds to settle debts and mitigate any 
associated interest risk.
The Group’s policy, with regard to interest rate risk, is to monitor actual and anticipated changes in base rates, and if deemed 
appropriate seek out alternative financing proposals to ensure retaining a competitive rate.
Profile
At the balance sheet date, the interest rate profile of the Group’s interest-bearing financial instruments was:
 
Year ended 
29 February 
2016 
£000
Year ended 
28 February 
2015 
£000
Variable rate instruments  
Cash (3,548) (916)
Bank loans 642 1,397
(2,906) 481
Fixed rate instruments
Loan note payable – 4,237
Finance leases 319 256
319 4,493
Total net financial (assets)/liabilities (2,587) 4,974
Sensitivity analysis 
The calculations below assume that the change occurred at the balance sheet date and had been applied to risk exposures 
existing at that date. This analysis assumes that all other variables, in particular foreign currency rates, remains constant and 
considers the effect of financial instruments with variable interest rates. 
 
Year ended 
29 February 
2016 
£000
Year ended 
28 February 
2015 
£000
Impact on 
Closing 
Equity/Profit 
and Loss
Impact on 
Closing 
Equity/Profit 
and Loss
Increase of 0.5 basis points (1) (3)
Decrease of 0.5 basis points 1 3 53
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17 Financial instruments continued
(d) Foreign exchange risk
All borrowings are denominated in Sterling.
The Group sells into Europe in eight currencies including Sterling and Euros. In the year ended 29th February 2016, 26% 
(2015: 21%) of total sales were in non-Sterling currencies, of which 60% (2015: 68%) were in Euros. Where costs (including 
local tax liabilities) are incurred in these respective currencies, currency balances are retained and payments made in these 
currencies, thereby mitigating any associated currency loss. Surplus foreign currency holdings are reviewed on a daily basis 
and balances in excess of known liabilities are converted into Sterling, restricting the period between the transaction and the 
point of conversion, thereby reducing the transactional risk. 
The Group purchases own-branded instruments and equipment from the Far East, transacting in US Dollars. The lead time 
from committed order to receipt of stock is typically 12–14 weeks, during which time the Group bears currency risk. The Group 
also trades with one supplier (2015: two suppliers) on a trade credit basis with terms of 60 days. The Group has the trading 
platform ability and sufficient price flexibility to be able to pass on some adverse currency variances, and the Group generates 
enhanced margins on these products such that a proportion of these losses can be absorbed. The Group does not currently 
enter into forward contracts but reviews the situation, and would consider committing to such a position should it make 
commercial sense to do so.
 
Year ended 
29 February 
2016 
£000
Year ended 
28 February 
2015 
£000
Trade and Other Receivables
Sterling 211 71
Euro 125 13
Other European currencies 245 –
581 84
Cash and Cash Equivalents
Sterling 3,511 899
Euro 34 8
Other European currencies 3 9
3,548 916
Trade Payables
Sterling 3,454 2,595
Euro 66 –
US Dollar 198 636
3,718 3,231
Local sales tax
Sterling 126 31
Euro 221 117
Other European currencies 70 10
417 158
The Group’s cash and cash equivalents are not sensitive to foreign exchange variations as currencies held are held to the 
extent they are required to settle a liability in that currency, or they are converted into Sterling.
Non-Sterling trade receivables include cash lodged with payment providers that is promptly settled. International trade debtors 
represent an immaterial amount such that the Group is not sensitive to associated foreign exchange variations.
Euro funds are retained to settle Euro denominated payables. US Dollar denominated trade payables are not currently bought 
forward against, but only represent a small exposure that can be otherwise managed. 54
Gear4music (Holdings) plc 
Annual Report and Accounts 2016
Notes (Forming Part of the Financial Statements) continued
For the year ended 29th February 2016
17 Financial instruments continued
(e) Debt and Capital Management
The Group’s objective when managing capital, which is deemed to be share capital, is to maximise the return on net invested 
capital while maintaining its ongoing ability to operate and guarantee adequate returns for shareholders and benefits for other 
stakeholders, within a sustainable financial structure. 
The Group monitors its gearing ratio on a regular basis and makes appropriate decisions in light of the current economic 
conditions and strategic objectives of the Group.
There were no changes in the Group’s approach to capital management during the period. The Group does not have any 
externally imposed capital requirements. The funding requirements of the Group are met by cash raised on IPO and the 
utilisation of external borrowings.
Fair values and carrying values of financial instruments
A comparison by category of the book values and fair values of the financial assets and liabilities of the Group at  
29th February 2016 and 28th February 2015:
29 February 2016 28 February 2015
Book value 
£000
Fair value 
£000
Book value 
£000
Fair value 
£000
Trade and other receivables 740 740 216 216
Cash and cash equivalents 3,548 3,548 916 916
Bank loans (642) (642) (1,397) (1,397)
Finance lease liabilities (319) (337) (256) (267)
Trade and other payables (5,246) (5,246) (4,557) (4,557)
Loan notes – – (4,237) (4,237)
(1,919) (1,937) (9,315) (9,326)
The following summarises the major methods and assumptions used in estimating the fair values of financial instruments 
reflected in the table.
Trade and other payables and receivables
The fair value of these items are considered to be their carrying value as the impact of discounting future cash flows has been 
assessed as not material.
Cash and cash equivalents
The fair value of cash and cash equivalents is estimated as its carrying amount where the cash is repayable on demand. The 
fair value of short-term deposits is considered to be the carrying value as the balances are held in floating rate accounts where 
the interest rate is reset to market rates.
Long-term and short-term borrowings
The fair value of bank loans are recognised initially at fair value less attributable transaction costs. Subsequent to initial 
recognition, interest-bearing borrowings are stated at amortised cost using the effective interest method.
The fair value of the loan notes is calculated based on the expected future principal and interest cash flows discounted at the 
market rate of interest at the balance sheet date.
Derivative financial instruments
The Group does not routinely enter into Forward exchange contracts. The Fair Value of any material forward exchange 
contracts held would be calculated by Management based on external valuations received from the Group’s bankers. 
  55
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17 Financial instruments continued
Fair value hierarchy
The table below analyses financial instruments, measured at fair value, into a fair value hierarchy based on the valuation 
techniques used to determine fair value.
– Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
– Level 2: inputs other than quoted priced included within Level 1 that are observable for the asset or liability, either directly 
(i.e. as prices) or indirectly (i.e. derived from prices).
– Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
Level 1 
£000
Level 2 
£000
Level 3 
£000
29 February 2016
Bank loans – (642) –
– (642) –
28 February 2015
Bank loans – (1,397) –
Loan notes – (4,237) –
– (5,634) –
18 Share capital and reserves
 
Year ended
 29 February
 2016 
Number
Year ended 
28 February 
2015 
Number
Share capital
Authorised, called up and fully paid:
Ordinary shares of 10 pence each 20,156,339 –
‘A’ Ordinary shares of £1 each – 389,423
‘B’ Ordinary shares of £1 each – 843,750
‘C’ Ordinary shares of £1 each – 32,452
20,156,339 1,265,625
On 27th May 2015 and pursuant to the investor agreement between the Company and Key Capital Partners and shareholder 
resolution, the Company allotted and issued £32,452 ‘C’ Ordinary shares in the capital of the Company, of which £12,980 were 
awarded to both Chris Scott and Gareth Bevan, and £6,492 to Andrew Wass. This took the total number of shares in issue at 
the time to 1,298,077.
On 3rd June 2015, immediately following the Company’s admission to AIM, the ‘A’, ‘B’, and ‘C’ Ordinary shares of £1 were each 
subdivided into one class of Ordinary shares of 10 pence each, and 7,175,569 new 10 pence shares were issued, taking the 
total number of shares to 20,156,339.
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. 
 
Year ended 
29 February 
2016 
£000
Year ended 
28 February 
2015 
£000
Share premium
Opening at 1 March – –
Issue of shares 9,255 –
Share issue costs (322) –
Closing at 29/28 February 8,933 – 56
Gear4music (Holdings) plc 
Annual Report and Accounts 2016
Notes (Forming Part of the Financial Statements) continued
For the year ended 29th February 2016
18 Share capital and reserves continued
 
Year ended 
29 February
 2016 
£000
Year ended 
28 February
 2015 
£000
Accumulated losses
Opening at 1 March (1,555) (869)
Share-based payment charge 8 –
Loss for the year (43) (686)
Closing at 29/28 February (1,590) (1,555)
Reserve   Description and purpose
Accumulated losses Cumulative net losses recognised in the consolidated income statement.
19 Share-based payments
The Group operates a share option plans for qualifying employees of the Group. Options in the plans are settled in equity in 
the Company and are subject to vesting conditions. On 3rd June 2015 on Admission of the Company to AIM, an initial award of 
a total of 23,381 shares was made to eight key employees. On 17th February 2016 an option over a further 1,845 shares was 
awarded. These shares have an exercise price equal to the nominal value of the shares (10 pence) that the Company will 
subsidise by way of a bonus provided there are sufficient distributable reserves, and subject to certain conditions will be 
automatically exercised on the third anniversary of the date of grant.
The fair value of the share option at grant date is determined based on the Black-Scholes model. 
The model inputs were the share price of 139 pence on 3rd June 2015 and 135 pence on 17th February 2016, the exercise 
price of 10 pence, expected volatility of 1%, no expected dividends, a term of 3 years and a risk free rate of 0.7%. 
The fair value of the liability is re-measured at each balance sheet date and settlement date.
The total expenses recognised for the year and the total liabilities recognised at the end of the year arising from share-based 
payments was £8,125.
20 Commitments
Capital commitment
As at 29th February 2016 a contractual minimum spend arrangement was in place for £458,000 (2015: £458,000), in relation to 
a contract for development services of the e-commerce platform.
Operating lease commitment
Non-cancellable operating lease rentals are payable as follows: 
 
Year ended 
29 February 
2016 
£000
Year ended 
28 February 
2015 
£000
Less than one year 283 163
Between one and five years 1,603 1,627
More than five years – 167
1,886 1,957
The operating lease commitment relates to the property lease of the Head Office site at Clifton Moor, York.
21 Related parties
Immediately prior to admission to AIM, Chris Scott (CFO) and Gareth Bevan (CCO) were allotted an aggregate of 259,600 
10 pence shares further to their exercise of pre-existing options, and Andrew Wass was allotted 64,920 10 pence shares in 
accordance with the investor agreement with Key Capital Partners. These shares had a market value of £451,083 on IPO.
Immediately following admission eight key employees were awarded options to an aggregate of 23,381 shares that, subject to 
performance criteria, will vest on the third anniversary of their award. On 17th February 2016 an option over a further 1,845 
shares was awarded to an additional key employee, subject to the same conditions. 57
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On 8th June 2015 the Group paid £4,469,477 to KCP the Group’s private equity investor, of which £3,169,477 was settled in 
cash and £1,300,000 in equity, in full and final settlement of the loan notes and accumulated interest due. Key Capital Partners 
reinvestment took their shareholding to 4,829,482 (23.96%).
On 17th February 2015, an amount of £225,000 was repaid by Gear4music (Holdings) plc to Mr A Wass. Interest had been 
charged on the loan at a rate of 6% and repaid on a quarterly basis. Interest charged on the loan during 2015 amounted to 
£12,000.
Transactions with key management personnel
The compensation of key management personnel is as follows:
 
Year ended 
29 February 
2016 
£000
Year ended 
28 February 
2015 
£000
Key management emoluments including social security costs 421 393
Company contributions to money purchase pension plans 4 2
425 395
Key management personnel comprise the Chairman, CEO, CFO and CCO.
Four Directors are accruing retirement benefits under a money purchase scheme (2015: 1). 
22 Accounting estimates and judgements
The preparation of consolidated financial information in conformity with IFRSs requires management to make judgements, 
estimates and assumptions concerning the future, that affect the application of accounting policies and the reported amounts 
of assets, liabilities, income and expenses. These judgements are based on historical experience and management’s best 
knowledge at the time and the actual results may ultimately differ from these estimates. Estimates and underlying assumptions 
are reviewed on an ongoing basis and revisions to accounting estimates are recognised in the period in which the estimates 
are revised and in any future periods affected.
The estimates and assumptions that have significant risk of causing a material adjustment to the carrying value of assets and 
liabilities are discussed below:
• The basis for stock provision and by association the carrying value – given the nature of the products sold, product margins 
earned, and trading terms with suppliers, Management currently provide for faulty returns retained for spare parts, and an 
estimate of the product loss to deal with returns stock. There are no other provisions made.
• An accrual has been made at 29th February 2016 for the profit element on products returned in the 30-day money back 
guarantee period.
• Assumptions inherent in the goodwill impairment review – four year approved management forecast and a 15% discount 
rate (see note 9).
• The UEL of tangible and intangible fixed assets – Management selected depreciation and amortisation periods appropriate 
to the assets held, and consistent with industry and accounting norm. Amortisation periods were independently reviewed as 
part of an intangible asset valuation exercise.
  58
Gear4music (Holdings) plc 
Annual Report and Accounts 2016
2016 2015
Notes £000 £000 £000 £000
Fixed assets
Investments 5 3,006 2,811
Current assets
Cash In Hand and at bank 8 11 21
Debtors (including £7.21m (2015: £1.20m) due after more than one year) 6,7 7,216 1,238
7,227 1,259
Creditors: amounts falling due within one year 9 (40) (183)
Net current assets 7,187 1,076
Total assets less current liabilities 10,193 3,887
Creditors: amounts falling due after more than one year 10 – (4,237)
Net assets/(liabilities) 10,193 (350)
Capital and reserves
Called up share capital 11 2,016 1,266
Share premium account 11 8,933 –
Profit and loss account 11 (756) (1,616)
Shareholders’ funds 10,193 (350)
The notes on pages 62 to 69 form part of these financial statements.
These financial statements were approved by the Board of Directors on 5th July 2016 and were signed on its behalf by:
Andrew Wass 5th July 2016
Director
Chris Scott 5th July 2016
Director
Company registered number: 07786708 
Company Balance Sheet
As at 29th February 2016 59
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Gear4music (Holdings) plc 
Annual Report and Accounts 2016
Note
Year ended 
29 February 
2016 
£000
Year ended 
28 February 
2015 
£000
Share capital
Opening 1,266 1,266
Issue of share capital 750 –
At 29 February 2016 11 2,016 1,266
Share premium
Opening – –
Issue of shares 9,255 –
Share issue costs (322) –
At 29 February 2016 11 8,933 –
Retained earnings
Previous periods (1,616) (699)
Shared-based payments (8) –
Profit/(loss) for the year 868 (917)
At 29 February 2016 11 (756) (1,616)
Total equity 11 10,193 (350)
Company Statement of Changes in Equity
For the year ended 29th February 2016 60
Gear4music (Holdings) plc 
Annual Report and Accounts 2016
Notes to the Company Financial Statements 
(Forming Part of the Financial Statements)
For the year ended 29th February 2016
1 Accounting policies
The Company’s principal activity is to act as the holding company for the Group, whose principal activity is as a retailer of 
musical instruments and equipment. 
1.1 Basis of preparation 
These financial statements were prepared in accordance with Financial Reporting Standard 102 The Financial Reporting 
Standard applicable in the UK and Republic of Ireland (‘FRS 102’) as issued in August 2014. The amendments to FRS 102 
issued in July 2015 and effective immediately have been applied. The presentation currency of these financial statements is 
Sterling. All amounts in the financial statements have been rounded to the nearest £1,000.
Under section s408 of the Companies Act 2006 the Company is exempt from the requirement to present its own profit and 
loss account. 
In the transition to FRS 102 from old UK GAAP, the Company has made measurement and recognition adjustments. An 
explanation of how the transition to FRS 102 has affected financial position and financial performance of the Company is 
provided in note 13. 
FRS 102 grants certain first-time adoption exemptions from the full requirements of FRS 102. The following exemptions have 
been taken in these financial statements:
• 35.10 (r): If a parent becomes a first-time adopter for its separate financial statements earlier or later than for its 
consolidated financial statements, it shall measure its assets and liabilities at the same amounts in both financial 
statements, except for consolidation adjustments. 
In these financial statements, the Company is considered to be a qualifying entity (for the purposes of this FRS) and has 
applied the exemptions available under FRS 102 in respect of the following disclosures: 
• Reconciliation of the number of shares outstanding from the beginning to end of the period; 
• Cash Flow Statement and related notes; and
• Key Management Personnel compensation. 
As the consolidated financial statements of the Company include the equivalent disclosures, the Company has also taken the 
exemptions under FRS 102 available in respect of the following disclosures:
• Certain disclosures required by FRS 102.26 Share Based Payments; and,
• The disclosures required by FRS 102.11 Basic Financial Instruments and FRS 102.12 Other Financial Instrument Issues in 
respect of financial instruments not falling within the fair value accounting rules of Paragraph 36(4) of Schedule 1.
The Company proposed to continue to adopt the reduced disclosure framework FRS 102 in future periods.
Accounting period
The financial statements presented cover the years ended 29th February 2016 and 28th February 2015.
Measurement convention
The financial statements have been prepared on the historical cost basis.
Functional currency
The financial statements are presented in Sterling which is the Company’s functional currency.
1.2 Going concern
These financial statements are prepared on a going concern basis as explained on page 38.
1.3 Investment in subsidiaries
Investments in subsidiaries are stated at cost less any provision for impairment. 61
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1 Accounting policies continued
1.4 Classification of financial instruments issued by the Company
In accordance with FRS 102.22, financial instruments issued by the Company are treated as equity only to the extent that they 
meet the following two conditions: 
(a) they include no contractual obligations upon the Company to deliver cash or other financial assets or to exchange financial 
assets or financial liabilities with another party under conditions that are potentially unfavourable to the Company; and 
(b) where the instrument will or may be settled in the Company’s own equity instruments, it is either a non-derivative that 
includes no obligation to deliver a variable number of the Company’s own equity instruments or is a derivative that will be 
settled by the Company exchanging a fixed amount of cash or other financial assets for a fixed number of its own equity 
instruments.
To the extent that this definition is not met, the proceeds of issue are classified as a financial liability. Where the instrument so 
classified takes the legal form of the Company’s own shares, the amounts presented in this financial information for called up 
share capital and share premium account exclude amounts in relation to those shares. 
1.5 Basic financial instruments
Basic financial instruments comprise investments other receivables, cash and cash equivalents, loans and borrowings, and 
trade and other payables.
Trade and other debtors
Other receivables are recognised initially at fair value. Subsequent to initial recognition they are measured at amortised cost 
using the effective interest method, less any impairment losses.
Trade and other creditors
Trade and other payables are recognised initially at fair value. Subsequent to initial recognition they are measured at amortised 
cost using the effective interest method.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits. 
Interest-bearing borrowings
Interest-bearing borrowings are recognised initially at fair value less attributed transaction costs. Subsequent to initial 
recognition, interest-bearing borrowings are stated at amortised cost using the effective interest method. 
1.6 Impairment
Financial assets (including debtors)
A financial asset not carried at fair value through profit or loss is assessed at each reporting date to determine whether there is 
objective evidence that it is impaired. A financial asset is impaired if objective evidence indicates that a loss event has 
occurred after the initial recognition of the asset, and that the loss event had a negative effect on the estimated future cash 
flows of that asset that can be estimated reliably.
An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its 
carrying amount and the present value of the estimated future cash flows. The effect of discounting is not material. When a 
subsequent event causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed through 
profit or loss.
Non-financial assets
The carrying amounts of the Company’s non-financial assets, other than inventories and deferred tax assets, are reviewed at 
each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s 
recoverable amount is estimated. 
The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. 
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate 
that reflects current market assessments of the time value of money and the risks specific to the asset.  62
Gear4music (Holdings) plc 
Annual Report and Accounts 2016
Notes to the Company Financial Statements 
(Forming Part of the Financial Statements) continued
For the year ended 29th February 2016
1 Accounting policies continued
1.6 Impairment continued
For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of 
assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or 
groups of assets (the ‘cash-generating unit’).
An impairment loss would be recognised if the carrying amount of an asset or its CGU exceeds its estimated recoverable 
amount. No impairments have been recognised in the periods presented.
1.7 Provisions
A provision is recognised in the balance sheet when the Company has a present legal or constructive obligation as a result of 
a past event, that can be reliably measured and it is probable that an outflow of economic benefits will be required to settle the 
obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects risks specific 
to the liability.
1.8 Financial income and expenses
Financing expenses comprise interest payable and finance leases recognised in profit or loss using the effective interest 
method, unwinding of the discount on provisions, and net foreign exchange losses that are recognised in the income statement 
(see foreign currency accounting policy). Financing income comprises interest receivable on funds invested and net foreign 
exchange gains. 
Interest income and interest payable is recognised in profit or loss as it accrues, using the effective interest method.
Dividend income is recognised in profit and loss on the date the Company’s right to receive payment is established.
1.9 Taxation
Tax on the profit or loss for the year comprises current and deferred tax.
Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or 
substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.
Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for financial reporting 
purposes and the amounts used for taxation purposes. The amount of deferred tax provided is based on the expected manner 
of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at 
the balance sheet date.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which 
the temporary difference can be utilised.
2 Expenses 
Included in profit/loss are the following:
 
Year ended 
29 February 
2016 
£000
Year ended 
28 February 
2015 
£000
Auditor remuneration – audit of financial statements 28 16
Auditor remuneration – other 140 119
Exceptional items:
Exceptional deal costs 606 165
Exceptional costs relate to professional fees incurred in relation to the Company’s admission to the Alternative Investment 
Market (‘AIM’) on 3rd June 2015. ‘Auditor remuneration – other’ includes £137,000 (2015: £115,000) of IPO-related fees and as 
such are of a one-off nature. 63
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Gear4music (Holdings) plc 
Annual Report and Accounts 2016
3 Directors’ remuneration
 
Year ended 
29 February 
2016 
£000
Year ended 
28 February 
2015 
£000
Directors’ remuneration 451 395
Company contributions to money purchase pension schemes 4 2
Amounts paid to third parties in respect of Directors’ service 32 –
487 397
There are four directors (2015: 1) for whom retirement benefits are accruing under a money purchase pension scheme.
The aggregate remuneration of the highest paid director was £179,000 (2015: £157,000), including Company pension 
contributions of £1,680 (2015: £1,680) were made to a money purchase scheme on their behalf.
4 Finance income and expense
 
Year ended 
29 February 
2016 
£000
Year ended 
28 February 
2015 
£000
Finance income
Dividend income 1,821 –
Interest income 30 41
Total finance income 1,851 41
                
On 22nd May 2015 Gear4music Limited, a 100% owned subsidiary of Gear4music (Holdings) plc, paid a dividend of £1,821,145 
to Gear4music (Holdings) plc. 
 
Year ended 
29 February 
2016 
£000
Year ended 
28 February 
2015 
£000
Finance expense
Loan note interest 233 692
Total finance expense 233 692
Loan note interest was due principally to Key Capital Partners, the Company’s private equity investor. In 2015 £12,000 was due 
to and paid to Andrew Wass in relation to loan notes that were settled in that financial year.
On 8th June 2015 the Group paid £4,469,477 to Key Capital Partners, of which £3,169,477 was settled in cash and £1,300,000 
in equity, in full and final settlement of the loan notes and accumulated interest due.
5 Fixed asset investments
Subsidiary 
undertakings 
£000
Cost
At 28 February 2015 2,811
Capital contribution 195
At 29 February 2016 3,006 64
Gear4music (Holdings) plc 
Annual Report and Accounts 2016
Notes to the Company Financial Statements 
(Forming Part of the Financial Statements) continued
For the year ended 29th February 2016
5 Fixed asset investments continued
Investments in subsidiary undertakings are included in the balance sheet at cost less any provision for diminution in value.  
The Company has the following investments in subsidiaries:
Subsidiaries
Country of 
incorporation
Registered 
number Year-end
Class of  
shares held Ownership
Gear4music Limited 
(formerly known as Red Submarine Limited)
UK 03113256 28 February Ordinary 100%
Cagney Limited 
(formerly known as Gear4music Limited)
UK 04493300 28 February Ordinary 100% via  
G4M Limited
Cagney Limited is a dormant company.
6 Deferred tax assets
Movement in deferred tax during the year 
At 
1 March 
2015 
£000
Recognised 
in income 
statement 
£000
At
 29 February 
2016 
£000
Unused tax losses (161) 33 (128)
(161) 33 (128)
7 Debtors
Due within one year:
 
Year ended 
29 February 
2016 
£000
Year ended 
28 February 
2015 
£000
Other debtors 5 2
5 2
Due after more than one year:
 
Year ended 
29 February 
2016 
£000
Year ended 
28 February 
2015 
£000
Amounts owed by Group undertakings 7,083 1,075
Deferred tax asset (see note 6) 128 161
7,211 1,236
The loan to Group undertakings is repayable in 12 months and one day from the year end. No interest is charged on the balance.
8 Cash and cash equivalents
 
Year ended 
29 February 
2016 
£000
Year ended 
28 February 
2015 
£000
Cash and cash equivalents per balance sheet 11 21
Cash and cash equivalents per cash flow statements 11 21
Significant non-cash transactions in the year included the Group paying £1.3m in equity to Key Capital Partners as part of the 
full settlement of their loan notes and accumulated interest. 65
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Annual Report and Accounts 2016
9 Creditors: amounts falling due within one year
 
Year ended 
29 February 
2016 
£000
Year ended 
28 February 
2015 
£000
Trade creditors 27 18
Accruals and deferred income 15 22
Other taxation and social security (2) 143
40 183
10 Interest-bearing loans and borrowings
This note contains information about the Company’s interest-bearing loans and borrowing which are carried at amortised cost. 
 
Year ended 
29 February 
2016 
£000
Year ended 
28 February 
2015 
£000
Non-current liabilities 
Loan notes – 4,237
– 4,237
Total liabilities 
Loan notes – 4,237
– 4,237
On 8th June 2015 the Company paid £4,469,477 to KCP the Company’s private equity investor, of which £3,169,477 was 
settled in cash and £1,300,000 in equity, in full and final settlement of the loan notes and accumulated interest due.
Interest accrued on these loan notes at 10% per annum compounding on a quarterly basis. A redemption premium of 20% was 
payable on the principle amount on repayment of the loan.
11 Share capital and reserves
 
Year ended 
29 February 
2016 
Number
Year ended 
28 February 
2015 
Number
Authorised, called up and fully paid:
Ordinary shares of 10 pence each 20,156,339 –
‘A’ Ordinary shares of £1 each – 389,423
‘B’ Ordinary shares of £1 each – 843,750
‘C’ Ordinary shares of £1 each – 32,452
20,156,339 1,265,625
                
On 27th May 2015 and pursuant to the investor agreement between the Company and Key Capital Partners and shareholder 
resolution, the Company allotted and issued £32,452 ‘C’ Ordinary shares in the capital of the Company, of which £12,980 were 
awarded to both Chris Scott and Gareth Bevan, and £6,492 to Andrew Wass. This took the total number of shares in issue at 
the time to 1,298,077.
On 3rd June 2015, immediately following the Company’s admission to AIM, the ‘A’, ‘B’, and ‘C’ Ordinary shares of £1 were each 
subdivided into one class of Ordinary shares of 10 pence each, and 7,175,569 new shares were issued, taking the total number 
of shares to 20,156,339.
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.  66
Gear4music (Holdings) plc 
Annual Report and Accounts 2016
Notes to the Company Financial Statements 
(Forming Part of the Financial Statements) continued
For the year ended 29th February 2015
11 Share capital and reserves continued
 
Year ended 
29 February 
2016 
£000
Year ended 
28 February 
2015 
£000
Share premium
Opening at 1 March – –
Issue of shares 9,255 –
Share issue costs (322) –
Closing at 29/28 February 8,933 –
 
Year ended 
29 February 
2016 
£000
Year ended 
28 February 
2015 
£000
Retained earnings
Opening at 1 March (1,616) (699)
Share-based payment charge (8) –
Profit/(loss) for the year 868 (917)
Closing at 29/28 February (756) (1,616)
12 Related parties
Immediately prior to admission to AIM, Chris Scott (CFO) and Gareth Bevan (CCO) were allotted an aggregate of 259,600 
10 pence shares further to their exercise of pre-existing options, and Andrew Wass was allotted 64,920 10 pence shares in 
accordance with the investor agreement with Key Capital Partners.
On 8th June 2015 the Company paid £4,469,477 to KCP the Group’s private equity investor, of which £3,169,477 was settled in 
cash and £1,300,000 in equity, in full and final settlement of the loan notes and accumulated interest due. Key Capital Partners 
re-investment took their shareholding to 4,829,482 (23.96%).
13 Explanation of transition to FRS 102 from old UK GAAP
As stated in note 1, these are the Company’s first financial statements prepared in accordance with FRS 102. The accounting 
policies set out in note 1 have been applied in preparing the financial statements for the year ended 29th February 2016 and 
the comparative information presented in these financial statements for the year ended 28th February 2015.
In preparing its FRS 102 balance sheet, the Company has adjusted amounts reported previously in financial statements 
prepared in accordance with its old basis of accounting (UK GAAP). An explanation of how the transition from UK GAAP to 
FRS 102 has affected the Company’s financial position and performance is set out on the opposite page. 67
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Statements
Corporate 
Governance
Strategic 
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Gear4music (Holdings) plc 
Annual Report and Accounts 2016
13 Explanation of transition to FRS 102 from old UK GAAP continued
Reconciliation of equity
1 March 2014 28 February 2015
Adopted UK 
GAAP 
£000
Effect of 
transition 
to FRS 102 
£000
FRS 102 
£000
Adopted UK 
GAAP 
£000
Effect of 
transition 
to FRS 102 
£000
FRS 102 
£000
Fixed assets 
Investments 
2,740 41 2,781 2,740 71 2,811
Current assets
Debtors 1,626 10 1,636 1,236 2 1,238
Cash at bank and in hand – – – 21 – 21
1,626 10 1,636 1,257 2 1,259
Creditors: amounts due within one year (39) – (39) (183) – (183)
Net current assets 1,587 10 1,597 1,074 2 1,076
Creditors: amounts falling due after more than one year (3,725) (86) (3,811) (4,036) (201) (4,237)
Net assets/(liabilities) 602 (35) 567 (222) (128) (350)
Capital and reserves 
Called up share capital 1,266 – 1,266 1,266 – 1,266
Profit and loss account (664) (35) (699) (1,488) (128) (1,616)
Shareholders’ equity 602 (35) 567 (222) (128) (350)
Notes to the reconciliation of equity and income statement:
Previously under UK GAAP long-term assets and liabilities were measured at cost, less any impairment losses.  
Under FRS 102 these assets and liabilities are measured initially at fair value and subsequently under amortised cost.
Remeasurement of the Company’s long-term intercompany loan due from Gear4music Limited to fair value gave rise to a 
reduction in the fair value of the loan of £41,000 on transition to FRS 102 at 1st March 2014 and a further £30,000 reduction  
at the comparative balance sheet date. These adjustments have been recognised as capital contributions as a debit to 
investments, reflecting the fact that the loan is made at a non-commercial rate of interest. The effective interest charge has 
been unwound over the repayment term.
Restatement of the Company’s KCP loan notes under the amortised cost model gave rise to an adjustment to the carrying 
value of the loan at 1st March 2014 recognised through brought forward retained earnings (£45,000) and the amount 
recognised through financial expenses for the year to 28th February 2015 (£156,000). This re-statement reflects the 
recognition of the full amount of the redemption premium spread to the date of IPO (June 2015). In the adopted UK GAAP 
accounts this premium had been treated as being spread to the date of the loan note redemption (September 2018).  
A corresponding deferred tax asset measured at 20% has also been recognised in relation to these adjustments. 68
Gear4music (Holdings) plc 
Annual Report and Accounts 2016
Notes  Gear4music (Holdings) plc 
Kettlestring Lane
Clifton Moor
York, YO30 4XF
United Kingdom
0330 365 4444
ir@gear4music.com
Advisers & IR Contacts:
Nominated Advisors (NOMAD)
Panmure Gordon (UK) Limited 
One New Change 
London 
EC4M 9AF
Registrars
Capita Asset Services
Eastgate House
40 Dukes Place
London 
EC3A 7NH
Solicitors
Walker Morris 
Kings Court 
12 King Street 
Leeds 
LS1 2HL
Auditors
KPMG LLP 
1 Sovereign Square 
Sovereign Street
Leeds 
LS1 4DA
Investor Relations
MHP Communications
6 Agar Street 
London 
WC2N 4HN
Gear4music (Holdings) plc Annual Report and Accounts 2016
www.gear4music.com
www.gear4musicplc.com