FULL YEAR RESULTS FOR THE YEAR ENDED 30 NOV 2022

RNS Number : 2213S

musicMagpie plc

08 March 2023

 

8 March 2023

musicMagpie plc

("musicMagpie", or "the Group")

FULL YEAR RESULTS FOR THE YEAR ENDED 30 NOVEMBER 2022

Consumer Technology revenue growth of 12.2% and rental subscribers up to 36,000 at 28 February 2023

musicMagpie, a circular economy pioneer specialising in refurbished consumer technology and disc media in both the UK and US, announces its audited full year results for the year ended 30 November 2022 ("FY22").

Operational highlights

· Active subscribers to device rental service increased to 30,500 at year end (2021: 13,500) and 36,000 at 28 February 2023

· Rental book provides recurring revenues, with year-end active renters providing c£3.1m of committed revenue into FY23

· 24 month rental contracts launched post period end

· Magpie Circular offering extended in October 2022 with the launch of corporate renting, and  Stagecoach as its first customer

· SMARTDrop kiosk programme completed with kiosks installed across c290 Asda stores in the UK with over £10m paid out to date and with further plans to install in other high footfall areas during 2023

· The Group closed its FY22 financial year with a record Black Friday week 

· Expanded third party platforms to four with Back Market added in May 2022 and Walmart post year end (adding to long-standing relationships with Amazon and eBay)

Financial highlights

· Consumer Technology revenue up 12.2% to £96.6m (2021: £86.1m), representing 66% of Group revenue

· Gross margin of 26.3% (2021: 30.4%) with consistency across H1 and H2

· Net cash from operations £6.2m (2021: £2.6m); cash generative before investing activities

· Committed three-year £30m revolving credit facility with HSBC UK and Natwest entered in July 2022 to help drive future Rental growth

· Net Debt of £7.9m (2021: £1.8m cash) following key investment in rental assets

	FY22 £m	FY21 £m2	Movement
Revenue	145.3	145.6	(0.2%)
- Consumer Technology	96.6	86.1	12.2%
- Disc Media and Books	48.7	59.5	(18.2%)
Gross profit	38.1	44.4	(14.2%)
Adjusted EBITDA1	6.5	12.2	(46.7%)
Loss before taxation	(1.5)	(14.8)	n/a
Net (Debt)/ Cash	(7.9)	1.8	n/a

Notes

1   Adjusted EBITDA is a non-GAAP measure and has been calculated as earnings before interest, taxation, depreciation, amortisation, equity-settled share-based payments and other non-underlying items.

2 H1 2021 benefitted from Covid related tailwinds

Q1 trading and o utlook:

Following on from the record Black Friday close to FY22, the start of the new financial year saw the Group having to navigate through the challenges of the well-publicised postal strikes, in addition to the tough consumer environment and continuing macroeconomic uncertainty.  Looking beyond the first quarter of the Group's financial year, which traditionally has a low contribution to the full year performance, whilst the economic outlook remains unpredictable the Board remains confident in the Group's strategy and in its medium-term growth prospects, underpinned by the growing and differentiated rental proposition.

Commenting on the results, Steve Oliver, Chief Executive Officer & Co-Founder of musicMagpie, said:

"In common with many consumer-facing businesses, this has been a tough year for musicMagpie in the face of a rapidly changing macroeconomic environment. However, against this backdrop I am delighted with the performance of our core Consumer Technology business, which grew by over 12% and now accounts for nearly 70% of our total revenue. We achieved a huge amount in the year, from completing the roll-out of our SMARTDrop kiosks with Asda, significantly growing our consumer rental subscriber base, to adding our products to both Back Market and Walmart and launching our consumer tech rental service for corporates.

Our rental subscription service for phones, tablets and other products has continued to grow strongly as both consumers and businesses alike have started to recognise the outstanding value and flexibility that it offers. As of 28 February, we had 36,000 active renters on our books, and recently launched a 24-month rental contact which we believe will be even more attractive to customers in the current economic climate.

While the short-term outlook continues to be challenging, we believe our ability to help consumers raise cash and save money positions us well for resilient trading. In the longer term, we remain very confident in musicMagpie's future prospects - and especially those of our rental business."

- Ends -

Enquiries

musicMagpie plc Steve Oliver, CEO Ian Storey, COO	Tel: [phone]
Matthew Fowler, CFO
Shore Capital (Nominated Adviser and Broker)	Tel: [phone]
Mark Percy
Malachy McEntyre
Daniel Bush
John More
Powerscourt (Financial Public Relations) Rob Greening Genevieve Ryan Sam Austrums	Tel: [phone]

Notes to Editors

About musicMagpie plc

Operating through two trusted brands - musicMagpie in the UK and decluttr in the US - musicMagpie's core strategy is simple: to provide consumers with a smart, sustainable and trusted way to buy, rent and sell refurbished consumer technology and physical media products with sustainability running to the very heart of its operations. Founded in 2007, the Group has an established presence in the UK, with operations in Stockport, Greater Manchester, and in the US in Atlanta, Georgia.

musicMagpie has a strong environmental and social focus, as demonstrated by its trademarked 'smart for you, smart for the planet' ethos. Nearly 400,000 consumer technology products were resold in FY22. In addition, the Group re-sells approximately 10m books and disc media each year that could have ended up as waste. During 2022, musicMagpie's UK consumer tech and disc media customers, along with its trade partners, helped to save over 43,000 tonnes of CO2 by buying, selling and renting with the Group - an amount equivalent to providing heating for over 16,000 homes, or powering more than 50,000 flights from London to New York.  The Group has been given the London Stock Exchange's Green Economy Mark in recognition of its contribution to the global green economy.

When selling to musicMagpie, the customer is offered a fixed valuation via the website, provided with free logistics to ship the products and (subject to it being 'as described') receives payment for their product on the day of arrival at the Group's warehouse. The Group also recently partnered with Asda to give customers the option of using its SMARTDrop Kiosks in store for a fast and easy way to recycle phones for instant cash. Customers purchasing from musicMagpie receive branded refurbished product for a fraction of the price of buying new.

The Group has the highest number of seller reviews on both Amazon and eBay and has consistently achieved extremely positive feedback scores. The Group also has a 4.4* rating on UK Trustpilot with over 252,000 reviews.  

For further information please visit :   www.musicmagpieplc.com

Chief Executive Officer's review

We have a simple three-pillared strategic approach to driving growth in our business:

1. 'Buy more':

Our model requires a steady flow of high-quality products entering our ecosystem through various entry points for consumers and corporates. The ability to buy more for less underpins our future profitability. Our strategy is focused on making it even easier for consumers and, increasingly, corporates to recycle their old devices. Our biggest competitor in both areas is apathy, i.e. people doing nothing and simply putting an old device in a drawer and forgetting about it. Our mission is to persuade consumers and corporate organisations to do something 'smart for themselves and smart for the planet' with the estimated £16bn worth of old devices that are currently lying around their houses and businesses.

A key part of this strategy has been the successful roll-out of our estate of nearly 300 SMARTDrop kiosks, mainly across the Asda estate, which provide an even faster, even more trusted and even more convenient way for consumers to sell their old devices for an instant payment to their bank account. In terms of our Asda partnership, October 2022 saw the completion of our roll-out in over 290 of its stores.  This means that 90% of the UK's population now lives within a 15-minute drive of a kiosk, making it even easier, faster and more trusted to sell to us. Asda is proving to be a great partner in our mission to make the recycling of old devices a mainstream activity. The 290 kiosks provide its customers with a great way to 'pay for their shopping that day' with their old device, an especially valuable service during the cost of living crisis that we are currently experiencing. In addition to the Asda network, we now also have kiosks in other locations including the Trafford Centre in Manchester, with further plans to install in other high footfall areas during 2023. Post-period end, we reached the milestone of paying out over £10m to our customers through the kiosk network since its inception, and our kiosks now account for around 40% of the total paid out traded value of phones bought from consumers weekly.

Our kiosk strategy allows us to buy incremental devices and target a lower average cost and our focus is now on how we can further develop awareness of this fantastic service with more significant marketing and brand awareness that emphasise the merits of this convenient service. Our customer journey, pricing and operational processes are regularly enhanced to ensure we are meeting the needs of our customers by ensuring that stock is quickly transacted, processed, refurbished and ultimately resold (or rented) in a timely manner. Looking ahead, we plan to enhance our grading ability still further at the kiosks to better and more consistently identify blemishes in the device and also intend to review our pricing model at kiosks to reflect the highly convenient nature of the service and instant nature of the cash received.

Following the successful launch of our corporate recycling service in 2021, this strategic approach to buying incremental devices from businesses has evolved to a corporate circular model similar to our overall circular economy proposition for consumers. Magpie Circular was launched in 2022, which not only enables corporates to recycle their old tech in return for funds that they can put back into their business or donate to charity, but also allows them to rent either refurbished or 'new' condition products.

We are positioning ourselves as being 'here to help'; by enabling corporates to boost their ESG credentials by reducing e-waste.  We provide e-waste avoidance certificates and give them information on the equivalent carbon saving for all the tech that they recycle with us. Critical to this is the data governance involved and every transaction is accompanied by the offer of a certificate of data wiping to give the corporate comfort that its old items are being treated with the same responsibility and trust that our consumers receive.

2. 'Sell more':

Despite the challenging trading environment for consumer-facing businesses, Consumer Tech outright sales grew 8.3% year on year, (12.2% growth including rentals). This was achieved by expanding our sales channels to be more platform agnostic ensuring that maximum distribution of product is achieved and by recognising that we need to service consumers on whatever channel they wish to purchase from us.  We are making it easier to buy refurbished Consumer Tech, Disc Media and Books with confidence from musicMagpie, which is the biggest and most trusted refurbished tech reseller in the UK.

In the first half of the financial year, we expanded our existing Amazon UK and US relationship by extending our offering to Amazon Fulfilment by Amazon and Seller Fulfilled Prime. In April, we added Back Market UK to complement our existing third-party outlets of Amazon and eBay, followed by Back Market US in the summer, giving us three major platforms for product sales in each locale.

Selling through third-party platforms requires the payment of a selling commission, with varying rates across the different platforms, and of course the same level of consumer 'ownership' is not achieved as it is when selling through the musicMagpie store. However, the benefit is that we do not have to spend on marketing costs to acquire customers and we can access a wider pool of consumers, a number of whom will be interacting with our brand for the first time. By tactically using other selling platforms, we can select the best outlet for our products based on demand, competitor behaviour and each platform's promotional activity. Our preferred sales channel will always be our own musicMagpie and decluttr stores, but managing platforms in this way delivers profitable sales and will continue to be a key part of our growth strategy.

Post-period end, we announced the addition of Walmart.com to our suite of third-party platform partners. Whilst the initial launch is for Disc Media only, Consumer Tech will be added during the current financial year, which will most likely be launched on Walmart's dedicated refurbished programme, Walmart Restored. It is unclear how much traction the recently launched Restored programme will gain, but with the world's largest retailer creating a dedicated refurbished electronics programme, it is further confirmation that the circular trend is growing in the US.

3. 'Rent more':

Our monthly rental subscription offering continues to grow year on year and its disruptive and differentiated nature continues to be a highly attractive and flexible value offer for many consumers - especially in these uncertain economic times. At year end, the active rental book was 30,500, an increase of 17,000. The book of rental agreements, which represents contracted future cash flows, has become a significant asset for the business and something that we are continuing to grow at pace. Throughout the year, renewal rates and delinquency rates have been fairly consistent, and we are constantly exploring different techniques to improve and enhance our offer.

Our rental offering also increased with the inclusion of wearables, games consoles and MacBooks, including new Apple products at the time of launch to market in September.

As outlined above, in the second half of the year, we launched Magpie Circular which includes a corporate rental offering to sit alongside our consumer-facing subscription service. Working in partnership with Utelize, we provide corporates with a managed service to review and refresh devices and call packages without being tied to network provider devices and costs. Corporate renting, which is characterised by a larger number of devices in a single transaction and a much lower risk of delinquency, has a number of advantages over consumer renting. Customer acquisition will be less consistent than consumer but we are confident that the offering will be attractive to an increasing number of corporates - given the cost effectiveness, the flexibility and, of course, the environmental benefits. We were pleased to announce Stagecoach as our first corporate rental customer in October 2022, contracted on a three-year term.

Post-period end, we launched a 24-month subscription service to coincide with the Christmas 2022 period. In the current economic climate consumers are more mindful of their monthly expenditure which is why we are helping them with an even lower monthly price point. Longer-term contracts also provide us with lower transactional costs. Whilst we expect lower overall average monthly rentals from 24-month contracts, the impact in the first year of launch is a higher renewal rate as none of the 24-month contracts come up for renewal at the end of the first year.

The growth of both consumer and corporate rentals will underpin our future growth and we see tremendous potential in this area; it is our major differentiating factor as it deepens the relationship with our customers and provides the business with high-quality recurring income and EBITDA. We have seen strong and consistent demand for our rental subscription service and believe that we can grow it with only relatively modest investment in advertising to increase awareness. However, the service requires careful management of the investment cost, as we substitute an outright sale and immediate cash for a longer-term contractual cash flow. We have a three-year committed RCF with NatWest and HSBC to help drive future growth in this area and are excited about the potential of rental to help transform the business.

Sustainability

Sustainability is at the heart of everything we do.  Our core mission is to be 'here to help' bring the circular economy to all, to educate consumers on waste reduction and to and to extend the life of products by preventing them from ending up in landfill. We believe that as the market shifts towards subscription and rental models, our business model stands us in good stead to lead this sea-change towards a more sustainable economy.

In addition to the highly circular nature of our core services, to help support our communities and environment, we have implemented a range of sustainability measures to improve our environmental impact. These include reducing our carbon footprint, limiting waste and decreasing resource consumption. Additionally, we actively engage with customers, suppliers and local communities to educate and collaborate on sustainable practices. By taking a holistic approach to the circular economy and sustainability, we strive to not only benefit our business, but also contribute to a more sustainable future for all, in line with our 'smart for you, smart for the planet' ethos, and ultimately to be 'here to help' make a difference.

Looking after our people

We care about our colleagues and Magpies care about each other. During the year there have been exceptional highlights and contributions and I am proud that every one of our colleagues continues to strive to make a difference in all of our locales in many ways. Our Charity Committee continues to find innovative and enjoyable activities to support our chosen charity, this year being EGG: Engage, Grow, Go, which aims to provide permanent intervention to find a home and employment for homeless individuals. In line with our core values, innovating and collaborating to deliver new projects efficiently and timely by working together drives us forward in achieving our goals and unites us in our common purpose: to care about our customers, colleagues, community and the environment. During the year we have seen 80 colleagues thrive by receiving internal promotions and it is my greatest pride in leading the business that we are able to consistently retain our top talent and attract new talent into the business and that no Magpie should ever have to look to leave the business to further their career.

I would also like to take this opportunity to thank all of our amazing Magpies across the business, without whom musicMagpie would not be where it is today.

Cost base

The cost of living crisis has not only impacted our customers, but also our colleagues. As part of our year-end wage review, we responded by increasing wages for lower-paid colleagues in line with increases made to the minimum wage. We did this ahead of the statutory date of April 2023 by introducing these increases in December 2022 to help our lower paid colleagues through a difficult winter as part of our deep-rooted belief in social and environmental obligation. Whilst this will increase our underlying cost base year on year, we are confident that we can mitigate the impact of this wage inflation through a comprehensive review of spending, which has seen us review costs in all areas of our business. This includes the Non-Executive Directors and me agreeing to reduced fees for a minimum period of six months, for which I am extremely grateful to my colleagues.

Although managing our buy and sell prices does provide some protection from cost increases, inflation in our cost base is clearly a major consideration. Energy costs have of course been a significant feature of inflation, but we took steps to hedge against this by purchasing our demanded units of electricity before the price increases occurred. As a result, our energy costs for 2023 should be at very similar levels to 2022.

We are committed to leaving no stone unturned in our efforts to control costs, make savings and support our margin aspirations and we expect to manage costs at broadly the same level as 2022.

Looking ahead

Whilst the business has clearly not performed as well as we would have wished in the last year, we are pleased with the growth in Consumer Tech in 2022, which has helped to mitigate the expected decline in our Books and Disc Media categories post pandemic. It is well documented that there are major challenges in the global economy that will impact consumers in the months ahead and the cost of living crisis is clearly going to make life tough for many. As a retail business, we will inevitably be affected by these challenges, but our circular economy model should provide some insulation. musicMagpie was born and grew rapidly in the worst recession in a century back in 2008 and being 'here to help' consumers raise cash for their old tech and media whilst saving money when buying or renting refurbished technology is a compelling offer for the current environment. It is our rental offer which truly differentiates us and offers both consumers and now corporates an offer 'for the moment' of greater flexibility at a lower monthly cost. We anticipate further significant growth from rental in the coming year.

Despite the short-term challenges, in the medium to longer term we remain hugely excited about the prospects of the business and our rental model in particular.  The fundamentals of our business model have not changed and we continue to be confident in the execution of our strategy.

We are very much 'here to help' in making a difference to the welfare of consumers, corporates and our environment and I remain proud of the positive impact we have on all.

Steve Oliver

Chief Executive Officer

Financial review

Revenue and gross profit

Group revenue for the year ended 30 November 2022 was relatively stable at £145.3m (2021: £145.5m). Consumer Technology growth of £10.5m almost entirely mitigates the declining revenues from Disc Media and Books of £10.8m. Gross margin for the Group was 26.3% (2021: 30.4%). The year on year reduction reflects both a change in mix toward Consumer Tech and a reduced gross margin for this segment owing to a greater use of third party platforms and more cost on sourced product.

Revenues for the musicMagpie brand which primarily trades in the UK were £110.2m (2021: £115.4m), with £4.5m or 6.5% growth in Consumer Technology unable to fully offset the declining revenues from Disc Media and Books. In the US Decluttr revenues were £35.0m (2021: £30.1m). Significant growth was seen on third party platforms, with increased focus and product range on Amazon and eBay and the addition of BackMarket which contributed in the second half of the year. The sales decline in Disc Media and Books in the US was less marked than the UK at £1.3m, or 8.7%.

Consumer Technology

Consumer Technology revenue increased by 12.2% to £96.6m (2021: £86.1m) and now represents the dominant category in the Group with 67% of total revenues. The rental business grew from £1.8m to £5.3m as active renters increased from 13,500 to 30,500 at the year end. At £5.3m of sales and with gross margin of 78.7%, which excludes write offs and impairments, the rental business is now a material and growing contributor to the Group.

Outright sales grew from £84.2m to £91.2m, or 8.3%, and the majority of this growth came from third-party platform sales. With the addition of Back Market in April 2022 to Amazon and eBay, the Group had three platforms to maximise selling opportunities and take advantage of various alternating promotions and platforms focus. While selling via the platforms incurs a commission, they allow the Group to reduce its own marketing costs and leverage the platforms spend and brand awareness. Post year end the Group added Walmart to its global platform partnerships. Gross margin for Consumer Technology was 20.9% (2021: 24.7%). The positive impact of an increasing mix of rental within the category has been unable to offset the reduction owing to the cost increases in sourced product seen at the end of 2021. Since the start of 2021 the traded margins in the segment have remained fairly constant and with buying through kiosks and growing rental, the expectation is that margin should increase slowly over time.

Disc Media and Books

Revenue for the year was £48.7m (2021: £59.5m). The 2021 comparative includes periods that benefitted from Covid-19 lockdowns and does not give a true reflection of revenue performance. Comparing the 2021 H2 revenue of £26.4m to the H2 revenue from 2022 of £23.3m gives a more reflective decline rate for the segment of around 11.7%. The category is declining mainly owing to the continued reduction in the purchase of both new and second-hand physical media as consumers increasingly consume content in different ways, for example streaming. Gross margin remains resilient at 36.9% (2021: 38.7%).

	2022	2021	Movement
	£m	£m
Revenue	145.3	145.5	-
Consumer Technology	96.6	86.1	12.2%
- Outright Sales	91.2	84.2	8.3%
- Rental Income	5.3	1.8	300.0%
Disc Media & Books	48.7	59.5	-18.2%
Gross Profit	38.1	44.4	-14.2%
- Consumer Technology	20.9%	24.7%	-
- Disc Media & Books	36.9%	38.7%	-
Adjusted EBITDA1	6.5	12.2	-46.7%
Loss before tax	(1.5)	(14.8)	-
Net cash from operations	6.2	2.6	-78.3%

1.  Adjusted EBITDA is a non-GAAP alternative performance measure. See Note 28 to the financial statements for further definition and reconciliation.

	2022	2021
Net cash from operations	6.2	2.6
Acquisition of PPE
- Rental assets	(6.6)	(3.7)
- Other	(3.1)	(0.7)
Development costs	(4.6)	(2.8)
Cash outflow from investing	(14.2)	(7.2)
New loan drawings	13.5	1.0
Interest and lease	(1.6)	(3.0)
Other	0.1	4.3
Cashflow from financing	11.9	2.3
Cash increase/ (decrease)	3.9	(2.3)
FX	0.1	-
Cash carried forward	6.8	2.8
Net (debt)/ cash	(7.9)	1.8

Adjusted EBITDA1

Gross profit was £38.1m (2021: £44.4m). Operating Expenses were £31.7m (2021: £32.2m) with the reduction owing to cost control, especially with marketing where a greater mix of platform sales allows for lower spend overall. Adjusted EBITDA was therefore £6.5m (2021: £12.2m).

Below EBITDA the main cost items relate to non-current assets: Depreciation increased to £3.9m (2021: £1.8m) with rental assets being £2.4m (2021: £0.5m) of the total charge and £1.9m of the increase year on year. Rental assets are depreciated on a reducing balance basis at 33% per year and the increased rental depreciation is simply a factor of the increased cost of assets invested into rental. Impairment charges relate to the rental business that experiences an element of loss of devices out on rent. The increase in impairment to £0.8m (2021: £0.4m) is reflective of the growth in the rental business. There are a number of recovery steps the business takes to recover devices and manages to a rate of around 10%, of revenues (2021: 10%).

Amortisation was £1.9m (2021: £1.5m) with the increase on capitalised IT development costs where the Group has increased the number of active IT projects to remain innovative and effective in the market place. Share based payment charges of £0.2m (2021: £17.4m) relate to Sharesave open to all employees and an LTIP issued to certain senior managers during the year; the large 2021 charge was an exceptional item related to AIM IPO.

Non-underlying items

The Group entered into forward purchase contracts during the spring of 2022 to acquire electricity at a range of fixed prices for up to three years. The purpose of these contracts was to provide certainty of future pricing for the Group and this has been achieved by securing supply prices at broadly the same levels as seen in the year to November 2022. Under IFRS accounting the value of these contracts has been marked to the external market price of electricity at 30 November 2022. As the contracted price that electricity will be supplied is below the external market price, an asset has recorded and a gain reported as non-underlying in the income statement. The £1.1m gain will reverse over time as the electricity units are consumed or if the market price of electricity falls.

During the year the Group incurred a number of expenses that have been treated as non-underlying in line with historic treatments, or because they are large and one-off in nature. These costs include dual running IT costs £0.9m (2021: £0.2m), Covid costs of £0.2m (2021: £nil) and £0.2m (2021: £nil) of a tax settlement relating to a pre-Brexit tax structure.

The Operating loss for the year was £0.5m (2021: £13.5m loss) and after interest costs of £0.9m (2021: £1.3m) the statutory loss before tax was £1.5m (2021: £14.8m). The taxation charge in the period was £3.3m (2021: £2.7m credit) and is owing to the change in value of the share based payments deferred tax asset on the balance sheet. The loss after taxation was £4.7m (2021: £12.1m) and a basic loss per share of 4.4p (2021: 12.7p).

Net Assets and Cashflow

Non-current assets increased from £21.1m to £28.9m. The increase is mainly owing to the increase in rental assets of £3.8m. In addition there was a growth in both non-rental fixed assets of £1.8m related to the kiosk programme, a new property lease in the UK of £2.0m and in capitalised development costs of £3.0m as we continue to progress upgrades and enhancements to our IT platforms. Deferred tax assets reduced from £5.3m to £1.9m as share based items were re-valued using the share price at the balance sheet date.

When a device is booked out to rental, the item is transferred from inventory to non-current assets for the duration of the rental term. The value of rental assets on the balance sheet is £6.6m, this represents 30,500 devices that are contracted to come back into the business for outright sale or further rental. Net debt at the balance sheet date was £7.9m (2021: £2.0m net cash) and bank reported net debt, which ignores unamortised deal fees of £0.3m, was £8.2m giving a covenant leverage figure of 1.3. The retained loss for the period was £4.6m (2021: £12.1m) and net assets reduced from £24.3m to £19.5m.

Net cash generated from operating activities was £6.2m (2021: 2.6m). Despite a lower EBITDA for the period, there was a £1.0m cash inflow on working capital which compares to the £4.9m outflow in 2021. The reversal in working capital cash flows is owing to tighter control around year end, helped by a very strong end to Black Friday week. Adjusted operating cash flow calculated as Adjusted EBITDA less movements in working capital, was £7.6m (2021: £7.3m) giving a cash conversion ratio of 117% (2021: 60%) and demonstrates the ability of the business to generate positive cashflows before investing activities. Cash outflows on investing activities was £14.2m (2021: £7.2m). The biggest single cash cost was the acquisition of rental assets of £6.6m (2021: £3.7m). The increase in expenditure has supported the growth in the rental book to 30,500 (2021: 13,500) active payers at the year end.

Capitalised development expenditure of £4.6m (2021: £2.8m) reflects the full year impact of scaled up IT teams over recent periods to both retain our technological advantage and accelerate our strategic initiatives. We expect this cost to reduce gradually over the forthcoming year. Capital expenditure was £3.1m (2021: £0.7m) with approximately £2.0m of the increase year on year being the cost of installing the SMARTDrop kiosks in Asda stores.

In July 2022 the Group refinanced its existing £10m credit facility replacing it with a £30m committed revolving credit facility with HSBC UK and NatWest. The initial term is three years, with the potential to extend for a further 12 months. The main financial covenants on the lending are that leverage (EBITDA to net debt) shall be less than 2.5 times and that interest cover (EBITDA divided by interest) shall be greater than four times. The facility provides the Group with the ability to grow the rental business. By changing the rate of growth of the rental book there is an immediate impact on cash and therefore on the facility's financial covenants. The rate of growth of rental is an effective tool to manage the financial covenants of the facility.

Matthew Fowler

Chief Financial Officer

7 March 2023

 

Consolidated Statement of Comprehensive Income

	Note	Year ended 30 November 2022 £000	Year ended 30 November 2021 £000
Turnover	4 , 5	145,279	145,566
Cost of sales		(107,138)	(101,211)
Gross profit		38,141	44,355
Operating expenses		(38,478)	(35,875)
Operating expenses - exceptional		(174)	(22,000)
Total operating expenses		(38,652)	(57,875)
Adjusted EBITDA*	29	6,471	12,174
Depreciation of property, plant and equipment	14	(3,877)	(1,755)
Impairment of property, plant and equipment	14	(835)	(410)
Loss on disposal of property, plant and equipment	14	(19)	(12)
Amortisation of intangible assets	15	(1,910)	(1,517)
Equity - settled share-based payments	25	(167)	(17,379)
Other non - underlying items	6	(174)	(4,621)
Operating loss		(511)	(13,520)
Financial expense	10	(946)	(1,299)
Loss before taxation		(1,457)	(14,819)
Taxation	11	(3,278)	2,694
Loss for the period attributable to the equity holders of the parent		(4,735)	(12,125)
Other comprehensive income
Items that may be reclassified to profit and loss Foreign exchange differences on translation of foreign operations		145	38
Total comprehensive loss for the year attributable to the equity holders of the parent		(4,590)	(12,087)
		Pence	Pence
- basic loss per share	13	(4.8)p	(12.67)p
- diluted loss per share	13	(4.7)p	(12.67)p

*Adjusted EBITDA is a non-GAAP measure. See note 28 for definition and reconciliation.

Consolidated Statement of Financial Position

	Note	As at 30 November 2022 £000	As at 30 November 2021 £000
Assets Property, plant and equipment	14	13,995	6,118
Intangible assets	15	12,379	9,679
Deferred tax asset	12	1,909	5,333
Derivative financial asset	20	578	-
Total non-current assets		28,861	21,130
Inventories	18	8,824	8,019
Trade and other receivables	19	2,602	3,724
Derivative financial asset	20	555	-
Cash and cash equivalents	21	6,806	2,849
Total current assets		18,787	14,592
Total assets		47,648	35,722
Liabilities Trade and other payables	22	9,340	8,359
Lease liabilities	23	687	366
Corporation tax payable		-	269
Total current liabilities		10,027	8,994
Net current assets		8,760	5,598
Other interest-bearing loans and borrowings	23	14,675	887
Lease liabilities	23	3,403	1,557
Shares classified as debt	23	-	-
Total non-current liabilities		18,078	2,444
Total liabilities		28,105	11,438
Net assets		19,543	24,284
Equity Share capital	27	1,078	1,078
Share premium	27	14,449	14,449
Capital redemption reserve	27	1,108	1,108
Merger reserve	27	(991)	(991)
Translation reserve	27	25	(120)
Retained earnings		3,874	8,760
Equity attributable to the equity holders of the parent		19,543	24,284

These financial statements were approved by the board of directors on 7 March 2023 and were signed on its behalf by:

S Oliver

CEO

Company Statement of Financial Position

Registered number 12977343

	Note		As at 30 November 2022 £000	As at 30 November 2021 £000
Assets Investments	16		14,333	14,285
Total non-current assets			14,333	14,285
Trade and other receivables	19		10,757	11,476
Total current assets			10,757	11,476
Total assets			25,090	25,761
Liabilities Trade and other payables		22	37	-
Total liabilities			37	-
Net current assets			10,720	-
Net assets			25,053	25,761
Equity Share capital	27		1,078	1,078
Share premium	27		14,449	14,449
Capital redemption reserve	27		1,108	1,108
Merger reserve	27		801	801
Retained earnings			7,617	8,325
Equity attributable to the equity holders of the parent			25,053	25,761

The Company has taken advantage of the exemption permitted by Section 408 of the Companies Act 2006 not to present its own profit and loss account. The Company made a loss of £876,000 (2021: loss of £8,959,000) for the period.

These financial statements were approved by the board of directors on 7 March 2023 and were signed on its behalf by:

S Oliver

CEO

Consolidated Statement of Changes in Equity

		Share	Share	Capital redemption	Merger	Translation	Retained	Total
		capital	premium	reserve	reserve	reserve	earnings	Equity
	note	£000	£000	000	£000	£000	£000	£000
As at 1 December 2020		14	1,690	-	-	(158)	874	2,420
Loss for the year		-	-	-	-	-	(12,125)	(12,125)
Foreign currency translation		-	-		-	38		38
Total comprehensive income/ (loss) for the year		-	-	-	-	38	(12,125)	(12,087)
Cancellation of share premium	27	-	(1,690)	-	-	-	1,690	-
Reclassification of shares	27	1,100	-	-	-	-	-	1,100
Repurchase of deferred shares	27	(1,108)	-	1,108	-	-	-	-
Bonus issue of shares		991	-	-	(991)	-	-	-
Shares issued	27	81	14,922			-	-	15,003
Issue costs of shares Interest on preference shares waived by the	27	-	(473)			-	-	(473)
owners	26	-	-			-	185	185
Share-based payments	25	-	-			-	17,379	17,379
Tax effects of share-based payment charge							757	757
Balance as at 30 November 2021		1,078	14,449	1,108	(991)	(120)	8,760	24,284

		Share	Share	Capital redemption	Merger	Translation	Retained	Total
		capital	premium	reserve	reserve	reserve	earnings	Equity
	note	£000	£000	000	£000	£000	£000	£000
As at 1 December 2021		1,078	14,449	1,108	(991)	(120)	8,760	24,284
Loss for the year		-	-	-	-	-	(4,735)	(4,735)
Foreign currency translation		-	-		-	145		145
Total comprehensive income/ (loss) for the year		-	-	-	-	145	(4,735)	(4,590)
Share-based payments	25	-	-			-	167	167
Tax effects of share-based payment charge							(318)	(318)
Balance as at 30 November 2022		1,078	14,449	1,108	(991)	25	3,874	19,543

Company Statement of Changes in Equity

		Share	Share	Capital redemption	Merger	Retained	Total
		capital	premium	Reserve	reserve	earnings	Equity
	note	£000	£000	£000	£000	£000	£000
As at 27 October 2020		-	-	-	-	-	-
Loss for the period		-	-	-	-	(8,959)	(8,959)
Total comprehensive loss for the period		-	-	-	-	(8,959)	(8,959)
Share based payments	25				-	17,284	17,284
Share for share exchange	27	14	-		1,792	-	1,806
Reclassification of shares	27	1,100	-		-	-	1,100
Repurchase of deferred shares	27	(1,108)		1,108			-
Bonus issue of shares	27	991	-		(991)	-	-
Shares issued	27	81	14,922		-	-	15,003
Issue costs of shares	27	-	(473)		-	-	(473)
Balance as at 30 November 2021		1,078	14,449	1,108	801	8,325	25,761

Company Statement of Changes in Equity

		Share	Share	Capital redemption	Merger	Retained	Total
		capital	premium	Reserve	reserve	earnings	Equity
	note	£000	£000	£000	£000	£000	£000
As at 1 December 2021		1,078	14,449	1,108	801	8,325	25,761
Loss for the year		-	-	-	-	(875)	(875)
Total comprehensive loss for the year		-	-	-	-	(875)	(875)
Share based payments	25				-	167	167
Balance as at 30 November 2022		1,078	14,449	1,108	801	7,617	25,053

Consolidated Cash Flow Statement

	Year ended 30 November 2022 £000	Year ended 30 November 2021 £000
Net cash flows from operating activities Loss for the year	(4,735)	(12,125)
Adjustments for: Financial expense	946	1,299
Taxation expense
Depreciation of property, plant and equipment	3,877	1,755
Impairment of property, plant and equipment	835	410
Loss on property, plant and equipment	19	12
Amortisation of intangible assets	1,910	1,517
Fair value gain on derivative instruments	(1,133)	-
Share-based payments expense	167	17,379
Taxation paid	-	-
Working capital adjustments Increase in inventories	(805)	(1,184)
Decrease/ (increase) in trade and other receivables	1,122	(1,216)
Increase/(decrease) in trade and other payables	712	(2,522)
Net cash from operations	6,193	2,631
Cash flows used in investing activities Acquisition of property, plant and equipment	(9,661)	(4,404)
Capitalised development expenditure	(4,555)	(2,837)
Net cash used in investing activities	(14,216)	(7,241)
Cash flows from financing activities Proceeds from new loan	21,026	1,000
Proceeds from shares issued	-	15,002
Costs incurred on IPO charged to Share Premium	-	(473)
Financial expenses paid	(577)	(2,275)
Lease liabilities paid	(868)	(618)
Interest paid on lease liabilities	(169)	(131)
Repayment of other loans	(7,500)	(6,000)
Repayment of shareholder loan notes	-	(4,200)
Net cash from financing activities	11,912	2,305
Net (decrease)/increase in cash and cash equivalents	3,889	(2,305)
Cash and cash equivalents brought forward	2,849	5,140
Effect of exchange rate fluctuations on cash	68	14
Cash and cash equivalents carried forward	6,806	2,849

 

 

Notes

1.  CORPORATE INFORMATION

The Directors of musicMagpie plc (the "Company") present their full year report and the audited Consolidated Financial Statements for the year ended 30 November 2022.

musicMagpie plc is a public limited company incorporated in the United Kingdom whose shares are publicly traded on the Alternative Investment Market (AIM) of the London Stock Exchange and is incorporated and domiciled in the UK. Its registered office address is One Stockport Exchange, Railway Road, Stockport, Cheshire, SK1 3SW.

The Company's financial statements are included in the consolidated financial statements of musicMagpie plc, which can be obtained from its registered office address. The Company has taken advantage of the exemption permitted by Section 408 of the Companies Act 2006 not to present its own profit and loss account.

The Company, musicMagpie plc is the ultimate Group company of the consolidated Group.

2.  ACCOUNTING POLICIES

2.1  Basis of Preparation

The consolidated financial statements have been prepared in accordance with UK adopted International Accounting Standards  and with those parts of the Companies Act 2006 applicable to companies reporting under International Accounting Standards. The Group has chosen to prepare the parent company financial statements in accordance with Financial Reporting Standard 101: Reduced Disclosure Framework ("FRS 101"). The financial statements have been prepared under the historical cost convention, except for derivative financial instruments which are measured at fair value through profit or loss.

The accounting policies that follow set out those policies that apply in preparing the financial statements for the year ended 30 November 2022 and the Group and Company have applied the same policies throughout the year.

The following exemptions from the requirements of IFRS have been applied in the preparation of the Company's financial statements and, where relevant, equivalent disclosures have been made in the Group accounts of the parent, in accordance with FRS 101:

· Presentation of a Statement of Cash Flows and related notes;

· Disclosure of the future impact of new International Financial Reporting Standards in issue but not yet effective at the reporting date;

· Financial instrument disclosures;

· A reconciliation of the number and weighted average exercise prices of share options, how the fair value of share-based payments was determined and their effect on profit or loss and the financial position;

· Related party disclosures for transactions between the parent and  wholly owned members of the Group;

· Disclosure of the objectives, policies and processes for managing capital.

Basis of Consolidation

A subsidiary is an entity that is controlled by the parent. The results of subsidiary undertakings are included in the consolidated statement of comprehensive income from the date that control commences until the date that control ceases. Control is established when the Group has the power to govern the operating and financial policies of an entity so as to obtain benefits from its activities. In assessing control, the musicMagpie Group takes into consideration potential voting rights that are currently exercisable.

All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.

2.2  Going Concern

The financial statements are prepared on a going concern basis which the directors believe to be appropriate for the following reasons. The Group made a loss before taxation of £1,457,000 during the year ended 30 November 2022 (year ended 30 November 2021: loss of £14,819,000).  At the year-end date it had net current assets of £8,760,000 (year ended 30 November 2021: £5,598,000).  The Group has access to a £30m committed credit facility.

The Group presently meets its day to day working capital requirements through cash reserves and its bank facilities which are subject to various facility limits and covenants. The directors have reviewed the trading and cash flow forecasts for the 12 month period from the date of approval of the financial statements as part of their going concern assessment and having incorporated reasonable downside sensitivities have confirmed that the Group will be able to continue to meet quarterly covenant tests and remain within the borrowing limits set out within its bank facility agreement.

The Directors therefore believe there is a reasonable expectation that the Group can continue as a going concern for at least the next 12 months from the date of approval of the financial statements. Accordingly, they continue to adopt the going concern basis in preparing the financial statements.

2.3  Foreign currency

Transactions in foreign currencies are translated to the functional currency at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the foreign exchange rate ruling at that date and the foreign exchange differences arising on translation are recognised in profit or loss.  The functional currency of the Company is sterling.

The assets and liabilities of foreign operations are translated to the presentational currency, sterling, at foreign exchange rates ruling at the reporting date. The revenues and expenses of foreign operations are translated at an average rate for the year where this rate approximates to the foreign exchange rates ruling at the dates of the transactions. Foreign exchange differences arising on retranslation are recognised in profit or loss.

2.4  Financial instruments

Financial assets

Financial assets comprise trade and other receivables (including intercompany balances) and cash and cash equivalents.

Trade receivables are initially measured at transaction price, and subsequently at their amortised cost subject to any impairment in accordance with IFRS 9.

Trade and other receivables are recognised initially at the amount of consideration that is unconditional. The Group holds these receivables with the objective of collecting contractual cash flows and therefore measures them subsequently at amortised cost using the effective interest method.

Cash and cash equivalents comprise cash in hand, cash at bank, cash in transit and call deposits. Cash in transit comprise of cash collected from the customers by third party e-commerce platforms but not yet received by the Group. These balances are considered to be highly liquid, with minimal risk of default and are typically received within a week.

The assessment of impairment of trade receivables and other receivables, including intercompany balances is in accordance with IFRS 9. Impairment is assessed by reference to expected recoverability of assets, including the underlying profitability and cash flows from subsidiaries from whom intercompany balances are owed. A loss allowance for expected credit losses (ECL) is recognised on all receivable balances subsequently measured at amortised cost as follows:

For trade receivables, lifetime ECLs are recognised using the 'simplified approach' permitted under IFRS 9.

For other financial instruments, lifetime ECLs are recognised when there has been a significant increase in credit risk since initial recognition. However, if the credit risk on the financial instrument has not increased significantly since initial recognition, the loss allowance for that financial instrument is measured at an amount equal to 12-month ECL.

Lifetime ECL represents the expected credit losses that will result from all possible default events over the expected life of a financial instrument. In contrast, 12-month ECL represents the portion of lifetime ECL that is expected to result from default events on a financial instrument that are possible within 12 months after the reporting date.

Credit risk on a financial instrument (including intercompany balances), is assumed not to have increased significantly since initial recognition if the financial instrument is determined to have low credit risk at the reporting date. A financial instrument is determined to have low credit risk if:

· the financial instrument has a low risk of default;

· the debtor has a strong capacity to meet its contractual cash flow obligations in the near term; and;

· adverse changes in economic and business conditions in the longer term may, but will not necessarily, reduce the ability of the borrower to fulfil its contractual cash flow obligations.

Financial liabilities

Financial liabilities comprise trade and other payables, and interest-bearing loans. These are measured at initial recognition at fair value and subsequently at amortised cost using the effective interest rate method. Interest expense and foreign exchange gains and losses are recognised in profit or loss. Any gain or loss on derecognition is also recognised in profit or loss.

Classification of financial instruments issued by the Group

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 Group 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 musicMagpie Group; and

b)  where the instrument will or may be settled in the Group's own equity instruments, it is either a non- derivative that includes no obligation to deliver a variable number of the musicMagpie Group's own equity instruments or is a derivative that will be settled by the musicMagpie Group's 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 musicMagpie Group's own shares, the amounts presented in these financial statements for called up share capital and share premium account exclude amounts in relation to those shares.

Inter-company balances are classified as current in the financial statements.  In arriving at this classification, management have looked at the financial position of the subsidiary entities and  their relative ability to meet balances owing and considered scenarios where there are possible issues with repayment.

2.5  Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses. Property, plant and equipment includes assets rented to customers (Rental Assets) which, as we retain ownership of the device throughout the contractual term, the cost of the asset is capitalised and depreciated over its expected remaining useful economic life.

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.

The Company assesses at each reporting date whether property, plant and equipment are impaired.

Depreciation is charged to profit and loss over the estimated useful lives of each part of an item of Property, plant and equipment . Leased assets are depreciated over the shorter of the lease term and their useful lives. The estimated useful lives are as follows:

Plant and machinery	6 - 7 years	Straight line
Motor vehicles	3 years	Straight line
Fixtures and fittings	6 - 7 years	Straight line
Computer and office equipment	3 years	Straight line
Rental assets	33%	Reducing balance

Depreciation methods, useful lives and residual values are reviewed at each reporting date.

2.6  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 recognised amount of any non-controlling interests in the acquiree; 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.

When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss.  Costs related to the acquisition, other than those associated with the issue of debt or equity securities, are expensed as incurred.

2.7  Intangible assets

Goodwill

Goodwill is stated at cost less any accumulated impairment losses. This represents Goodwill in the business as a whole and this is not amortised but is tested annually for impairment.

Research and development

Expenditure on development activities is capitalised if the product or process is technically and commercially feasible and the Group intends and has the technical ability and sufficient resources to complete development, future economic benefits are probable and if the Group can measure reliably the expenditure attributable to the intangible asset during its development. Development activities involve a plan or design for the production of new or substantially improved products or processes. The expenditure capitalised includes the cost of materials, direct labour and an appropriate proportion of overheads. Capitalised development expenditure is stated at cost less accumulated amortisation and less accumulated impairment losses. Research and other development expenditure is expensed as incurred.

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.

Amortisation

Amortisation is charged to the profit or loss on a straight-line basis over the estimated useful lives of intangible assets unless such lives are indefinite. Intangible assets with an indefinite useful life and goodwill are systematically tested for impairment at each reporting date. Other intangible assets are amortised from the date they are available for use. The estimated useful lives are as follows:

· Website development	3 - 5 years
· Capitalised IT development costs	3 - 5 years
· Acquired intangibles (proprietary software)	10 years
· Domains	10 years

2.8  Investments

Investments in subsidiaries are held at cost, less any provision for impairment

2.9  Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is based on the first-in first-out principle. The cost of inventories includes the average cost of purchase and other costs, such as inbound delivery and direct labour, in bringing them to their existing location and condition.  Net realizable value is measured by reference to sales prices in the market or products that can be readily sold and by an assessment of the harvestable value of components of a device if sale is not possible.

2.10  Impairment of non-financial assets excluding inventories and deferred tax 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, and intangible assets that have indefinite useful lives or that are not yet available for use, 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"). For the purpose of impairment testing, goodwill is allocated to a single cash-generating unit, or ("CGU"), being the Group as a whole reflecting the lowest level  at which the business is monitored for internal reporting purposes.

An impairment loss is recognised if the carrying amount of an asset or its CGU exceeds its estimated recoverable amount. Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of the CGU are allocated first to reduce the carrying amount of any goodwill allocated to the units, and then to reduce the carrying amounts of the other assets in the unit (Group of units) on a pro rata basis.

An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

2.11  Employee benefits

Defined contribution plans

A defined contribution 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 profit or loss in the periods during which services are rendered by employees.

Short-term benefits

Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognised for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.

Share based payments

Share-based payment arrangements in which the Group receives goods or services as consideration for its own equity instruments are accounted for as equity-settled share-based payment transactions, regardless of how the equity instruments are obtained by the Company.

The grant date fair value of share-based payments awards granted to employees is recognised as an employee expense, with a corresponding increase in equity, over the period in which the employees become unconditionally entitled to the awards. The fair value of the awards granted is measured using either Monte Carlo option pricing model or Black Scholes model, taking into account the terms and conditions upon which the awards were granted. The amount recognised as an expense is adjusted to reflect the actual number of awards for which the related service and non-market vesting conditions are expected to be met, such that the amount ultimately recognised as an expense is based on the number of awards that do meet the related service and non-market performance conditions at the vesting date. See note 25 for details of employee share options incentive plans operated by the Group.

2.12 Provisions

A provision is recognised in the statement of financial position 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.

2.13 Revenue

Revenue is income generated from the sale or rental of goods in the ordinary course of the Group's business activities. In accordance with IFRS 15, revenue is recognised when any performance obligations in a contract with a customer has been satisfied.  The Group's revenues are derived from the supply of goods (technology, media and books) and the rental of mobile phones to customers.

Sale of goods

Revenue represents the fair value of amounts receivable for goods and is stated net of discounts, value added taxes and returns. The Group does not operate any loyalty programmes. The supply of goods contains a single performance obligation with the customer to deliver the goods and revenue is recognised on dispatch of goods to the customer. For goods sold direct to consumers, payment is usually received at the point of sale. For goods sold via wholesale channels, a sales invoice is raised on dispatch.

Revenues for goods and services are recognised on despatch to the customer instead of delivery to the customer for practical reasons.

Rental of devices

The Group also earns rental income on devices rented to customers over a fixed term. The ownership of  the device does not pass to the customer at the end of the contract term and there is no option to purchase the device at any point during the contract term. Rental payments are received on a monthly basis and early termination charges are payable if the contract is terminated before the end of the term by the customer.

The contracts for the rental of devices are classified as operating leases in accordance with IFRS 16 'Leases'.  The Group recognises lease payments received under operating leases as income on a straight-line basis over the lease term. Early termination charges are recognised as income in the period in which the contract is terminated.

2.14  Financial expense

Financial expense includes interest payable..

2.15  Taxation

Tax on the profit or loss for the year comprises current and deferred tax. Tax is recognised in the income statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.

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 reporting date, and any adjustment to tax payable in respect of previous years. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.

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 following temporary differences are not provided for: the initial recognition of goodwill; the initial recognition of assets or liabilities that affect neither accounting nor taxable profit other than in a business combination, and differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. 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 reporting 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. Deferred tax assets and liabilities are offset where there is a legally enforceable right to offset current tax assets and liabilities and where the deferred tax balances relate to the same taxation authority.

2.16  Leases as lessee

At the commencement date of the lease, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

Recognition and measurement

At commencement or on modification of a contract that contains a lease component, along with one or more other lease or non-lease components, the Group accounts for each lease component separately from the non- lease components. The Group allocates the consideration in the contract to each lease component on the basis of its relative stand-alone price and the aggregate stand-alone price of the non-lease components.

The Group recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use assets comprise the initial measurement of the corresponding lease liability, lease payments made at or before the commencement day, less any lease incentives received and any initial direct costs. They are subsequently measured at cost less accumulated depreciation and impairment losses.

The right-of-use asset is depreciated using the straight-line method from the commencement date to the end of the lease term, unless the lease transfers ownership of the underlying asset to the Group by the end of the lease term or the cost of the right-of-use asset reflects that the Group will exercise a purchase option. In that case, the right-of-use asset will be depreciated over the useful life of the underlying asset, which is determined on the same basis as those of property and equipment. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group's incremental borrowing rate. The Group has applied the incremental borrowing rate for calculating the lease liability of 5%. The incremental borrowing rate is the rate of interest that the Group would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value to the right-of-use assets in a similar economic environment. The Group determines its incremental borrowing rate with reference to its existing and historical cost of borrowing adjusted for the term and security against such borrowings.

Lease payments included in the measurement of the lease liability comprise the following:

• fixed payments, including in-substance fixed payments;

• variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date

• amounts expected to be payable under a residual value guarantee; and

• the exercise price under a purchase option that the Group is reasonably certain to exercise,

• lease payments in an optional renewal period if the Group is reasonably certain to exercise an extension option, and

• penalties for early termination of a lease unless the Group is reasonably certain not to terminate early.

The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, there is a change in the Group's estimate of the amount expected to be payable under a residual value guarantee, if the Group changes its assessment of whether it will exercise a purchase, extension or termination option or if there is a revised in- substance fixed lease payment.

When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, to the extent that the right-of-use asset is reduced to nil, with any further adjustment required from the remeasurement being recorded in profit or loss.

The Group presents right-of-use assets in 'property, plant and equipment' and lease liabilities on the face of the statement of financial position. The Group applies IAS 36 to determine whether a right-of-use asset is impaired and accounts for any identified impairment loss as described in policy 2.10.

Short-term leases and leases of low-value assets

The Group has elected not to recognise right-of-use assets and lease liabilities for lease of low-value assets and short-term leases. The Group recognises the lease payments associated with these leases as an expense on a straight-line basis over the lease term.

2.17 Derivative financial instruments

The Group accounts for derivative instruments under IFRS 9 Financial Instruments.  The Group does not hedge account.  As such  derivative instruments are measured at fair value through the profit and loss at each reporting date.

3.1  Significant accounting judgements and estimates

Judgements made by the Directors, in the application of these accounting policies that have significant effect on the financial statements and estimates with a significant risk of material adjustment in the next year are discussed below.

Key sources of estimation uncertainty

• Impairment of assets - in testing for impairment of investments, goodwill and other intangible assets, management have made certain assumptions concerning the future development of the business that are consistent with its annual budget and forecasts into perpetuity. Should these assumptions regarding the discount rate or growth in the profitability be unfounded then it is possible that investments and other assets included in the statement of financial position could be impaired. See further details in note 15.

• Inventory provisioning - the Group carries significant amounts of inventory against which there are provisions for slow moving lines. The provisioning policies require a degree of judgement and the use of estimates around future sales based on the historical demand for product lines.  As product is almost always in a condition ready for immediate sale, any costs necessary to make stock sellable are immaterial. In addition, management make use of this historical sales data regarding selling price of items in order to ensure that inventories are valued at the lower of cost and net realisable value. Inventories at the year-end were valued at £8,824,000 (Year ended 30 November 2021: £8,019,000) which included a provision for slow moving lines of £729,000 (Year ended 30 November 2021: £529,000).  If the estimate of future demand for product were under or overstated by 25% the provision would be impacted by £182,000 (£125,000).

• The Group has a derivative financial instrument in the Statement of Financial Position in the form of a forward contract to purchase electricity at a fixed price.  The mark to market of the forward contract requires various estimates to arrive at a fair value for the instrument at year end, which was £1,133,000 (2021: nil).  The valuation included a risk free fair value, a credit valuation adjustment and a debit valuation adjustment.  The main assumptions used to value these were the expected SONIA interest rate, the credit worthiness of both the Group and the electricity supplier, the implied volatility of electricity and the forward price of electricity in the market.  See note 6.  If the Group was assumed to have maximum creditworthiness the debit value adjustment of the asset would reduce by £394,000.

Critical accounting judgements in applying the Group's accounting policies

Certain critical accounting judgements (apart from those involving estimations included above) in applying the Group's accounting policies are described below.

· The Group has deferred taxation assets on the balance sheet of £1,909,000 (2021: £5,333,000).  In arriving at the carrying value management have made judgments as to whether the deferred taxation will be utilized in future periods.  When concluding that the deferred taxation assets will be utilized management have had regard to the board approved one year budget and the group's five year plan,.  These future forecasts show the Group to profitable owing to the long term benefit to profits from the investment and planned growth in Rental.  Based on the growth plans of Rental, and utilization of the deferred taxation assets occurs within 5-7 years.

 

3.2  New accounting standards and interpretations issued but not yet effective

The following Adopted IFRSs have been issued but have not been applied in these financial statements. Their adoption is not expected to have a material effect on the financial statements unless otherwise indicated:

• Amendments to IAS 8: Definition of Accounting Estimates (effective 1 January 2023).

• Amendments to IAS 1 and IFRS Practice Statement 2: Disclosures of Accounting Policies (effective 1 January 2023).

• Amendments to IAS 12: Deferred Tax related to Assets and Liabilities arising from a Single Transaction (effective 1 January 2023).

• Amendments to IAS 1 Presentation of Financial Statements: Classification of Liabilities as Current or Non-current and Classification of Liabilities as Current or Non-current (effective 1 Janaury 2024).

The Group has not early adopted any accounting standards.

4.  Segmental reporting

The Chief Operating Decision Maker (CODM) has been determined to be the Chief Executive Officer, with support from the Board. InformationreportedtotheChiefExecutiveOfficerfor the purposes of resource allocation and assessment of segment performance is focused on product categories. The principal product categories and the Group's reportable segments under IFRS 8 are Technology, Media and Books.

An analysis of the results for the period by reportable segment is as follows:

Year ended 30 November 2022	Technology			Media and books	Total
	Outright sales	Rental income	Total
	£000	£000	£000	£000	£000
Revenue	91,213	5,345	96,558	48,721	145,279
Gross profit	15,944	4,207	20,151	17,990	38,141
Processing wages	(4,428)	-	(4,428)	(8,218)	(12,646)
Contribution after direct labour	11,516	4,207	15,723	9,772	25,495
Trading margin (%)	26.8	100.0	30.9	82.4	48.2
Gross margin (%)	17.5	78.7	20.9	36.9	26.3

Trading margin is the sale proceeds less the cost of the product and is one method used by the Company to assess profitability of segments and product lines.

Contracted rental income outstanding at the year ended 30 November 2022 amounted to approximately £3,111,000  (Year ended 30 November 2021: £1,864,805) which is due in the next 12 months.

Year ended 30 November 2021	Technology			Media and books	Total
	Outright sales	Rental income	Total
	£000	£000	£000	£000	£000
Revenue	84,245	1,809	86,054	59,512	145,566
Gross profit	19,973	1,311	21,284	23,071	44,355
Processing wages	(3,988)	-	(3,988)	(8,225)	(12,213)
Contribution after direct labour	15,985	1,311	17,296	14,846	32,142
Trading margin (%)	32.5	100.0	33.9	81.7	53.4
Gross margin (%)	23.7	72.4	24.7	38.7	30.4

5.  Revenue

Disaggregation of revenue

An analysis of revenue by geographical market is given below:

	Year ended	Year ended
	30 November 2022 £000	30 November 2021 £000
United Kingdom	102,727	108,065
Within the European Community	4,086	4,225
United States of America	34,362	29,274
Outside the European Community (excluding the USA)	4,104	4,002
Total	145,279	145,566

An analysis of revenue by country of origination is given below:

	Year ended	Year ended
	30 November 2022 £000	30 November 2021 £000
United Kingdom	110,233	115,453
United States of America	35,046	30,113
Total	145,279	145,566

Due to the nature of the Group's business, it is not materially affected by seasonal or cyclical trading.

6.   Other non-underlying items	Year ended	Year ended
	30 November 2022 £000	30 November 2021 £000
Non-underlying gain	1,133	-
IPO related costs	-	(3,998)
Other non-underlying costs	(1,307)	(623)
Total	(174)	4,621

Underlying performance excludes the above gain and expenses which consist of the following in line with historic treatments, or because they are large or one-off in nature. For 2022 these consisted of:

-  Mark to market gain made by the Group on various forward contracts for the purchase of electricity.  The purchase price for electricity that the Group has contracted at is below the market price of electricity at the reporting date and the resulting gain has been classified as non-underlying.

-  Dual running IT costs related to IPO £0.9m

-  COVID related expenditure of £0.2m

-  VAT settlement relating to a pre-Brexit tax structure of £0.2m

For 2021, IPO related costs related to costs incurred in admitting musicMagpie plc onto the Alternative Investment Market ("AIM") on 22 April 2021. Other non-underlying costs in 2021 costs related to non-recurring redundancy, additional COVID related expenditure costs and non-executive monitoring fees.

7. Operating loss included in the loss are the following		Year ended 30 November 2022 £000	Year ended 30 November 2021 £000
Amortisation of intangible assets		1,910	1,517
Depreciation of property, plant & equipment:
Owned assets		3,152	1,130
Right-of-use assets		725	627
Impairment of property, plant and equipment		835	410
Loss on disposal of property, plant and equipment		19	12
Auditor's remuneration:
Audit of these financial statements*		177	145
Other assurance services		-	-
Net forex gains in the period		145	38
* £15,000 (year ended 30 November 2021: £15,000) related to the audit of the company. The group undertook no R&D that needed to be expensed in the year (year ended 30 November 2021: £nil)
8.   Remuneration of directors	Year ended		Year ended
Short term benefits	30 November 2022 £000		30 November 2021 £000
Directors' emoluments	664		626
Employers pension contributions	9		2
Amounts paid to third parties in respect of directors' services	-		10
Total	673		638

Included in the above are amounts paid to Non-executive directors of £230,000 (year ended 30 November 2021: £183,000).

The aggregate of emoluments of the highest paid director were £311,000 (year ended 30 November 2021: £326,000). Pension contributions paid on his behalf were £7,000 (period ended 30 November 2021: £2,000).

The comparative information relates the amounts paid to the Directors for qualifying services provided to the Company from the IPO combined with amounts paid to the directors for services provided to former parent company (Entertainment Magpie Group Limited) prior to that date.

Information on Directors' remuneration for the year ended 30 November 2022 is set out on pages 51 to 54.

9.   Staff numbers and costs

The average number of persons employed by the Group (including directors) during each financial period, analysed by category, was as follows:

	Group   2022	Group   2021	Company 2022	Company 2021
Office and administration	202	198	12	11
Warehouse	481	449	-	-
Total	683	647	12	11
The aggregate payroll costs of these persons were as follows:
	Group   2022   £000	Group   2021   £000	Company  2022   £000	Company   2021   £000
Wages and salaries	17,790	18,083	1,094	1,027
Social security costs	1,317	1,188	143	164
Other pension costs	271	317	10	5
Equity-settled share-based payments (see note 25)	167	17,379	-	5,908
Total	19,545	36,967	1,247	7,104

In addition to the above payroll costs, a further £2,661,000 (Year ended 30 November 2021: £2,040,000) has been capitalised as they relate to website and IT development costs.

Included in the above wages and salaries costs are temporary staff who were paid £3,010,000 during the year (Year ended 30 November 2021: £3,024,000).

10. Financial expense	Year ended	Year ended
	30 November 2022	30 November 2021
	£000	£000
Interest expense on loan notes	-	176
Interest on bank and other loans	323	209
Interest expense on lease liabilities	169	107
Other non-underlying financial expense	152	438
Bank interest and similar charges	302	369
Interest expense on preference shares classified as liabilities	-	-
	946	1,299

Other non-underlying financial expenses are finance costs written off that relate to previous debt structures.

11.  Taxation

	Year ended 30 November 2022 £000	Year ended 30 November 2021 £000
Current tax expense
UK corporation tax on profits for the period	40	636
Adjustments in respect of previous periods	132	19
Total current tax expense	172	655
Deferred tax credit
Origination and reversal of timing differences	3,014	(2,372)
Adjustment in respect of previous periods	92	(18)
Effect of changes in tax rates	-	(959)
Total deferred tax charge/ (credit)	3,106	(3,349)
Total tax charge (credit) in the income statement	3,278	(2,694)

Equity items
Current tax	-	(439)
Deferred tax current year charge/(credit)	318	(318)
Total	318	(757)

Reconciliation of effective tax rate

	Year ended 30 November 2022 £000	Year ended 30 November 2021 £000
Loss	(1,457)	(14,819)
Tax using the UK corporation tax rate of 19% (2021: 19%)	(277)	(2,816)
Other tax adjustments, reliefs and transfers	20	923
Adjustments in respect of prior periods - current tax Adjustments in respect of prior periods - deferred tax	132 92	(52) -
Tax rate changes Research and Development Expenditure Credit	- 40	(959) -
Share options	3,000	563
Deferred tax not recognised	271	(124)
Tax losses recognised in the period	-	(229)
Total tax charge/ (credit) in the income statement	3,278	(2,694)

12.  Deferred tax

	Tax losses £000	Capital allowances £000	Share options* £000	Others £000	Total £000
At 30 November 2021	1,357	102	3,735	139	5,333
Credited/(debited) to profit or loss	536	(712)	(3,000)	70	(3,106)
Debited to equity	-	-	(318)	-	(318)
At 30 November 2022	1,893	(610)	417	209	1,909

In the budget on 3 March 2021, the UK Government announced an increase in the main UK corporation tax rate from 19% to 25% with effect from 1 April 2023. The change in rate was substantively enacted on 24 May 2021.

The deferred tax asset is calculated at 25% (2021 25%) based on the rate substantively enacted at the reporting date. Deferred tax assets and liabilities are offset where there is a legally  enforceable right to offset

*The deferred taxation asset is related to share-based payments has been revalued using the share price at the balance sheet date.  Owing to the reduction in the share price from November 2021 to November 2022 the value of the share based payments deferred taxation asset has fallen

In addition to the above, the group has un-recognised Deferred tax assets in respect of carried forward losses amounting to £1,676,000 (Year ended 30 November 2021: £1,364,000).

13.  Earnings per share

	note	Year ended 30 November 2022 £000	Year ended 30 November 2021 £000
Loss for the period		(4,735)	(12,125)
		Number	Number
Weighted average number of shares	1 , 2	98,588,041	95,680,242
Diluted number of shares		101,153,813	95,680,242
		Pence	Pence
Basic loss per share (pence)		(4.8)	(12.67)
Diluted loss per share (pence)		(4.7)	(12.67)
Notes:

1  The  weighted average number of shares and diluted number of shares excludes share held by the Employee Benefit Trust in respect of share options outstanding and exercisable at the end of the year. See note 25 for further details.

2  No adjustment has been made to the diluted weighted average number of shares for the sharesave share option schemes as these have an antidilutive effect.  .

Adjusted earnings per share is disclosed in Note 29 (Alternative Performance Measures) to show performance undistorted by adjusting items and is therefore considered to show the underlying performance of the Group.

14.  Property, plant and equipment

	Right of use lease assets	Plant and machinery	Motor vehicles	Fixtures and fittings	Rental assets	Computer and office equipment	Total
	£000	£000	£000	£000	£000	£000	£000
Cost
Balance at 1 December 2020	4,535	3,117	285	2,554	63	4,001	14,555
Additions	-	339	-	113	3,657	295	4,404
Effect of movements in foreign currency	3	1	-	1	-	1	6
Impairment	-	-	-	-	(462)	-	(462)
Disposals	-	-	(285)	-	-	-	(285)
Balance at 30 November 2021	4,538	3,457	-	2,668	3,258	4,297	18,218
Additions	2,620	2,203	-	447	8,018	261	13,549
Effect of movements in foreign currency	161	24	-	30	-	8	223
Impairment	-	-	-	-	(1,120)	-	(1,120)
Disposals		(2,928)	-	(1,245)	(1,395)	(2,937)	(8,505)
Balance at 30 November 2022	7,319	2,756	-	1,900	8,761	1,629	22,365
Depreciation
Balance at 1 December 2020	2,202	2,577	273	1,881	1	3,733	10,667
Charge for the year	627	297	-	196	471	164	1,755
Effect of movements in foreign currency	-	1	-	1	-	-	2
Impairment	-	-	-	-	(52)	-	(52)
Disposals	-	-	(273)	-	-	-	(273)
Balance at 30 November 2021	2,829	2,875	-	2,078	420	3,897	12,099
Charge for the year	725	316	-	235	2,385	216	3,877
Effect of movements in foreign currency	78	12	-	20	-	5	115
Impairment	-	-	-	-	(283)	-	(283)
Disposals	-	(2,839)	-	(1,262)	(401)	(2,936)	(7,438)
Balance at 30 November 2022	3,632	364	-	1,071	2,121	1,182	8,370
Net book value
At 30 November 2022	3,687	2,392	-	829	6,640	447	13,995
At 30 November 2021	1,709	582	-	590	2,838	399	6,118
Once rental contracts pass a certain ageing of delinquency, the contracts are considered irrecoverable and the value of the handsets on rent impaired down to zero value.
Company
The Company has no tangible fixed assets.

15.  Intangible assets

	Goodwill	Website development	IT development	Proprietary software	Domains	Total
	£000	£000	£000	£000	£000	£000
Cost
Balance at 1 December 2020	4,848	1,264	6,155	3,000	53	15,320
Additions	-	195	2,643	-	-	2,837
Disposals	-	-	-	-	-	-
Balance at 30 November 2021	4,848	1,459	8,798	3,000	53	18,158
Additions	-	168	4,387	-	-	4,555
Disposals	-	(1,081)	(3,760)	-	-	(4,841)
Balance at 30 November 2022	4,848	546	9,425	3,000	53	17,872
Amortisation
Balance at 1 December 2020	-	1,054	4,402	1,482	24	6,962
Charge for the year	-	79	1,132	300	5	1,517
Disposals	-	-	-	-	-	-
Balance at 30 November 2021	-	1,133	5,534	1,782	29	8,479
Charge for the year	-	120	1,485	300	5	1,910
Disposals	-	(1,047)	(3,848)	-	-	(4,895)
Balance at 30 November 2022	-	206	3,171	2,082	34	5,493
Net book value
At 30 November 2022	4,848	340	6,254	918	19	12,379
At 30 November 2021	4,848	325	3,263	1,218	24	9,679

All amortisation of intangible assets is charged to the consolidated statement of comprehensive income and is included within operating expenses (see note 7).

Company

The Company has no intangible fixed assets.

Intangible assets and goodwill

The Group has two cash generating units (CGUs): a Rental CGU and a non-rental CGU.  Goodwill arising from the acquisition of Entertainment Magpie Holdings Limited in September 2015 is allocated to the non-rental CGU.  Intangible assets are then allocated between the CGUs based on the specific nature of cost.

Goodwill is tested annually for impairment on the basis of value in use calculations using discounted cash flows. The key assumptions of these calculations are shown below:

	30 November 2022	30 November 2021
Period on which management approved forecasts are based	5 years	4 years
Growth rate applied beyond approved forecast period	(10%)	2%
Discount rate Pre-tax 11.00%	Post tax 8.17%

The method  used to calculate the discounted cashflows for each CGU uses the same model, but with different assumptions for each .  The methodology for each is as follows:  A standard discounted cashflow model is used.  The discounted cashflow valuation uses the board approved budget and five year plan for the first five years .  For years six to ten there is an assumed retraction in the model of 10% per annum, which is considered a prudent allowance for the unpredictability of these out years.  Year ten uses a terminal value on the cashflow from that year for the non-rental CGU.  Given the rental CGU is a relatively new business, no terminal value is ascribed to that CGU  Inflation in the cost base is captured in the board approved plans, however as noted in the strategic review the Group is somewhat insulated from inflation owing to the buy-sell nature of the Consumer Technology segment and the use of energy contracts entered into in summer of 2022.

The key assumptions upon which management have based their cash flow projections are:

· The weighted average cost of capital (WACC)  used to discount the future cashflows

· the use of a terminal value in year ten.

.

The recoverable amount of the Rental CGU is estimated to exceed the carrying amount of the CGU at 30 November 2022 by £34.9m.

The recoverable amount of the non-rental CGU is estimated to exceed the carrying amount of the CGU at 30 November 2022 by £1.6m.

The comparative for 2021 was calculated using a single CGU and the recoverable amount of the CGU was estimated to exceed the carrying amount of the CGU at 30 November 2021 by £85.5m."

The following sensitivities were run on the valuation approaches

· Increasing the WACC to 15% would not change the outcome of the review

· Excluding the terminal valuation would not change the outcome of the review

16.  Investments

Company	In subsidiaries £000
Cost and net book value
At the beginning of the year	14,285
Additions	48
At the end of the year	14,333

17. Subsidiaries

The Group consists of the parent Company, musicMagpie plc, incorporated in the UK and a number of subsidiaries held directly/indirectly by the parent. The table below shows details of all subsidiaries of musicMagpie Plc as at 30 November 2022.

Name of subsidiary	Principal place of business	Class of shares held	Proportion of ownership	Principal activity
Entertainment Magpie Group Limited ^	United Kingdom	Ordinary	100% Intermediate holding company
Entertainment Magpie Holdings Limited*^	United Kingdom	Ordinary	100% Intermediate holding company
Entertainment Magpie Limited*	United Kingdom	Ordinary	100%& Purchase & resale of electronic items and replay  media products
MM Guernsey Limited*^	Guernsey	Ordinary	100% Refurbishment & dispatch of replay media products
Mozo Media Limited *^	United Kingdom	Ordinary	100% Refurbishment & dispatch of replay media products
Entertainment Magpie, Inc*	United States of America	Ordinary	100% Refurbishment & dispatch of replay media products

*Held indirectly via Entertainment Magpie Group Limited

^ the company has met the relevant conditions for the directors to take advantage of the exemption conferred by s479A of the Companies Act 2006

18. Inventories	Year ended	Year ended
	30 November 2022 £000	30 November 2021 £000
Goods for resale	8,824	8,019
Total	8,824	8,019

Goods for resale recognised as cost of sales in the year ended 30 November 2022 amounted to £75,336,000 (Year ended 30 November 2021: £67,840,000). The write-down of inventories to net realisable value and reversals are included in cost of sales.

The Company's closing stock value is £nil (2021 - £nil) 19. Trade and other receivables Current assets	Group	Company	Group	Company
	2022	2022	2021	2021
	£000	£000	£000	£000
Trade receivables	701	-	786	-
Amounts due from Group companies	-	10,738	-	11,476
Other receivables	216	-	443	-
Prepayments and accrued income	1,685	19	2,496	-
Total	2,602	10,757	3,724	11,476

  Information related to the Group's exposure to credit risk, market risk and impairment losses on receivables are included in note 28.  Due to the short-term nature of the current receivables, their carrying amount is considered to be the same as their fair value determined using level 3 inputs.

20. Derivative financial asset	2022	2021
	£000	£000
Derivative financial asset
Derivatives not designated as hedging instruments	1,133	-
Total	1,133	-
Current and non-current:
Current	555	-
Non-current	578	-
Total	1,133	-

The derivative financial assets are all net settled; therefore, the maximum exposure to credit risk at the reporting date is the fair value of the derivative assets which are included in the consolidated financial statement of financial position.

21. Cash and cash equivalents

 

	2022	2021
	£000	£000
Cash and cash equivalents	6,806	2,849
Total	6,806	2,849

22.  Trade and other payables

 

 

	Group	Company	Group	Company
	2022	2022	2021	2021
	£000	£000	£000	£000
Trade payables	6,166	-	6,246	-
Other taxation and social security	542	-	601	-
Other payables and accruals	2,632	37	1,512	-
Total	9,340	37	8,359	-

Due to the short-term nature of the current payables, their carrying amount is considered to be the same as their fair value determined using level 3 inputs.

23.  Interest-bearing loans and borrowings

This note provides information about the contractual terms of the Group's interest-bearing loans and borrowings, which are measured at amortised cost. For more information about the Group's exposure to interest rate and foreign currency risk, see note 28.

2022		2021
£000		£000
Current liabilities
Lease liabilities	687	366
Total	687	366
Non-current liabilities
Bank loans	14,675	887
Lease liabilities	3,403	1,557
Total	18,078	2,444
Falling due within one year	687	366
Falling due after more than one year	18,376	2,557
Total	19,063	2,923
Unamortised debt issue costs	(298)	(113)
Total interest-bearing loans and borrowings	18,765	2,810

On 27 July 2022, the Group refinanced it loan with SVB with the introduction of a £30m three year committed Revolving Credit Facility ("RCF") arrangement with HSBC UK and Natwest banks. This agreement is potentially extendable by an additional 12 months if elected before the first anniversary of the facility.  The financial covenants of the facility are that leverage, measured as net debt divided by EBITDA, must be less than 2.5 times and that interest cover, measured as EBITDA divided by finance charges, must be grater than 4 times.

The terms of the facility include debentures over the assets of the company and a deposit control agreement over cash balances in the US entity. 

The Company has no borrowings.

Terms and debt repayment schedule 30 November 2022	Currency	Interest rate	Year of maturity	Face value	Carrying value
				£000	£000
Bank loans	GBP	SONIA + 1.95 -2.5%	2025 (+1 year)	14,973	14,675
Lease liabilities	GBP	5%	2023 - 2027	3,194	3,194
Lease liabilities	USD	5%	2027	896	896
Total				19,063	18,765

Interest on the RCF is dependent on leverage.

30 November 2021	Currency	Interest rate	Year of maturity	Face value	Carrying value
				£000	£000
Bank loans	GBP	SONIA + 2.0-2.5%	2024	1,000	887
Lease liabilities	GBP	5%	2018 - 2027	835	835
Lease liabilities	USD	5%	2027	1,088	1,088
Total				2,923	2,810

Changes in liabilities from financing activities

30 November 2022	Loan notes	Other loans	Bank loan	Shares classified as debt	Lease liabilities	Total
	£000	£000	£000	£000	£000		£000
Balance at 30 November 2021	-	-	887	-	1,923		2,810
Changes from financing cash flows Lease additions	-	-	-	-	3,035		3,035
Proceeds from new loan	-	-	21,026	-	-		21,026
Repayment of existing loans	-	-	(7,500)	-	-		(7,500)
Interest paid	-	-	(207)	-	(169)		(376)
Payment of lease liabilities	-	-	-	-	(868)		(868)
Total	-	-	14,206	-	3,921		18,127
Other changes Interest expense			323	-	169		492
Interest waived by the shareholders	-	-	-	-	-		-
Other movements	-		146	-	-		146
Share reorganisation	-	-	-	-	-		-
Total	-	-	469	-	169		638
Balance at 30 November 2022	-	-	14,675	-	4,090		18,765

30 November 2021	Loan notes	Other loans	Bank loan	Shares classified as debt	Lease liabilities	Total
	£000	£000	£000	£000	£000		£000
Balance at 30 November 2020	5,432	5,803	-	1,240	2,565		15,040
Changes from financing cash flows Repayment of borrowings	(4,200)	(6,000)	-	-	-		(10,200)
Proceeds from new loan	-	-	1,000	-	-		1,000
Interest paid	(1,408)	(345)	(105)	-	(131)		(1,989)
Payment of lease liabilities	-	-	-	-	(618)		(618)
Total	(5,608)	(6,345)	895	-	(749)		(11,807)
Other changes Interest expense	176	345	105	45	107		778
Interest waived by the shareholders	-	-	-	(185)	-		(185)
Other movements	-	197	(113)	-	-		84
Share reorganisation	-	-	-	(1,100)	-		(1,100)
Total	176	542	(8)	(1,240)	107		(423)
Balance at 30 November 2021	-	-	887	-	1,923		2,810

Other movement in other loans and bank loans represents additional loan fees paid during the year and amortisation of those loan fees.

24. Right of use assets and lease liabilities

All leases where the Group is a lessee are accounted for by recognising a right of use asset and a lease liability.  There are no short term or low value leases.

Amounts recognised in the consolidated statement of financial position

 

Right of use assets	Land and buildings £000
Balance at 1 December 2020	2,333
Additions to right of use assets	-
Effect of movements in foreign currency	3
Depreciation	(627)
Balance at 30 November 2021	1,709
Additions to right of use asset	2,620
Effect of movements in foreign currency	83
Depreciation	(725)
Balance at 30 November 2022	3,687

 

Lease liabilities	Land and buildings £000
Balance at 1 December 2020	2,565
Additions to lease liabilities	-
Interest expense	107
Lease payments	(749)
Balance at 30 November 2021	1,923
Additions to lease liabilities	3,035
Interest expense	169
Lease payments	(1,037)
Balance at 30 November 2022	4,090

Amounts recognised in the consolidated income statement

Land and buildings	Year ended 30 November 2022 £000	Year ended November 2021 £000
Depreciation charge on right of use assets	725	627
Interest on lease liabilities	169	107
Total	894	734

Lease liabilities - Maturity analysis of contractual undiscounted cash flows

	Carrying amount	Contractual cash flows	1 year or less	1-2 years	2-5 years	More than 5 years
	£000	£000	£000	£000	£000	£000
30 November 2022	4,090	4,916	867	969	2,357	723
30 November 2021	1,923	2,205	454	346	1,316	89

25. Employee benefits

Defined contribution pension

The Group operates defined contribution pension schemes. The pension cost charge for the year represents contributions payable by the Group to the schemes and amounted to £271,000 (Year ended 30 November 2021: £317,000).

Share based payments

EBT

On 8 February 2021, the Group adopted a new employee share option plan granting options to employees which would vest and become exercisable only on the occurrence of an exit event (including an IPO). The non-cash fair value charge recognised in relation to these in the period to 30 November 2021 under IFRS 2 'Share-based Payment' was £17,284,000. 

In August 2018, the Group granted equity-settled share options to certain employees. The non-cash fair value charge recognised in the period in respect of these equity-settled share options under the same vesting criteria as above was £95,000 (Year ended 30 November 2020: £381,000).  Both the February 2021 and August 2018 options are fully expensed and covered in total by shares held in the musicMagpie Employee Benefit Trust.

Sharesave

The Group has issued two sharesave schemes in an attempt to encourage share ownership by employees.  The 2021 scheme was not disclosed in the prior year owing to materiality and is shown here for the first time to give comparability with the 2022 scheme.  Both schemes were open to all employees of the Group.  A maximum of up to £500 per month can be invested into the schemes for a three year period starting on the grant date.  The option price of each award was set three days prior to the grant date.  The options have a ten year life.  Each option vests after 36 months and there are no performance criteria attached to vesting.  Vesting and exercise are subject to various conditions around individual service.  Participants do not need to exercise the options and can alternatively take cash out of the scheme at any time.

Long Term Incentive Plan (LTIP)

The Group operates an LTIP scheme for the Directors and certain senior managers.  There was one grant of options during the year and this is the only grant outstanding at the year end.  The number of options granted and their vesting criteria are determined by the Group's Remuneration Committee.  The vesting criteria are performance related and are set out in detail within the Directors Remuneration Report..  The options vest over three years (subject to the vesting criteria) and have a ten year life.  Vesting and exercise are subject to various conditions around individual service.

Details of the share options outstanding during the period are as follows:
	Number		Weighted exercise price			Weighted average remaining contracted life
Sharesave	2022	2021	2022		2021	2022		2021
Outstanding at 1 December	48,672	-
Granted during the year	508,720	103,391
Exercised	-	-
Forfeited	(3,200)	(54,719)
Outstanding at 30 November	554,192	48,672	£0.56		£1.82	9.75 yrs		8.75 yrs
	Number		Weighted exercise price			Weighted average remaining contracted life
EBT	2022	2021	2022		2021	2022		2021
Outstanding at 1 December	9,195,902	29,900
Granted during the year	-	116,734
Reclassification and bonus issue	-	11,065,979
Exercised	-	(2,016,711)
Outstanding at 30 November	9,195,902	9,195,902	£0.00		£0.00	5.4yrs		6.4yrs
	Number		Weighted exercise price			Weighted average remaining contracted life
LTIP	2022	2021	2022		2021	2022		2021
Outstanding at 1 December	-	-
Granted during the year	2,565,772	-
Exercised		-
Forfeited	-	-
Outstanding at 30 November	2,565,772	-	nil p		n/a	9.25		n/a

Fair value of share options and assumptions

	As at 30 November 2022			As at 30 November 2021
	LTIP	EBT	Sharesave	LTIP	EBT	Sharesave
Fair value at measurement date	£0.45	-	£nil	-	£1.88	£0.35
Share price at grant	£0.45	-	£0.31	-	£1.88	£1.82
Exercise price	£0.00	-	£0.45	-	nil	£1.82
Expected volatility	25.0%	-	25.0%	-	45.0%	25.0%
Expected dividends	0.0%	-	0.0%	-	0.0%	0.0%
Risk free interest rate	2.0%	-	2.0%	-	0.6%	1.25%
Option life	3.25 years	-	3.25 years	-	0.2 years	3.25 years

The sharesave and LTIP were calculated using a Black Scholes option pricing model.  The EBT was valued using a Monte Carlo option pricing model.

Volatility has been calculated using the standard deviation of the Group's daily share price since IPO in April 2021.  An additional 3% was added to the calculated volatility to account for the share price history being less than the valuation period.  Volatility in the prior year was calculated by reference to a peer group as there was insufficient data to calculate volatility for the Group independently.

Staff costs - equity settled share-based payments

		Year ended 30 November 2022 £000	Year ended 30 November 2021 £000
Sharesave		27	-
EBT		-	17,379
LTIP		140	-
		167	17,379

26. Related parties

Transactions with key management personnel

The Directors of musicMagpie plc together with the Senior Leadership Team (SLT) are considered to be the key management personnel of the Group for the purposes of this disclosure.  The Directors of musicMagpie plc and their immediate relatives control 12.3% percent of the voting shares of the Group.

Group

The compensation of the Directors, including amounts paid for services provided to the directors of the former parent company (Entertainment Magpie Group Limited) totalled £673,000 (Year ended 30 November 2021: £638,000). See note 8 for further details.

Compensation for other members of the Senior Leadership Team not included in the above totalled £1,095,000. (Year ended 30 November 2021: £986,000)

In addition, Equity-settled share-based payment charges and Employers NI with key management personnel totalled £371,000 (Year ended 30 November 2021: £17,276,000).

Other related party transactions The below transactions related to Northern Entities	Year ended	Year ended
	30 November 2022	30 November 2021
	£000	£000
Interest on loan and non-executive director fee charges	-	176
Waived interest on preference shares	-	(185)
Non-executive and monitoring fees	-	20

Transactions with the Employee Benefit Trust

There were no movements in EBT during the year (2021: issue of shares and satisfaction of exercised options (see notes 26 and 25 respectively)) and at the year end date, the EBT holds 9,195,902 shares representing 8.53% of the share capital of the Company to satisfy future exercises of outstanding and exercisable share option awards. 

Company

The compensation of the Directors totalled £664,000 (Year ended 30 November 2021: £408,000) and compensation for other members of the Senior Leadership Team £865,000 (Year ended 30 November 2021: £624,000).

In addition, Equity-settled share-based payment charges and Employers NI with the Directors totalled £138,000 (Year ended 30 November 2021: £5,970,000,000) and Equity-settled share-based payment charges and Employers NI for other members of the Senior Leadership Team £176,000 (Year ended 30 November 2021: £11,230,000).

Other related party transactions The below transactions related to Northern Entities (shareholder)	Year ended	Year ended
	30 November 2022	30 November 2021
	£000	£000
Interest on loan and non-executive director fee charges	-	37
Non-executive and monitoring fees	-	4

27. Capital and reserves Share capital

The authorised, issued and fully paid number of shares are set out below:

	Ordinary		Shares issued			Subdivision				Shares issued		Exercise		Subdivision		Ordinary		Share	Reclassification		Shares		Ordinary		Cancel		Ordinary
	shares		on			of shares				to Employee		of warrant		of shares		shares issued		reclassification	into Deferred		issued		shares		Deferred		shares
	30 Nov 2020		incorporation							Benefit Trust									Shares				issued on IPO		Shares		30 Nov 2021
	Number		Number			Number				Number		Number		Number		Number		Number	Number		Number		Number		Number		Number
A Ordinary shares of £0.01 each	375,000																	(375,000)									-
B Ordinary shares of £0.01 each	-											175,000						(175,000)									-
C1 Ordinary shares of £0.01 each	100															9,900		(10,000)									-
C2 Ordinary shares of £0.01 each	341,500					100												(341,600)									-
D1 Ordinary shares of £0.01 each	11,000									34,400								(45,400)									-
D1(A) Ordinary shares of £0.05 each	16,600													66,400				(83,000)									-
D2 Ordinary shares of £0.05 each	35,000													140,000				(175,000)									-
E Ordinary Shares of £2.00 each	1,500													298,500				(300,000)									-
F Ordinary Shares of £0.05 each	20,000													80,000				(100,000)									-
G Ordinary Shares of £0.01 each	-									56,117								(56,117)									-
H Ordinary Shares of £0.01 each	-									56,117								(56,117)									-
Preference shares of £1.00 each	1,100,000													108,900,000				(110,000,000)									-
Deferred Shares																			110,790,017						(110,790,017)		-
Ordinary Shares of £1 each Ordinary Shares of £0.01 each		- -			-		1	-	(1)								111,717,234			(110,790,017)		99,072,783		7,772,020		-		107,772,020
Total Share Capital (£'000)				14	-			-			1		2		1,100		-  -			-		991		78		(1,108)		1,078
	Ordinary		Shares issued			Subdivision				Shares issued		Exercise		Subdivision		Ordinary		Share	Reclassification		Shares		Ordinary		Cancel		Ordinary
	shares		on			of shares				to Employee		of warrant		of shares		shares issued		reclassification	into Deferred		issued		shares		Deferred		shares
	30 Nov 2021		incorporation							Benefit Trust									Shares				issued on IPO		Shares		30 Nov 2022
	Number		Number			Number				Number		Number		Number		Number		Number	Number		Number		Number		Number		Number
Ordinary Shares of £0.01 each	107,772,050				-			-			-		-		-		-    -					36,237		-		-		107,808,287
Total Share Capital (£'000)	1,078				-		-	-			-		-		-		-  -			-		-		-		-		1,078

The ordinary shares have full voting, dividend and capital distribution rights, including on winding up. They are non-redeemable.

The Company was incorporated on 27 October 2020 as a private company limited by shares in England and Wales to act as a holding company for the Group with the allotment of 1 share of £1. Prior to this, the share capital of the Group was represented by the share capitalofthepreviousparent,EntertainmentMagpieGroupLimited('EMGL').The Company was re-registered as a public limited company on 12 April 2021.

The following steps were taken in connection with the Group Reorganisation since the incorporation of the Company. On 5 February 2021:

- the one ordinary share of £1.00 in issue was subdivided into 100 ordinary shares of £0.01 each and redesignated as 100 C2 ordinary shares of £0.01 each.

On 8 February 2021:

- EMGL established a Jersey resident Employee Benefit Trust ('EBT') and issued 34,400 D1 ordinary shares of £0.01 each, 56,117

G ordinary shares of £0.01 each and 56,117 H ordinary shares of £0.01 each to the trustees of the EBT. EMGL provided the funds to purchasebywayofagiftof£1,466.34totheEBT,whichwas thenheldonitsbehalf by EMGL in satisfaction of the subscription price.

On 11 February 2021:

- EMGL undertook a capital reduction (supported by a solvency statement) pursuant to which the share premium account of the  company was reduced from £1,689,834 to nil.

On 30 March 2021:

- Lloyds Development Capital (Holdings) Limited ('LDC') exercised its warrant over 175,000 B ordinary shares of £0.01 each with  EMGL issuing shares of the corresponding denomination and value.

On 31 March 2021:

- the Company acquired the entire issued share capital of EMGL from the existing shareholders by way of share for share exchange for an equivalent number and class of shares in the capital of the Company.

On 15 April 2021:

-   the 16,600 D1 (A) ordinary shares of £0.05 each, the 35,000 D2 ordinary shares of £0.05 each, the 1,500 E ordinary shares of £2.00 each, the 20,000 F ordinary shares of £0.05 each and the 1,100,000 preference shares of £1.00 each were subdivided into 83,000D1(A) ordinaryshares of£0.01each, 175,000D2ordinary shares of £0.01 each, 300,000 E ordinary shares of £0.01 each, 100,000 F ordinary shares of £0.01 each and 110,000,000 preference shares of £0.01 each respectively.

- the Company issued and credited as fully paid 9,900 C1 ordinary shares of £0.01 each as a bonus issue to the existing holders pro-rata to their existing shareholdings at nominal value;

- the entire issued share capital of the Company was reclassified entirely into ordinary shares of £0.01 each;

- 110,790,117 ordinary shares of £0.01 each were reclassified into 110,797,017 deferred shares of £0.01 each;

- the Company issued and credited as fully paid 99,072,783 ordinary shares of £0.01 each in the Company as a bonus issue to the existing holders pro rata to their existing  shareholdings at nominal value. This included 11,065,979 shares issued to the EBT in recognition of the shares held by it to settle outstanding share options when these are exercised;

- all of the deferred shares were repurchased by the Company for an aggregate consideration of £1.00 in accordance with the Articles and such deferred shares were cancelled.

Following completion of all of the aforementioned steps, the Company's existing shareholders held 100,000,000 shares.

On 22 April 2021, the Company issued 7,772,020 ordinary shares of £0.01 each in an IPO for consideration of £15,000,000 at an issue price of £1.93 per share, taking the number of ordinary shares in issue to 107,772,020.

On the 4 August 2022 the Company issued 36,237 ordinary shares.

Share premium

The share premium reserve represents the excess amount of value received on the issuance of share capital above the nominal value per share. Costs associated with the issue of new share capital have been offset against this balance.

Capital redemption reserve

The capital redemption reserve represents a non-distributable reserve into which amounts are transferred following the redemption or purchase of own shares.

Translation reserve

The translation reserve comprises all foreign currency differences arising from the translation of the financial statements of foreign operations.

       Merger reserve

The merger reserve in the Company represents the fair value of consideration given in excess of the nominal value of the ordinary shares issued in the acquisition share for share exchange with Entertainment Magpie Group Limited, net of the nominal value of the bonus shares issued.

The merger reserve in the Group represents the nominal value of the bonus shares issued.

28.   Financial instruments and Risk Management

The Group has exposure to the following risks arising from financial instruments: Credit risk

Liquidity risk

Market risk, including currency risk and interest rate risk

The Group's overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential. Adverse effects on the Group's financial performance. Other than for energy costs, the Group does not use derivative financial instruments to manage risk exposures. This note presents information about the Group's exposure to each of the above risks, the Group's objective, policies and processes for measuring and managing risk, and the Group's management of capital.

Risk management framework

The Board of Directors has overall responsibility for the establishment and oversight of the Group's risk management framework. The Group's risk managementpolicies are established to identify and analyse the risks faced by the Group, to set appropriate risk limitsand controls, and to monitor risks and adherence to limits. Risk management policies and systemsare reviewed regularly to reflect changes in market conditions and the Group's activities.

Capital risk management

musicMagpie plc considers its capital comprises share capital, share premium and retained earnings.

The Group's objectives when managing capital are to safeguard its ability to continue as a going concern in order to optimise its return to shareholders. The Board's policy is to retain a strong capital base so as to maintain investor, creditor, and market confidence andtosustainfuturegrowth.TheDirectorsregularlymonitorthelevelofcapitalintheGrouptoensurethatthiscanbeachieved. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

Credit risk

Credit risk is the risk of financial loss to the Group if a counterparty to a financial instrument fails to meet its contractual obligation. Credit risk arises from cash and cash equivalents, deposits with banks and financial institutions, as well as credit exposures to wholesale and retail customers, including outstanding receivables and committed transactions.

As the principal business of the Group is cash sales direct with consumers, the Group's trade receivables are small. Accordingly, the Group does not systematically report outstanding receivables analysed by credit quality, in particular with respect to the credit quality offinancialassetsthatareneitherpastduenorimpaired.Thecarryingamountoffinancialassetsrecordedinthefinancialstatements represents the Group's maximum exposure to credit risk and any associated impairments are immaterial.  The Company has trade receivables and intercompany debtors, the expected credit loss on these balances is immaterial.

Exposure to credit risk

Year ended          Yearended

30 November 2022 30 November 2021

	£000		£000
Trade and other receivables	917		1,228
Cash and cash equivalents	6,806		2,849
Total	7,723		4,077

Liquidity risk

Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Group's approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, both under normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group's reputation.

All financial instruments other than borrowings and lease liabilities have contractual maturities within one year. The following are contractual undiscounted cash flows:

Contractual cash flows 30 November 2022 Carrying 1 Year or Between 1 Between 2 More than 5 amount Total Less and 2 years and 5 years years £000 £000 £000 £000 £000 £000 Trade and other payables 8,798 8,798 8,798 - Bank loans 14,675                  14,973 177 -               14,796 Lease liabilities 4,090 4,916 867 969            2,357                                723 Total 27,563 28,687 9,842 969               17,153                                          723 Contractual cash flows 30 November 2021 Carrying 1 Year or Between 1 Between 2 More than 5 amount Total Less and 2 years and 5 years years £000 £000 £000 £000 £000 £000 Trade and other payables 7,758 7,758 7,758 - - Loan notes - - - - - Other loans - - - - - Bank loans 887 946 59 887 - Shares classified as debt - - - - - Lease liabilities 1,923 2,205 454 346         1,316  89 Total 10,567 10,909 8,271 1,233         1,316 89

 

Market risk

Market risk is the risk that changes in the market prices, such as foreign exchange rates and interest rates will affect the Group's net income. The Group's exposure to market risk predominantly relates to interest and currency risk.

Interest rate risk

The Group's interest rate risk arises from its variable and fixed rate instruments being borrowings and finance lease liabilities. Borrowings issued at variable rates exposes the Group to cash flow interest rate risk. Borrowings issued at fixed rates expose the Group to fair value interest rate risk. The Group monitors the levels of fixed to floating debt held to manage these risks and aims to ensure that it has appropriate cash facilities to meet liabilities as they fall due.

At the reporting date, the interest rate profile of the Group's interest-bearing financial instruments was as follows:

	30 November	30 November
	2022	2021
Fixed rate instruments	£000	£000
Loan notes	-	-
Lease liabilities	4,090	1,923
Shares classified as debt	-	-
Total	4,090	1,923
Variable rate instruments Bank loans	14,973	946
Other loans	-	-
Total	14,973	946
Sensitivity analysis

A change of 150 basis points in interest rates at the reporting date would have decreased equity and profit or loss by £106,000 (2021: 100 basis points £74,000). This calculation assumes that the change occurred at the reporting date and had been applied to risk exposures existing at that date.

This analysis assumes that all other variables, in particular foreign currency rates, remain constant and considers the effect of financial instruments with variable interest rates. The analysis is performed on the same basis for all the periods presented.

Currency risk

The Group operates in the UK and US; revenue and costs are typically denominated in local currency. Gains and losses arising on retranslation of monetary assets and liabilities that are not denominated in the functional currency of individual companies are recognised in the consolidated statement of comprehensive income. The Group does not hedge these transaction differences.

Gains and losses arising on the retranslation of US operations' net assets into the consolidation currency are recognised in other comprehensive income and held separately in a translation reserve in equity. The Group does not hedge these translation differences.

The Group's exposure to foreign currency risk is as follows:

30 November 2022                                 30 November 2021

	GBP Sterling	US Dollars	Total	GBP Sterling	US Dollars	Total
	£000	£000	£000	£000	£000	£000
Cash and cash equivalents	5,834	972	6,806	2,348	501	2,849
Trade and other receivables	836	81	917	783	445	1,228
Trade and other payables	(7,915)	(883)	(8,798)	(6,734)	(1,024)	(7,758)
Borrowings	(14,675)	-	(14,675)	(887)	-	(887)
Lease liabilities	(3,194)	(896)	(4,090)	(835)	(1,088)	(1,923)
Total	(19,114)	(726)	(19,840)	(5,325)	(1,166)	(6,491)
The following significant exchange rates were applied:
	30 November 2022		30 November 2021
Average rate for the financial period
US Dollars	1.26		1.38
Balance sheet rate
US Dollars	1.21		1.33
Sensitivity analysis

A 10 percent weakening of the US Dollar against the pound sterling at 30 November 2022 would have decreased equity and profit or loss by £20k  (2021: Increased equity and profit and loss by £134k). This calculation assumes that the change occurred at the balance sheet date and had been applied to risk exposures existing at that date.

A 10 percent strengthening of the US Dollar against the pound sterling would have had the equal but opposite effect on the US Dollar to the amounts shown above, on the basis that all other variables remain constant.

Fair values

IFRS 7 'Financial Instruments: Disclosure' requires fair value· measurements to be undertaken using a fair value hierarchy that reflects the significance of the inputs used in the measurements, according to the following levels:

Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities

Level 2: inputs other than quoted prices 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).

	2022		2021
	Carrying amount	Fair value	Carrying amount	Fair value
	£000	£000	£000	£000
Borrowings	14,675	14,973	887	1,000
Total	14,675	14,973	887	1,000

29. Alternative Performance Measures

Management assess the performance of the Group using a variety of alternative performance measures. In the discussion of the Group's reported operating results, alternative performance measures are presented to provide readers with additional financial information that is regularly reviewed by management. However, this additional information presented is not uniformly defined by all companies including those in the Group's industry.

Accordingly, it may not be comparable with similarly titled measures and disclosures by other companies. Additionally, certain information presented is derived from amounts calculated in accordance with IFRS but is not itself an expressly permitted GAAP measure. Such measures are not defined under IFRS and are therefore termed 'non-GAAP' measures and should not be viewed in isolation or as an alternative to the equivalent GAAP measure.

The following are the key non-GAAP measures used by the Group.

Adjusted profit before tax

Adjusted profit before tax means (loss)/profit before tax before equity-settled share-based payments and other non- underlying items including non- underlying financial expense relating to deal and early termination fees from previous financing.

	Year ended 30 November 2022 £000	Year ended 30 November 2021 £000
Loss before tax	(1,457)	(14,819)
Equity-settled share-based payments	167	17,379
Other non-underlying items	174	4,621
Non-underlying financial expense	152	718
Adjusted (loss) / profit before tax	(964)	7,899

Non-underlying financial expense includes finance costs in relation to the previous debt structure.

Adjusted EBITDA

Adjusted EBITDA means Adjusted (loss)/ profit before tax before depreciation, impairment of property, plant and equipment and amortisation of intangible assets and financial expense.

	Year ended 30 November 2022 £000	Year ended 30 November 2021 £000
Adjusted (loss) / profit before tax	(964)	7,899
Depreciation of property, plant and equipment	3,877	1,755
Impairment of property, plant and equipment	835	410
Loss on disposal of property, plant and equipment	19	12
Amortisation of intangible assets	1,910	1,517
Financial expense	794	581
Adjusted EBITDA	6,471	12,174

Adjusted operating cash flow

Adjusted operating cash flow is calculated as Adjusted EBITDA adjusted for movements in working capital.

	Year ended 30November2022 £000	Year ended 30 November 2021 £000
Adjusted EBITDA	6,471	12,174
Movements in working capital	1,029	(4,922)
Adjusted operating cash flow	7,500	7,252

Cash conversion %

This is calculated as cash generated from operating activities in the Consolidated Cash Flow Statement, adjusted to exclude cash payments for exceptional items, as a percentage of Adjusted EBITDA.

	Year ended 30November 2022 £000	Year ended 30 November 2021 £000
Net cash generated from operations (from Consolidated Cash Flow Statement)	6,193	2,631
Other non-underlying items	174	4,621
Cash generated from operations before non-underlying items paid	6,367	7,252
Adjusted EBITDA	6,471	12,174
Cash conversion %	98.4%	59.6%
Net (debt)/ cash

This is calculated as cash and cash equivalent balances less outstanding external loans. Unamortised loan arrangement fees are netted against the loan balance in the financial statements but are excluded from the calculation of net cash/(debt). Lease liabilities and hire purchase are not included in the calculation of net debt.

Year ended       Year ended

30 November 2022 30 November 2021

	£000	£000
Cash and cash equivalents	6,806	2,849
Loans and accrued loan interest	(14,675)	(887)
Unamortised loan arrangement fees	(298)	(113)
External loans	(14,973)	(1,000)
Net (debt) / cash	(8,167)	1,849

 

END

 

 

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