FULL YEAR RESULTS

RNS Number : 2976D

musicMagpie plc

02 March 2022

 

2 March 2022

musicMagpie plc

("musicMagpie", or "the Group")

FULL YEAR RESULTS FOR THE YEAR ENDED 30 NOVEMBER 2021

EBITDA performance for the year in line with market expectations

Delivered strong progress in the Group's rental subscription service - a key strategic priority

musicMagpie, a leading re-commerce business in the UK and US specialising in refurbished consumer technology, announces its audited full year results for the year ended 30 November 2021.

	FY 21 £m	FY 20 £m	FY21 vs. FY20 Change	FY 19 £m	FY21 vs. FY19 Change
Revenue	145.5	153.3	-5.1%	131.5	+10.7%
Gross Profit	44.3	44.8	-1.1%	30.4	+45.7%
Gross Margin	30.4%	29.2%	+4.1%	23.1%	+31.7%
Adjusted EBITDA 1	12.2	13.9	-12.2%	4.6	+167.1%
Adjusted Profit Before Tax 2	7.9	9.2	-14.4%	(0.2)
Adjusted Earnings per Share 3	7.33p	8.56p	-14.4%	n/a
Net Cash/(Debt) at period end	1.8	(6.3)		(12.6)

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 Adjusted Profit Before Tax means profit before tax before equity-settled share-based payments and other non-underlying items, including non-underlying financial expenses.

3 Adjusted Earnings per Share is calculated on Adjusted Profit Before Tax and is given to exclude the effects of equity-settled share-based payments and other non-underlying items and is therefore considered to show the underlying performance of the Group

Financial highlights

·   Revenue for the Group of £145.5m (FY20: £153.3m, FY19: £131.5m) down 5.1% in line with management   expectations as a result of business normalisation in FY21 following the first year of the pandemic in FY20 but up   10.7% on an FY19 comparative, a CAGR of 5.2%

o  Consumer Technology revenue increased by 3.1% to £86.1m (FY20: £83.5m: FY19: £70.4m), representing 59% of Group revenue

o  UK Consumer Technology revenue grew by 6.1% to £71.2m, a 16.2% CAGR on FY19 performance

· Gross margin increased to 30.4% (FY20: 29.2%: FY19: 23.1%) due to buy and sell price focus combined with the       increased contribution from rental contracts

o  Gross profit in Consumer Technology across the Group increased by 9.9% to £21.3m (FY20: £19.4m; FY19 £12.6m) with gross margin increasing from 23.2% to 24.4%

·       Adjusted EBITDA of £12.2m (FY20: £13.9m: FY19: £4.6m), in line with management expectations

· Net cash of £1.8m at period end (FY20: net debt (£6.3m)) with continued investment in strategic initiatives   underpinned by profitable growth and £15m primary raise at IPO with significant headroom on committed facility

Operational highlights

· Strong progress from the Group's innovative new device rental subscription service, launched in October 2020, with   c.19,000   active paying subscribers as at 28 February 2022.  Success of our Rental proposition has led us to expand   in to new product categories such as tablets, games consoles, MacBooks and wearables

· Launched a sustainability partnership with Asda, including a projected roll-out expansion of musicMagpie's innovative  SMARTDrop kiosks to nearly 300 Asda stores commencing March 2022: over 8,000 devices traded by 28 February 2022, paying out over £2.3m to consumers increasing inbound items

· The musicMagpie corporate recycling programme fully launched in February 2021, aimed at businesses looking to       increase their sustainability efforts: contracts signed with Deloitte and Zurich

· New Apple products now available for sale and rent on musicMagpie Store

· Matthew Fowler joining from genedrive plc as CFO on 20 April 2022

· Successful IPO in April 2021 on the AIM market of the London Stock Exchange raising primary proceeds of £15m to repay existing debt and for investment in Rental and SMARTDrop Kiosks

Successful continuation of environmental initiatives

· Received London Stock Exchange's Green Economy Mark, which recognises companies that derive 50% or more of total annual revenue from products/services that contribute to the 'Green Economy'

· Created the 'Mount Recyclemore' sculpture at the G7 summit to highlight the growing global problem of e-waste

· During the year, musicMagpie gave a 'second-life' to over 400,000 technology products, as well as 2,500 tonnes of legacy categories of disc media and books.  musicMagpie's consumer tech and disc media customers, along with its trade partners, helped to save over 50,000 tonnes of CO2 during the year by buying, selling and renting with the Group - an amount equivalent to providing heating for over 18,000 homes

Current trading and outlook

· FY21 ended strongly with record sales in the UK and US during the Black Friday period across the business. This sales momentum continued as we entered the current year, however, as the first quarter of FY22 has progressed, volumes and trade-in activity levels have moderated in line with consumer trends

· Consumer Tech revenues for the first quarter of the year have been in line with management expectations, but a trend towards lower sales volume at a higher average selling price and an increase in the proportion of products sourced from intermediary wholesale partners, is currently expected to compress the gross margin on outright sales in the category in the current year by c.4.0 percentage points compared to FY21

· The rental subscription service is continuing to grow, with c.19,000 active subscribers at the end of Q1, with a forward contracted order book of £2.2m (2021: £0.4m). 15 per cent. of outbound Consumer Tech volumes on musicMagpie store are now rental sales versus 4 per cent. in 2021. The introduction and success of rentals to our business model is expected to have a short-term compression on the Group's headline revenue growth as we move from upfront to monthly revenue recognition.  This area of the business is expected to earn higher revenue and EBITDA over the life of a device, as opposed to a one-off sale, underpinned by a contracted recurring income and cash flow stream and will become more visible in the Group's performance in the medium-term

· Books and Disc Media continue to perform in line with management expectations

· The strength of our circular economy model and Rental offering, as well as the increasing awareness of the rising problem of e-waste, means that the Board remains highly confident in its growth strategies and in the prospects of musicMagpie  

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

"This has been a landmark year in the history of musicMagpie, and I am hugely proud of everything that the business has achieved. We have delivered strong operational and strategic progress in our first year as a listed company, and have done so while staying true to our clear environmental and social focus and our long-standing 'smart for you, smart for the planet' ethos. During the year, we gave a 'second-life' to over 400,000 technology products, as well as 2,500 tonnes of disc media and books. This helped to save over 50,000 tonnes of CO2, which is the equivalent to providing heating for over 18,000 homes.

In the current uncertain climate for consumers, the benefits of buying and renting refurbished consumer technology products, whilst helping the environment, has never been more compelling. We are particularly pleased with the progress being made by our rental subscription service, which provides customers with a more affordable and flexible option than an outright purchase or a pay-monthly contract. We are extremely excited about its future growth prospects, and scaling this area of the business further will be a major point of focus for us in the coming year.

I would like to thank each and every one of our colleagues for their unswerving loyalty, dedication and professionalism. It is their hard work, creativity and innovation that drives our business, and it has been humbling to witness their resilience and adaptability in changing their ways of working during the pandemic."

Analyst Conference Call

Steve Oliver (CEO) and Ian Storey (COO) will host an analyst presentation at 9:00am GMT today, Wednesday 2 March 2022, to talk through the Group's operational and financial performance.

Please advise whether you and / or a colleague would like to attend to Powerscourt, either by phone on [phone] or by email to [e-mail] .

Enquiries

musicMagpie plc Steve Oliver, CEO Ian Storey, COO	Tel: [phone]
Peel Hunt (Nominated Adviser and Joint Broker) Edward Knight Paul Gillam Tom Ballard	Tel: [phone]
Shore Capital (Joint Broker) Malachy McEntyre Mark Percy Daniel Bush John More	Tel: [phone]
Powerscourt (Financial Public Relations) Rob Greening Genevieve Ryan Sam Austrums	Tel: [phone]

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF THE MARKET ABUSE REGULATION (EU) 596/2014 WHICH IS PART OF UK LAW BY VIRTUE OF THE EUROPEAN UNION (WITHDRAWAL) ACT 2018.

THE PERSON RESPONSIBLE FOR ARRANGING FOR THE RELEASE OF THIS ANNOUCEMENT ON BEHALF OF THE COMPANY IS STEVE OLIVER, CEO. 

Notes to Editors

musicMagpie is a leader in the re-commerce of consumer technology (including smartphones, tablets, consoles and wearables), disc media (including CDs, DVDs and games) and books, with sustainability running to the very heart of its operations. The business has a clear strategic growth plan to buy more, sell more and rent more.

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. Operating through its two trusted brands - musicMagpie in the UK and decluttr in the US - the Group's core business model is simple: to provide consumers with a smart, sustainable and trusted way to buy, rent and sell refurbished consumer technology and physical media products. 

musicMagpie has a strong environmental and social focus, as demonstrated by its trademarked 'smart for you, smart for the planet' ethos. Over 400,000 consumer technology products were resold to consumers in FY21. In addition, the Group re-sells approximately 2,500 tonnes of books and disc media each year that could have ended up as waste. During 2021, musicMagpie's UK consumer tech and disc media customers, along with its trade partners, helped to save over 50,000 tonnes of CO₂ by buying, selling and renting with the Group - an amount equivalent to providing heating for over 18,000 homes. 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. 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 4.6* rating on UK Trustpilot with over 215,000 reviews.

For further information please visit:  www.musicmagpieplc.com/

A CLEAR STRATEGIC GROWTH PLAN: "BUY MORE, SELL MORE, RENT MORE"

Operating through our two trusted brands - musicMagpie in the UK and decluttr in the US - our core strategy is simple: to provide consumers with a smart, trusted and sustainable way to buy, rent and sell refurbished consumer technology and physical media products. The market for pre-owned consumer technology and physical media is worth approximately £9 billion in the UK and US and is supported by a number of positive tailwinds.

We see a significant opportunity for musicMagpie to accelerate its growth by adopting a simple three-pillared strategic approach to "buy more, sell more, rent more":

1.  "Buy more"

In order to be in a position to rent and sell products to our customers, we need to have a continual stream of high-quality products coming into our ecosystem; increasing the number of entry points for products into the musicMagpie circle is therefore a key priority. In addition to making it as easy as possible for consumers to sell their unwanted products directly to us, we also have a number of strategic initiatives underway for which we see significant potential:

· Our SMARTDrop kiosk offering, which launched in November 2020, is being successfully rolled out across the Asda network and will be in nearly 300 stores in 2022. At year end, approximately 5,300 smartphones had been traded in through the kiosks, paying out over £1.5m to customers, rising to 8,000 units and £2.3m at the end of the first quarter of FY22.  The kiosks also form a key component of the wider sustainability partnership that the Group has recently launched with Asda, as announced in September 2021.

· In February 2021, we launched a corporate technology recycling service for businesses looking to increase their sustainability efforts. The service allows businesses to recycle their unwanted company smartphones and tablets to musicMagpie for cash, which can then either go back into their business, fund upgrades, be used to reward colleagues, or even be donated to a charity of the company's choosing. The service also has the benefit of ensuring that all data is erased safely and securely. It has already been used by a number of high-profile global businesses, and contracts have recently been signed with both Deloitte and Zurich. 

2.  "Sell more"

The above initiatives are enabling us to sell more - and higher quality - products through musicMagpie in the UK and decluttr in the US. In addition, we have a number of projects underway to make the customer experience even better when it comes to their buying journey with us:

· Expanding our sales channels and ensuring that maximum distribution of product is achieved

· Personalising the consumer experience by using our customer data more effectively and powerfully

·     Making our musicMagpie and decluttr online stores 'best in class', using customer research and insight to         enhance our product development in areas such as check-out, basket, search, merchandising, and 'my account'

· Bringing accessories and other high margin 'peripheral' products to the fore of our offer

· Launched new Apple products for sale on the musicMagpie Store in the UK in July 2021, with a rental offering       following in November 2021

3.  "Rent more"

In October 2020 we launched an innovative device rental subscription service in the UK. It provides customers with a more affordable and flexible option than an outright purchase or a pay-monthly contract with a mobile network, and we are hugely excited about its future growth prospects.

It has made strong progress since its launch, and its growing popularity with consumers means that, as at 28 February 2022, the service now has c.19,000 active paying subscribers, including our first cohort of subscription renewals.  This has already made a positive contribution to Group margins in FY21, and creates the potential to earn higher recurring revenues and EBITDA over the life of a device as opposed to a one-off sale.

Given its attractive financial profile and the strong momentum that we are already seeing in this area, maximising and scaling our rental business is a major point of focus for us in the coming year. Initiatives that are underway include:

· Expanding into other product categories, such as tablets, games consoles, MacBooks and wearables

· Marketing / PR campaigns to drive consumer awareness of the uniqueness of the rental offer

· Making new Apple products available to rent, and raising their visibility both through their positioning on the site     and via external communications

· Extending the service to corporate customers

SUSTAINABILITY AT OUR HEART

Since the inception of musicMagpie in 2007, the Group has had circularity at its heart. musicMagpie is absolutely committed to the protection of the environment; the prevention of pollution; continual environmental improvement throughout the life cycle of our products, services and business operations; and compliance with all legal and other environmental policy requirements. 

In particular, given its relevance to our business model, musicMagpie is committed to raising awareness of the growing problem of e-waste. For example, in June the Group created the 'Mount Recyclemore' sculpture in partnership with the artist Joe Rush. The giant Mount Rushmore-style sculpture of the G7 leaders' heads, made entirely of discarded electronics, appeared on a beach near Carbis Bay during the G7 summit to coincide with discussions around how to tackle climate change and build a greener future. It was devised following musicMagpie-commissioned research showing that the G7 nations alone produce almost 15.9m tonnes of e-waste a year, with the US (6.9m), Japan (2.6m), Germany (1.6m) and UK (1.6m) being the worst offenders.

The Mount Recyclemore activity was exceptionally well received, and as part of the campaign the Group partnered with global waste management charity WasteAid. Throughout June, sellers had the option to donate the value offered by the Group to the charity whilst musicMagpie gave the charity £1 for each piece of consumer tech customers traded in with the Group.

More broadly, musicMagpie has a range of sustainability measures in place to improve our own efforts even further. These include mitigating our carbon footprint, limiting our waste, and engaging with colleagues, customers, suppliers and local communities to educate and work in close collaboration with them.

FINANCIAL PERFORMANCE REVIEW

Group revenue for the year ended 30 November 2021 was £145.5m, down 5.1% on the previous year (£153.4m), but up 10.7% compared to pre-pandemic levels (2019: £131.5m), a CAGR of 5.2%. This was in line with market expectations after a Covid-19 enhanced prior year.  Gross profit was £44.3m, a reduction of 1.1% on FY20 (£44.8m), but gross margin increased from 29.2% to 30.4%, with buy and sell price focus combined with the increased contribution from rental contracts driving the margin improvement.

On a geographical basis, in the UK, where the Group trades under the musicMagpie brand, revenue was down 3.1% to £115.4m (FY20: £119.1m). In the US, where the Group trades under the decluttr brand, revenue was down 6.0% to $41.5m (FY20: $44.1m) as the business continued with its strategy of focusing on profitable trading, protecting margin at the short-term expense of additional revenue. 

To fully understand revenue and margin movements, it is necessary to consider the performance of each of the three main product areas: the Group saw continued progression in its Consumer Technology category whilst Disc Media and Books both moved back towards pre-pandemic levels of activity in the second half of the year as expected. 

Consumer Technology (59% of Group revenue)

Consumer Technology revenue increased by 3.1% to £86.1m (FY20: £83.5m), now represents 59% of Group revenue cementing its place as the dominant product category.  Whilst the Group is pleased to see top line growth, this was muted by two key factors; the introduction of the rental service, which was a deliberate long term strategic move that is expected to bear fruit as the rental portfolio matures; and the focus on profitability over revenue growth in the US business. 

Firstly, the UK business saw consumer technology revenue grow by 6.1% to £71.2m (FY20: £67.1m), a 16.2% CAGR on FY19 performance.  October 2020 saw the strategic launch of musicMagpie's innovative device rental service, the introduction of which provides the potential to earn higher recurring revenues over the life of the device but reduces revenue performance at the outset. Subscription revenue is recognised monthly on a straight line basis over the duration of the rental contract, presently a 12-month period.  As at 30 November 2021, devices purchased by the Group for over £3.6m had been rented to subscribers with £1.8m (FY20: £5,000) of rental revenue recognised in the year with contracted future revenue of £1.9m.   

Secondly, the US business saw consumer technology revenues fall 3.0% to $20.5m (FY20: $21.1m).  Within this, sales from product purchased direct from consumers accounted for $17.5m growing by 30.8% year on year (FY20: $13.4m). Sales from product purchased from intermediary wholesale partners ('B2B') fell from $7.7m to $3.0m, a 61.6% drop as both stock availability and acceptable margin opportunities through those channels tightened for large parts of the year. 

Gross profit in Consumer Technology across the Group increased by 9.9% to £21.3m (FY20: £19.4m) with gross margin increasing from 23.2% to 24.4%.

Disc Media (35% of Group revenue)

The Group's legacy category of Disc Media was an undoubted beneficiary from the various periods of Covid-19 lockdowns and the related restrictions for a sizable part of FY20 and the early part of FY21. 

The Group has typically seen year on year reductions in Disc Media sales in the region of between 5% and 10%, reflecting a decline in the purchase of both new and second-hand physical media as consumers have increasingly consumed content in different ways such as streaming or video on demand.  FY20 however saw Disc Media sales increase to £58.8m, up 7.5% on the 12-month period ending 30 November 2019 (£54.8m), as consumers sought increased breadth of 'stay at home' entertainment.  FY21 therefore saw the category come up against tough, and trend bucking, comparatives. The second half of FY21 saw sales fall back, as expected, closer to pre-pandemic levels of activity.  Overall revenue for the category was down 13.8% to £50.7m for FY21. 

With a £7.1m sales drop, gross profit from Disc Media declined 6.2% to £19.7m (FY20: £21.0m), the revenue reduction partially mitigated by a 3.1% improvement in gross margin to 38.8% from 35.7%. This was attributable to the continued focus on margin maximisation and accordingly product selection, as well as a reduction in lower percentage margin new media sales. 

Books (6% of Group revenue)

The prior year saw the Books category follow a similar pandemic trend to Disc Media with sales up 73.7% from £6.3m in the 12-month period ending 30 November 2019 to £11.0m in FY20. 

FY21 sales fell back to £8.7m (down 20.6%), but still up x% on pre-pandemic levels. The second half saw average monthly sales of £0.6m, again a return to the average levels seen pre-pandemic.

Gross profit in the category was £3.3m (FY20: £4.4m) with gross margins reducing from 40.0% to 38.2%.

Operating expenses

Operating expenses, excluding equity-settled share-based payments and other non-underlying items, depreciation and impairment of fixed assets, and amortisation of intangible assets,  increased 2.8% to £31.8m (FY20: £31.0m). This was largely driven by increased investment in headcount (£1.8m year on year payroll cost increase) to ensure the Group has appropriate resources to execute its growth strategy, as well as the introduction of plc related costs. This was offset by a reduction in marketing spend (£1.1m reduction) as activity such as TV spend was normalised in the second half of the year in comparison to the one-off brand build TV activity undertaken during the pandemic in FY20.   

Adjusted EBITDA

The Group delivered an Adjusted EBITDA of £12.2m, a 12.3% reduction on the pandemic-enhanced FY20 out-turn (FY20: £13.9m; FY19: £4.6m). Adjusted EBITDA is considered to be the key financial performance indicator for the Group, albeit is a non-GAAP alternative performance measure, further explanation for which is given in Note 27 to the financial statements.

Loss before tax

The Group's statutory loss before tax of £14.8m (FY20: £7.0m profit) was after taking account of £25.7m of costs (FY20: £4.2m) associated with: equity-settled share-based payments of £17.4m (FY20: £0.4m); depreciation on disposal of property, plant and equipment of £1.8m (FY20: £1.3m); provision for impairment  of rental assets of £0.4m (FY20: nil); amortisation of intangible assets of £1.5m (FY20: £1.3m); and £4.6m (FY20: £1.3m) of IPO and other non-underlying items.

Of these costs, £21.1m (FY20: £2.9m) were non-cash items and £22.0m (FY20: £1.3m) were non-recurring items.

Cash flow and balance sheet

The Group generated net cash from operating activities of £2.7m (FY20: £12.0m). 

Adjusted operating cash flow[1]  calculated as Adjusted EBITDA1 less movements in working capital, was £7.3m (FY20: £13.2m) giving a cash conversion ratio of 60.0%.  This was down on the 95.6% recorded in FY20 due to a £4.9m working capital movement with stock and receivables each increasing by £1.2m and trade and other payables decreasing by £2.5m. 

Total cash used in investing activities was £7.2m (FY20: £1.9m) with acquisition of rental assets of £3.7m (FY20: £0.1m) and capitalised development expenditure of £2.8m (FY20: £1.5m) forming the majority of the year-on-year movement.  The increase in capitalised development expenditure reflects the scaling up of our IT development teams over the last 18 months to both retain our technological advantage and accelerate our strategic initiatives. 

On 5 February 2021, the Group refinanced with the introduction of a £10m three year committed revolving credit facility with Silicon Valley Bank ('SVB'), repaying existing bank debt from Aurelius Finance Company Limited.  We would like to thank both institutions for their unwavering support of our business and the management team. 

On IPO, the Group completed a primary fund raise of £15.0m, providing further funds for future investment activities in strategic growth intiatives such as rental and SMARTDrop kiosks, whilst also strengthening our balance sheet in the process.  £5.4m of this was used to repay investor loan notes and interest on completion in addition to reducing the drawn SVB facility to nil at that time. The combination of these saw financial expenses reduce by £1.4m to £1.3m year on year. 

Taking into account all of the above, the Group finished with net cash (calculated as cash at bank less amounts drawn against committed facilities) of £1.8m at 30 November 2021 (FY20: net debt of £6.3m), and retained headroom of £11.8m in the SVB revolving credit facility. 

CHARITY AND COMMUNITY

We care about each other, our customers, our communities and the environment.  During the pandemic, musicMagpie actively sought ways to help, donating books to children's charities, iPads and phones to Covid patients in hospitals, and £200,000 to the NHS Charities Together charity.

This year, the Group has continued its partnership with City in the Community to support their programmes focusing on improved mental wellbeing in young people and sporting activities with disadvantaged people in Greater Manchester. The Group has also once again given over an area of its warehouse to Cash for Kids to use as their HQ for their Mission Christmas campaign, which saw the charity collecting, processing and delivering gifts to over 35,000 disadvantaged children this Christmas.

Our colleagues have been involved in a number of charity events; a team of fifteen colleagues - the 'Wheelie Magpies' - collectively cycled over 2,000 miles in eight days raising over £10,000 for Smart Works. This is a charity which provides practical and emotional support to unemployed women to help them back into the workplace. In the summer, 10 teams of six Magpies walked 10,000 steps each day for six days to raise over £5,000 for the British Heart Foundation as part of their 60th birthday 'Team 60' challenge, clocking up a huge 4.5m steps over the six days.

FY2021 also saw musicMagpie launch payroll giving with the Charities Trust, enabling all colleagues to donate to charity through their pay. The Group also introduced a volunteering programme allowing colleagues two paid days a year to volunteer for a charity or take part in a charitable event.  The Group has facilitated two events through its partnership with Walking With the Wounded, a charity which supports disadvantaged veterans to re-integrate back into society and sustain their independence, with a number of colleagues joining veterans and colleagues from other local businesses to plant trees in the local area as part of their 'Op-Regen Mission Green' programme.

As part of this year's colleague Objectives and Key Results reviews, we have asked them to include an individual or team sustainability commitment, progress against which will be reviewed throughout the year and celebrated across the Group.

INITIAL PUBLIC OFFERING

In April, the Group successfully completed an IPO on the AIM market of London Stock Exchange ("LSE"). The IPO attracted strong support from high quality institutional investors, with the net proceeds being used to repay existing debt facilities and fund the Group's growth strategy and working capital requirements, in particular the expansion of its device rental proposition.  As part of the process, the Group was delighted to receive the LSE's Green Economy Mark, which recognises companies that derive 50% or more of their total annual revenue from products and services that contribute to the global 'Green Economy'.

BOARD

In tandem with the IPO, musicMagpie appointed Martin Hellawell as Non-Executive Chair, Dave Wilson as a Non-Executive Director and Chair of the Audit Committee, and Alison Littley as a Non-Executive Director, Senior Independent Director and Chair of the Remuneration Committee.

Martin is Chair of FTSE 250 listed Softcat plc, a leading UK provider of IT infrastructure technology and services. He previously spent 12 years as Chief Executive and Managing Director during which he led the company through a highly successful IPO and its first two years as a PLC. Martin is also Chair of Raspberry Pi Trading Limited, a subsidiary of the Raspberry Pi Foundation, a UK-based charity that works to put the power of computing and digital making into the hands of people all over the world. He is also Senior Independent Director at Team17 PLC. 

Dave was, until June 2021, the Chief Finance Officer and Chief Operating Officer at GB Group PLC ("GBG"), the global identity data intelligence specialist. Over the 12 years he served as CFO, GBG increased its market capitalisation from c.£14.2m to c.£1.7bn. Dave has a strong background in managing business growth, and previously held international and operational board level positions with companies including Envirofone.com, Codemasters, Fujitsu and Technology plc.  Dave became Chair of LBG Media in December 2021. 

Alison is a Non-Executive Director at Xaar plc, Norcros Plc and Osborne Group Ltd and Chair of the Remuneration Committees at all three. In her executive career, Alison held a variety of senior management positions in Diageo plc and Mars Inc, and was Chief Executive Officer at Buying Solutions, an agency to HM Treasury.

In November 2021, musicMagpie appointed Matthew Fowler as Executive Director and Chief Financial Officer. Matthew's start date at musicMagpie will be 20 April 2022 and he shall join the Board upon appointmement. This appointment follows Ian Storey's promotion to Group Chief Operating Officer at the time of the IPO. Matthew joins musicMagpie from genedrive plc, an AIM-quoted molecular diagnostics company, where he has been CFO since 2016. Prior to joining genedrive, Matthew spent eight years as Group Financial Controller of Scapa Group plc, an AIM-quoted multinational manufacturing business. He previously spent three years at British Nuclear Group as Finance Manager, having trained and qualified in the audit department of Deloitte & Touche.

CURRENT TRADING AND OUTLOOK

We entered the new financial year with confidence following a record Black Friday sales period in both the UK and US. Our rental subscription service has continued to grow through Q1, however in line with current consumer trends, we have seen a moderation of outright sales and trade-in volumes in Consumer Tech. 

In this environment, our rental offering is proving to be particularly attractive for consumers, with active paying subscribers increasing to c.19,000   at the end of Q1, increasing the forward contracted order book to £2.1 m (30 November 2021: £1.9m). Rentals accounted for c.15% of musicMagpie store Tech volume shipped to consumers in January 2022, up from 4% in January 2021.  The introduction and success of rentals to our business model is expected to have a short-term compression on the Group's headline revenue growth as we move from upfront to monthly revenue recognition.  This area of the business is expected to earn higher revenue and EBITDA over the life of a device, as opposed to a one-off sale, underpinned by a contracted recurring income and cash flow stream and will become more visible in the Group's performance in the medium-term.   

The success of rentals to date has led us to expand the subscription offer to tablets, games consoles, MacBooks and wearables. In addition, March 2022 will see us launch our rental solution to Corporate customers under the Magpie Circular banner, and we expect this to resonate well with businesses looking for a greener and more economical model for their Techology needs.  The continued expansion of the musicMagpie eco-system, and the material medium term profitability step-change this can bring, will see the Group continue to focus its resources on promoting and further scaling this offering, including increased platform development investment throughout 2022.   

Outright Consumer Tech sales have seen a trend of lower sales volume, but at a higher average sell price.   A similar trend has been evident in the US, with Q1 Consumer Tech revenue up 46%   against Q1 2021, driven by sales of higher value iPhones underpinned by the reintroduction of bulk purchasing activity from intermediary wholesale partners.  Overall, whilst we currently anticipate full year Consumer Tech revenues across both markets to be in line with current management expectations, the trend towards higher value, lower volume products sourced from intermediary wholesale partners is expected to reduce the Group's gross margin headline percentage on outright sales in the category by some c.4.0 percentage points for the current year compared to the year to 30 November 2021.   

We have continued to make excellent progress with our disruptive SMARTDrop kiosk proposition with devices traded to date increasing to over 8,000 units, paying out over £2.3m to consumers by  the end of Q1. Our increased roll out across the Asda Stores estate commences in March and runs through to September 2022.   

Since the start of the year, Disk Media has performed in line with management expectations. Books has maintained the sales performance level seen in the second half of FY21 and is anticipated to remain at this level.  These sunset categories continue to provide a good level of profitability and cash generation to underpin our continued investment in our Consumer Tech subscription model.

Whilst well-documented headwinds prevail for consumers, we believe the positioning of our circular economy model in the value-led sector leaves us well placed in the event of economic uncertainty as consumers seek ways both to save money and generate income. This, combined with our attractive rental offering and increasing awareness of the rising problem of e-waste, means that we continue to be confident in the medium term growth and prospects of musicMagpie.

DIVIDEND

In line with guidance given at the IPO, the Directors have decided to re-invest earnings of the Group to finance the development and expansion of the business in the short term.  Accordingly, the directors do not propose to declare a full year dividend for the period.

Martin Hellawell	Steve Oliver
Chairman	Chief Executive Officer

Consolidated Statement of Comprehensive income

	Note	Yearended 30November2021 £000	Yearended 30November2020 £000
Turnover	4,5	145,506	153,350
Costofsales		(101,211)	(108,566)
Grossprofit		44,295	44,784
Operatingexpenses		(35,875)	(33,521)
Operatingexpenses-exceptional	6,24	(22,000)	(1,663)
Totaloperatingexpenses		(57,875)	(35,184)
Otheroperatingincome		60	49
AdjustedEBITDA*	28	12,174	13,873
Depreciationofproperty,plantandequipment	14	(1,755)	(1,300)
Impairmentofproperty,plantandequipment	14	(410)	-
Lossondisposalofproperty,plantandequipment	14	(12)	-
Amortisationofintangibleassets	15	(1,517)	(1,261)
Equity-settledshare-basedpayments	24	(17,379)	(381)
Othernon-underlyingitems	6	(4,621)	(1,282)
Operating(loss)/profit		(13,520)	9,649
Financialexpense	10	(1,299)	(2,691)
(Loss)/profitbeforetax		(14,819)	6,958
Taxation	11	2,694	1,612
(Loss)/profitfortheperiodattributabletotheequityholdersoftheparent		(12,125)	8,570
Other comprehensive income/(expense)
Itemsthatmaybereclassifiedtoprofitandloss Foreignexchangedifferencesontranslationofforeignoperations		38	(86)
Totalcomprehensive(loss)/incomefortheperiodattributabletothe equityholdersoftheparent		(12,087)	8,484
		Pence	Pence
-basic(loss)/earningspershare	13	(12.67)p	9.44p
- diluted (loss)/earningspershare	13	(12.67)p	9.42p

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

Consolidated Statement of Financial Position

	Note	Asat 30November2021 £000	Asat 30November2020 £000
Assets Property,plantandequipment	14	6,118	3,888
Intangibleassets	15	9,679	8,358
Deferredtaxasset	12	5,333	1,666
Totalnon-currentassets		21,130	13,912
Inventories	18	8,019	6,835
Tradeandotherreceivables	19	3,724	2,508
Cashandcashequivalents	20	2,849	5,140
Totalcurrentassets		14,592	14,483
Totalassets		35,722	28,395
Liabilities Tradeand otherpayables	21	8,359	10,881
Otherinterest-bearingloansandborrowings	22	-	7,035
Leaseliabilities	22	366	745
Corporationtaxpayable		269	54
Totalcurrentliabilities		8,994	18,715
Netcurrentassets/(liabilities)		5,598	(4,232)
Otherinterest-bearingloansandborrowings	22	887	4,200
Leaseliabilities	22	1,557	1,820
Sharesclassifiedasdebt	22	-	1,240
Totalnon-currentliabilities		2,444	7,260
Totalliabilities		11,438	25,975
Netassets		24,284	2,420
Equity Sharecapital	26	1,078	14
Sharepremium	26	14,449	1,690
Capital redemption reserve	26	1,108	-
Merger reserve	26	(991)	-
Translationreserve	26	(120)	(158)
Retainedearnings		8,760	874
Equityattributabletotheequityholdersoftheparent		24,284	2,420

These financial statements were approved by the board of directors on 1 March 2022 and were signed on behalf by:

S Oliver

CEO

Company Statement of Financial Position

Registered number 12977343

	Note	Asat 30November2021 £000
Assets Investments	16	14,285
Totalnon-currentassets		14,285
Tradeandotherreceivables	19	11,476
Totalcurrentassets		11,476
Netassets		25,761
Equity Share capital	26	1,078
Sharepremium	26	14,449
Capital redemption reserve	26	1,108
Merger reserve	26	801
Retainedearnings		8,325
Equityattributableto theequityholdersof theparent		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 £8,959,000 for the period.

These financial statements were approved by the board of directors on 1 March 2022 and were signed on 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
Asat1December2019		14	1,690	-	-	(72)	(8,077)	(6,445)
Profitfortheyear		-	-	-	-	-	8,570	8,570
Foreigncurrencytranslation		-	-	-	-	(86)	-	(86)
Totalcomprehensiveincomefortheyear		-	-	-	-	(86)	8,570	8,484
Share-based payments	24	-	-	-	-	-	381	381
Balanceasat30November2020		14	1,690	-	-	(158)	874	2,420
				Capital
		Share	Share	Redemption	Merger	Translation	Retained	Total
		capital	premium	reserve	reserve	reserve	earnings	Equity
	note	£000	£000	£000	£000	£000	£000	£000
Asat1December2020		14	1,690	-	-	(158)	874	2,420
Lossfortheyear		-	-	-	-	-	(12,125)	(12,125)
Foreigncurrencytranslation		-	-		-	38		38
Totalcomprehensive(loss)/incomefortheyear		-	-	-	-	38	(12,125)	(12,087)
Cancellationofsharepremium	26	-	(1,690)	-	-	-	1,690	-
Reclassification ofshares	26	1,100	-	-	-	-	-	1,100
Repurchase of deferred shares	26	(1,108)	-	1,108	-	-	-	-
Bonus issue of shares		991	-	-	(991)	-	-	-
Shares issued	26	81	14,922			-	-	15,003
Issue costs of shares Interestonpreferenceshareswaivedbythe	26	-	(473)			-	-	(473)
owners	25	-	-			-	185	185
Share-based payments	24	-	-			-	17,379	17,379
Taxeffectsofshare-basedpaymentcharge							757	757
Balanceasat30November2021		1,078	14,449	1,108	(991)	(120)	8,760	24,285

Company Statement of Changes in Equity

				Capital
		Share	Share	Redemption	Merger	Retainer	Total
		capital	Premium	Reserve	Reserve	Earnings	Equity
	note	£000	£000	£000	£000	£000	£000
Asat27October2020		-	-	-	-	-	-
Lossfortheperiod		-	-	-	-	(8,959)	(8,959)
Totalcomprehensivelossfortheperiod		-	-	-	-	(8,959)	(8,959)
Sharebasedpayments	24				-	17,284	17,284
Shareforshareexchange	26	14	-		1,792	-	1,806
Reclassificationofshares	26	1,100	-		-	-	1,100
Repurchase of deferred shares	26	(1,108)		1,108			-
Bonus issue of shares	26	991	-		(991)	-	-
Shares issued	26	81	14,922		-	-	15,003
Issue costs of shares	26	-	(473)		-	-	(473)
Balanceasat30November2021		1,078	14,449	1,108	801	8,325	25,761

 

 

Consolidated Cash Flow Statement

	Yearended 30November2021 £000	Yearended 30November2020 £000
Net cashflows from operatingactivities (Loss)/profitfortheperiod	(12,125)	8,570
Adjustmentsfor: Financialexpense	1,299	2,691
Taxationexpense	(2,694)	(1,612)
Depreciationofproperty,plant andequipment	1,755	1,300
Impairmentofproperty,plantandequipment	410	-
Lossonproperty,plantandequipment	12	-
Amortisationofintangibleassets	1,517	1,261
Share-basedpaymentsexpense	17,379	381
Taxationpaid	-	-
Workingcapitaladjustments Increaseininventories	(1,184)	(642)
Increaseintradeandotherreceivables	(1,216)	(367)
(Decrease)/Increaseintradeandotherpayables	(2,522)	397
Netcashfromoperations	2,631	11,979
Cashflowsusedininvestingactivities Acquisitionofproperty,plant andequipment	(4,404)	(442)
Capitaliseddevelopmentexpenditure	(2,837)	(1,472)
Netcashused ininvestingactivities	(7,241)	(1,914)
Cashflowsfromfinancingactivities Proceedsfromnewloan	1,000	310
Proceedsfromsharesissued	15,002	-
CostsincurredonIPOchargedtoSharePremium	(473)	-
Financialexpensespaid	(2,275)	(2,682)
Leaseliabilitiespaid	(618)	(846)
Interestpaidonleaseliabilities	(131)	(243)
Repaymentofotherloans	(6,000)	(3,500)
Repaymentofshareholderloannotes	(4,200)	-
Net cashfrom/(usedin)financingactivities	2,305	(6,961)
Net(decrease)/increaseincashandcashequivalents	(2,305)	3,104
Cashandcashequivalentsbroughtforward	5,140	2,036
Effectofexchangeratefluctuationsoncash	14	-
Cashandcash equivalents carried forward	2,849	5,140

 

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 2021.

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 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. 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 International Accounting Standards in conformity with the requirements of the Companies Act 2006 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.

The accounting policies that follow set out those policies that apply in preparing the financial statements for the year ended 30 November 2021 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 with the parent or wholly owned members of the group;

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

Initial public offering ("IPO")

On 22 April 2021, the Company was admitted to the Alternative Investment Market (AIM) of the London Stock Exchange. These Consolidated Financial Statements are the Company's first subsequent to its admission.

The Admission Document for the IPO contains the audited Historical Financial Information of the Company on pages 66 to 106 (the "Historical Financial Information") presented under International Financial Reporting Standards ("IFRS"). The comparative figures for the financial year ended 30 November 2020 are an extract of the Company's historical financial information for that year. Prior to the restructuring the Group was not in existence in its current form, as described in this note. A statutory audit performed in accordance with the Companies Act 2006 was not performed and hence no audit opinion was issued in respect of the historical comparatives presented in these consolidated financial statements. However, as part of the process of Admission to listing on AIM and to trading on the London Stock Exchange, an accountant's report, undertaken by RSM UK Audit LLP, in accordance with the Standards for Investment Reporting 2000 ("SIR 2000") issued by the Auditing Practices Board in the United Kingdom, was issued on the Historical Financial Information included in the Admission Document. The accountant's report, dated 16 April 2021, included an unqualified opinion on the historical information presented. Statutory accounts for the year ended 30 November 2020, prepared under Financial Reporting Standard 102, were approved by the Board of Directors on 16 April 2021 and delivered to the Registrar of Companies. The report of the auditor on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 498 (2) or (3) of the Companies Act 2006. Note 25 of the Historical Financial Information refers to the transition to IFRS and sets out the main items contributing to the change in financial information compared with that reported under UK GAAP as at the transition date.

Group Reorganisation

In connection with the admission to AIM, the Group undertook a group reorganisation of its corporate structure which resulted in the Company, musicMagpie plc becoming the ultimate holding company of the Group. The creation of the Company was not conditional upon the IPO. The Company acquired 100% of the share capital of Entertainment Magpie Group Limited ("EMGL") on 31 March 2021 through a share for share exchange.

The insertion of the Company as a new holding company was such that the group reorganisation has been accounted for as a continuation of the existing group rather than an acquisition in accordance with the IFRS 3 guidance in respect of reverse acquisition accounting. Management determined that the Company was formed only to issue equity interests to affect a business combination and does not appear to meet the characteristics of an acquirer following the guidance given in paras. B15 to B18 of IFRS3. In applying the guidance it was determined that:

• EMGL was significantly greater in size than the Company;

• the shareholders and the Board of EMGL initiated the restructure of the Group to achieve an IPO;

• the owners of EMGL still retained majority voting rights after the combination; and

• no premium was paid as part of the share for share exchange.

Management also determined that the Company did not meet the definition of a business. Accordingly, the insertion of the Company on top of the existing group does not constitute a business combination under IFRS 3 'Business Combinations' and instead has been accounted for as a common control transaction. Merger accounting has been used to account for this transaction.

Under merger accounting principles, the assets and liabilities of the subsidiaries are consolidated at book value in the Group financial statements.

These consolidated financial statements of the Group are the first set of financial statements for the newly formed Group and the prior period has been presented as a continuation of the former EMGL Group on a consistent basis as if the Group reorganisation had taken place at the start of the earliest period presented. The prior period comparatives are those of the EMGL Group since no substantive economic changes have occurred. 

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 generated a loss of £12,125,000 during the year ended 30 November 2021 (year ended 30 November 2020: profit of £8,570,000) but this was largely driven by non-cash items including a share- based payments expense totaling £17,379,000. At the year-end date it had net current assets of £5,598,000 (year ended 30 November 2020: liabilities of £4,232,000).

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 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 the 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 and intercompany balances, lifetime ECL 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 (including intercompany balances), 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 due to the low credit risk of the issuer given its profitability in the short term.

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:

Plantandmachinery	6-7years	Straightline
Motorvehicles	3years	Straightline
Fixturesandfittings	6-7years	Straightline
Computerandofficeequipment	3years	Straightline
Rentalassets	1-7years	Reducingbalance

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.

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 Monte Carlo option pricing 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 24 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 and finance charges on shares classified as liabilities recognised in profit or loss using the effective interest method.

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

 

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 the 'property, plant and equipment' policy.

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.

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

· The Group makes an estimate of the useful economic life of property, plant, equipment and intangible assets. When assessing the useful economic life management considers expected usage of the assets; technical, technological, commercial and other types of obsolescence; changes in the market demand for the products related to the assets; the level of maintenance expenditure required to maintain the assets' operating capability and whether the assets' useful life is dependent on the useful life of other assets of the entity. See further details in note 14 and 15.

· 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.

· Stock provisioning - the Group carries significant amounts of stock 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. 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 £8,019,000 (Year ended 30 November 2020: £6,835,000) which included a provision for slow moving lines of £529,000 (Year ended 30 November 2020: £871,000).

· Valuation of employee share options - the valuation of employee share options is inherently subjective as it involves a number of inputs which are not market observable. See further details in note 24.

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.

· Capitalisation of website and IT development costs - judgement is applied to assess whether the criteria for capitalisation of costs is met.

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 IFRS 9, IAS 39, IFRS 7 and IFRS 16: Interest Rate Benchmark Reform - Phase 2 (effective date 1 January 2021).

· Amendments to IFRS 16: Covid-19-related Rent Concessions beyond 30 June 2021 (effective date 1 April 2021).

· Amendments to IAS 37: Onerous Contracts-Cost of Fulfilling a Contract (effective 1 January 2022).

· Amendments to References to the Conceptual Framework in IFRS 3 (effective 1 January 2022).

· Amendments to IAS 16: Property, Plant and Equipment-Proceeds before Intended Use (effective 1 January 2022).

· Annual Improvements to IFRS Standards 2018-2020 (effective 1 January 2022).

· IFRS 17 Insurance Contracts (effective 1 January 2023).

· 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 date to be confirmed).

4.  Segmental reporting

The Chief Operating Decision Maker (CODM) has been determined to be the Chief Executive Officer, with support from the Board. Information reported to the Chief Executive Officer for 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 2021		Technology		Media	Books	Total
	Outright sales	Rental income	Total
	£000	£000	£000	£000	£000	£000
Revenue	84,245	1,809	86,054	50,715	8,736	145,506
Gross profit	19,976	1,311	21,284	19,673	3,338	44,295
Processing wages	(3,988)	-	(3,988)	(7,423)	(802)	(12,213)
Contribution after direct labour	15,985	1,311	17,296	12,251	2,536	32,082
Trading Margin (%)	32.5	100.0	33.9	80.3	90.0	53.4
Gross margin	23.7	72.4	24.7	38.8	38.2	30.4

Contracted rental income outstanding at the year ended 30 November 2021 amounted to £1,864,805 (Year ended 30 November 2020: £3,000).

Year ended 30 November 2020		Technology		Media	Books	Total
	Outright sales	Rental income	Total
	£000	£000	£000	£000	£000	£000
Revenue	83,491	5	83,496	58,848	11,006	153,350
Gross profit	19,363	4	19,367	21,016	4,401	44,784
Processing wages	(3,660)	-	(3,660)	(7,132)	(861)	(11,653)
Contribution after direct labour	15,703	4	15,707	13,884	3,540	33,131
Trading Margin (%)	31.9	100.0	31.9	78.2	88.3	53.7
Gross margin	23.2	80.0	23.2	35.7	40.0	29.2

5.  Revenue

Disaggregation of revenue

An analysis of revenue by geographical market is given below:

	Year ended 30 November 2021 £000	Year ended 30 November 2020 £000
United Kingdom	108,005	107,770
Within the European Community other than United Kingdom	4,225	6,076
United States of America	29,274	33,267
Outside the European Community (excluding the USA)	4,002	6,237
TOTAL	145,506	153,350

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

	Year ended 30 November 2021 £000	Year ended 30 November 2020 £000
United Kingdom	115,403	119,082
United States of America	30,103	34,268
TOTAL	145,506	153,350

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

6.  Other non-underlying items	Yearended	Yearended
	30November 2021 £000	30November2020 £000
IPOrelatedcosts	3,998	220
Othernon-underlyingcosts	623	1,063
Total	4,621	1,282

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

7.  7.  Operating(loss)/profit includedinthe(loss)/profitarethefollowing	Yearended30November 2021 £000	Year ended 30November2020 £000
Amortisationofintangibleassets	1,517	1,261
Depreciationofproperty,plant&equipment:
Ownedassets	1,130	671
Right-of-useassets	627	629
Impairmentofproperty,plantandequipment	410	-
Lossondisposalofproperty,plantandequipment	12	-
Auditor'sremuneration:
Auditofthesefinancialstatements*	145	85
Otherassuranceservices	205	-
Otherservicesinrelationtotaxation	-	13
*£15,000(periodended30November2020:£10,000)relatedtotheauditofthecompany.
8.Remunerationofdirectors
	Year ended	Year ended
	30 November 2021	30 November 2020
Shorttermbenefits	£000	£000
Directors'emoluments	626		466
Employerspensioncontributions	2		-
Amountspaidtothirdpartiesinrespectofdirectors'services	10		25
Total	638		491

The aggregate of emoluments of the highest paid director were £326,000 (period ended 30 November 2020: £219,000). Pension contributions paid on his behalf were £2,000 (period ended 30 November 2020: £nil).

Information on Directors' remuneration for the year ended 30 November 2021 is set out in the Remuneration Committee Report of the Annual Report. This discloses the amounts paid to the Directors for qualifying services provided to the Company from the IPO. Note 8 includes these amounts combined with amounts paid to the directors for services provided to former parent company (Entertainment Magpie Group Limited) prior to that date. The comparative information relates to directors' remuneration of the former parent company.

9.   Staff numbers

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

	Group    2021	Group  2020	Company 2021	Company 2020
Officeandadministration	198	159	11	-
Warehouse	449	459	-	-
Total	647	618	11	-
Theaggregatepayrollcostsofthesepersonswereasfollows:
	Group   2021   £000	Group   2020   £000	Company   2021   £000	Company   2020   £000
Wagesandsalaries	18,083	16,337	1,027	-
Socialsecuritycosts	1,188	1,256	164	-
Otherpensioncosts	317	165	5	-
Equity-settledshare-basedpayments(seenote24)	17,379	381	5,908	-
Total	36,967	18,139	7104	-

In addition to the above payroll costs, a further £2,040,000 (Year ended 30 November 2020: £869,000) 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 £3,024,000 during the year (Year ended 30 November 2020: £2,846,000).

10.Financialexpense	Yearended	Yearended
	30November 2021	30November2020
	£000	£000
Interestexpenseonloannotes	176	421
Interestonbankandotherloans	209	1,130
Interestexpenseonleaseliabilities	107	197
Othernon-underlyingfinancialexpense	438	605
Bankinterestandsimilarcharges	369	318
Interestexpenseonpreferencesharesclassifiedasliabilities	-	20
	1,299	2,691

 

11.   Taxation

	Year ended 30 November 2021	Year ended 30 November 2020
	£000	£000
Current tax expense
UK corporation tax on profits for the period	636	54
Adjustments in respect of previous periods	19	-
Total current tax expense	655	54
Deferred tax credit
Origination and reversal of timing differences	(2,372)	(1,666)
Adjustment in respect of previous periods	(18)	-
Effect of changes in tax rates	(959)	-
Total deferred tax credit	(3,349)	(1,666)
Total tax credit in the income statement	(2,694)	(1,612)
Equity items
Current tax	(439)	-
Deferred tax current year charge/(credit)	(318)	-
Total	(757)	-

Reconciliation of effective tax rate

	Year ended 30 November 2021	Year ended 30 November 2020
	£000	£000
(Loss) / profit before tax	(14,819)	6,958
Tax using the UK corporation tax rate of 19% (2020: 19%)	(2,816)	1,322
Other tax adjustments, reliefs and transfers	923	(164)
Adjustments in respect of prior periods - current tax	(52)	-
Tax rate changes	(959)	-
Share options	563	-
Deferred tax not recognised	(124)	-
Tax losses recognised in the period	(229)	(1,104)
Deferred tax recognised	-	(1,666)
Total tax credit in the income statement	(2,694)	(1,612)

12.  Deferred tax

	Tax losses £000	Decelerated capitalallowances £000	Share options	Others £000	Total £000
At30November2020	926	512	-	228	1,666
Credited/(debited)toprofitorloss	431	(410)	3,417	(89)	3,667
Credited/(debited)to equity	-	-	318	-	318
At30November2021	1,357	102	3,735	139	5,333

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 in respect of carried forward losses and tangible fixed asset timing differences is calculated at 25% (2020 19%) 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

.13.   Earningspershare	note	Yearended30November2021 £000	Yearended 30November 2020 £000
(Loss)/profitfortheperiod		(12,124)	8,570
		Number	Number
Weightedaveragenumberofshares - basic	1,2 , 3	95,680,242	90,804,098
Diluted number of shares		95,680,242	90,979,098
		Pence	Pence
Basic(loss)/earningspershare(pence)		(12.67)	9.44
Diluted(loss)/earningspershare(pence)		(12.67)	9.42
Notes:

1.  Additional ordinary shares issued as a result of the share split conducted in 2021 (see note 26), have been incorporated in the earnings per share calculation in full without any time apportionment.

2. The adjustments made in calculating the weighted average number of ordinary and potential ordinary shares have been increased to reflect the share split in full without any time apportionment in the comparative period.

3. The above weighted average number of shares excludes shares held by the Employee Benefit Trust in respect of share options outstanding and exercisable at the end of the year. See note 24 for further details. No adjustment has been made to the diluted weighted average number of shares for shares options as these have an antidilutive effect.

Adjusted earnings per share is disclosed in Note 28 (Alternative Performance Measures) to show performance undistorted by adjusting items and is therefore considered to show the underlying performance of the Group.

14.Property,plantandequipment	Right of useleaseassets	Plant andmachinery	MotorVehicles	Fixturesandfittings	Rentalassets	Computerand officeequipment	Total
	£000	£000	£000	£000	£000	£000	£000
Cost
Balanceat1December2019	4,535	3,107	267	2,423	-	3,764	14,096
Additions	-	10	18	131	63	237	459
Effectofmovementsinforeigncurrency	-	-	-	-	-	-	-
Disposals	-	-	-	-	-	-	-
Balanceat30November2020	4,535	3,117	285	2,554	63	4,001	14,555
Additions	-	339	(0)	113	3,657	295	4,404
Effectofmovementsinforeigncurrency	3	1	-	1	-	1	6
Impairment	-	-	-	-	(462)	-	(462)
Disposals	-	-	(285)	-	0	-	(285)
Balanceat30November2021	4,538	3,457	-	2,668	3,258	4,297	18,218
Depreciation
Balanceat1December2019	1,573	2,377	255	1,662	-	3,500	9,367
Chargefortheperiod	629	200	18	219	1	233	1,300
Effectofmovementsinforeigncurrency	-	-	-	-	-	-	-
Disposals	-	-	-	-	-	-	-
Balanceat30November2020	2,202	2,577	273	1,881	1	3,733	10,667
Chargefortheperiod	627	297	-	196	471	164	1,755
Effectofmovementsinforeigncurrency	-	1	-	1	-	-	2
Impairment	-	-	-	-	(52)	-	(52)
Disposals	-	-	(273)	-	-	-	(273)
Balanceat30November2021	2,829	2,875	-	2,078	420	3,897	12,099
Netbookvalue
At30November2021	1,709	582	-	590	2,838	400	6,118
At30November2020	2,333	540	12	673	62	268	3,888
Company

The Company has no tangible fixed assets.

15.  Intangible assets and goodwill

	Goodwill	Websitedevelopment	IT development	Proprietarysoftware	Domains	Total
	£000	£000	£000	£000	£000	£000
Cost Balanceat1December2019	4,848	1,083	4,865	3,000	53	13,849
Additions	-	181	1,290	-	-	1,471
Disposals	-	-	-	-	-	-
Balanceat30November2020	4,848	1,264	6,155	3,000	53	15,320
Additions	-	195	2,643	-	-	2,837
Disposals	-	-	-	-	-	-
Balanceat30November2021	4,848	1,459	8,798	3,000	53	18,157
Amortisation Balanceat1December2019	-	977	3,523	1,182	19	5,701
Chargefortheperiod	-	77	879	300	5	1,261
Disposals	-	-	-	-	-	-
Balanceat30November2020	-	1,054	4,402	1,482	24	6,962
Chargefortheperiod	-	79	1,132	300	5	1,517
Disposals	-	-	-	-	-	-
Balanceat30November2021	-	1,133	5,534	1,782	29	8,479
Netbookvalue At30November2021	4,848	325	3,263	1,218	24	9,679
At30November2020	4,848	210	1,753	1,518	29	8,358

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

Goodwill arising from the acquisition of Entertainment Magpie Holdings Limited in September 2015 is allocated to a single cash-generating unit (CGU) being the Group as a whole.  This represents the lowest level in the business at which goodwill is monitored for  internal reporting purposes.

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 2021	30 November 2020
Period on which management approved forecasts are based	4 years	4 years
Growth rate applied beyond approved forecast period	2%	2%
Discount rate (post tax rate)	8.17%	9.05%

The four-year forecasts are based on the Directors expectation, adjusted for known factors and have been approved by the Board.

The growth rates used in the value in use calculation reflects the long-term historical growth in GDP for the economies in which the  CGU is located. The discount rates used were determined by reference to the funding structures in place.

The key assumptions upon which management have based their cash flow projections are sales growth rates, selling prices, gross margins and overhead growth to support the increased sales.

The calculated value in use significantly exceeded the carrying value of goodwill and management believe that no reasonably possible change in any of the above key assumptions would cause the carrying value of the unit to exceeds its recoverable amounts so no further sensitivity calculations were necessary to conclude there was no impairment.

16. Investments

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

Additions in the year relate to the Group restructure resulting in musicMagpie plc becoming the ultimate holding Company.

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 2021.

Nameofsubsidiary	Principalplace ofbusiness	Classofshares held	Proportionof ownership	Principalactivity
EntertainmentMagpieGroupLimited^	UnitedKingdom	Ordinary	100%	Intermediateholdingcompany
EntertainmentMagpieHoldingsLimited*^	UnitedKingdom	Ordinary	100%	Intermediateholdingcompany
EntertainmentMagpieLimited*	UnitedKingdom	Ordinary	100%	Purchase &resaleofelectronicitemsandreplaymedia products
MM Guernsey Limited*^	Guernsey	Ordinary	100%	Refurbishment&dispatchofreplaymediaproducts
MozoMediaLimited*^	UnitedKingdom	Ordinary	100%	Refurbishment&dispatchofreplaymediaproducts
EntertainmentMagpie,Inc*	United States of America	Ordinary	100%	Refurbishment&dispatchofreplaymediaproducts

The following Dormant subsidiaries of musicMagpie Plc were dissolved in the year to 30 November 2021.

That'sEntertainmentRetailLimited*	UnitedKingdom	Ordinary	100%	Dormant
Bradley Street Limited*	UnitedKingdom	Ordinary	100%	Dormant
Zoverstocks Limited*	UnitedKingdom	Ordinary	100%	Dormant

*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	Yearended	Yearended
	30November 2021 £000	30November 2020 £000
Goods forresale	8,019	6,835
Total	8,019	6,835

Goods for resale recognised as cost of sales in the year ended 30 November 2021 amounted to £67,840,000 (Year ended 30 November 2020: £74,297,375). 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 (2020: £nil)

19.Tradeand otherreceivables	Group	Company	Group	Company
	2021	2021	2020	2020
	£000	£000	£000	£000
Tradereceivables	786	-	528	-
Amountsduefromgroup companies	-	11,476	-	-
Otherreceivables	443	-	429	-
Prepaymentsandaccruedincome	2,496	-	1,551	-
Total	3,724	11,476	2,508	-

Information related to the Group's and Company's exposure to credit risk, market risk and impairment losses on receivables are included in note 27.

20.  Cash and cash equivalents

	2021	2020
	£000	£000
	2,849	5,140
	2,849	5,140

The company has no cash and cash equivalents

21.  Trade and other payables

 

2021		2020
£000		£000
Tradepayables	6,246	6,971
Othertaxation and socialsecurity	601	2,088
Otherpayablesandaccruals	1,512	1,822
Total	8,359	10,881
Thecompanyhasnotradeandotherpayables

22.  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 27.

2021		2020
£000		£000
Currentliabilities Otherloans	-	5,803
Interestaccruedonloannotes	-	1,232
Leaseliabilities	366	745
Total	366	7,780
Non-currentliabilities Loannotes	-	4,200
Bankloans	887	-
Sharesclassifiedasdebt	-	1,240
Leaseliabilities	1,557	1,820
Total	2,444	7,260
Fallingduewithinoneyear	366	7,780
Fallingdueaftermorethanoneyear	2,557	7,457
Total	2,923	15,237
Unamortiseddebtissuecosts	(113)	(197)
Totalinterest-bearingloansandborrowings	2,810	15,040

On 5 February 2021, the Group refinanced with the introduction of a £10m three year committed Revolving Credit Facility ("RCF") repaying existing bank debt included in other loans in the process. This agreement which runs until 5 February 2024 also includes an additional uncommitted accordion option facility for up to a further £10m.

On the IPO, Primary proceeds of £15.0m were raised, part of which were used to repay all outstanding liabilities with financing parties at this time.

TheCompanyhasnoborrowings Termsanddebtrepaymentschedule 30November2021	Currency	Interest rate	Yearofmaturity	Facevalue	Carryingvalue
				£000	£000
Bankloans	GBP	SONIA+2.0-2.5%	2024	1,000	887
Leaseliabilities	GBP	5%	2018- 2027	835	835
Leaseliabilities	USD	5%	2027	1,088	1,088
Total				2,923	2,810

The £10m three year committed Revolving Credit Facility ("RCF") includes a commitment fee charged on the undrawn element at SONIA + 0.8%.

30November2020	Currency	Interest rate	Yearofmaturity	Facevalue £000	Carryingvalue £000
Loannotes	GBP	10%	2022	4,200	4,200
Otherloans	GBP	LIBOR+9%	2021	6,000	5,803
Sharesclassifiedasdebt	GBP	3%	2022	1,240	1,240
Leaseliabilities	GBP	5%	2018- 2027	1,235	1,235
Leaseliabilities	USD	5%	2027	1,330	1,330
Total				14,005	13,808

Changes in liabilities from financing activities

30November2021	Loannotes	Otherloans	Bankloan	Shares classifiedas debt	Lease liabilities		Total
	£000	£000	£000	£000	£000		£000
Balanceat30November2020	5,432	5,803	-	1,240	2,565		15,040
Changesfrom financingcashflows Repaymentofborrowings	(4,200)	(6,000)	-	-	-		(10,200)
Proceedsfromnewloan	-	-	1,000	-	-		1,000
Interestpaid	(1,408)	(345)	(105)	-	(131)		(1,989)
Payment ofleaseliabilities	-	-	-	-	(618)		(618)
Total	(5,608)	(6,345)	895	-	(749)		(11,807)
Otherchanges Interestexpense	176	345	105	45	107		778
Interestwaivedbythe shareholders	-	-	-	(185)	-		(185)
Other movements	-	197	(113)	-	-		84
Sharereorganisation	-	-	-	(1,100)	-		(1,100)
Total	176	542	(8)	(1,240)	107		(423)
Balanceat30November2021	-	-	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.

30November2020	Loannotes	Otherloans	Bankloan	Shares classifiedas debt	Lease liabilities		Total £000
	£000	£000	£000	£000	£000
Balanceat30November2019	5,197	9,482	-	1,220	3,441		19,340
Changesfrom financingcashflows Repaymentofborrowings	-	(3,500)	-	-	-		(3,500)
Interestpaid	(186)	(1,914)	-	-	(243)		(2,343)
Payment ofleaseliabilities	-	-	-	-	(846)		(846)
Total	(186)	(5,414)	-	-	(1,089)		(6,689)
Otherchanges Newleases					16		16
Interest expense	421	1,735	-	20	197		2,373
Total	421	1,735	-	20	213		2,389
Balanceat30November2020	5,432	5,803	-	1,240	2,565		15,040

23.  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.

Amounts recognised in the consolidated statement of financial position

	Land and buildings
Right of use assets	£000
Balance at 1 December 2019	2,962
Additions to right of use assets	-
Depreciation	(629)
Balance at 30 November 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
	Land and buildings
Lease liabilities	£000
Balance at 1 December 2019	3,441
Additions to lease liabilities	16
Interest expense	197
Lease payments	(1,089)
Balance at 30 November 2020	2,565
Additions to lease liabilities	-
Interest expense	107
Lease payments	(749)
Balance at 30 November 2021	1,923

Amounts recognised in the consolidated income statement

	Year ended 30 November 2021 £000	Year ended 30 November 2020 £000
Depreciation charge on right of use assets	627	629
Interest on lease liabilities	107	197
Total	734	826

Lease liabilities - Maturity analysis of contractual undiscounted cash flows

	Carrying amount	Contractual cash flows	1yearorless	1-2years	2-5years	Morethan 5years
	£000	£000	£000	£000	£000	£000
30November2021	1,923	2,205	454	346	1,316	89
30November2020	2,565	2,954	729	454	1,223	548

24.  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 £317,000 (Year ended 30 November 2020: £275,000).

 Share based payments

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 options are exercisable only on the occurrence of an exit event of the company (such as a sale or listing) and will lapse, to the extent not already exercised, on the tenth anniversary of grant. The options are normally forfeitable if the employee leaves the Group before the options are exercised unless holders of not less than one half of the total number of A Ordinary Shares agree otherwise. 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)

Detailsofthe shareoptionsoutstanding duringthe periodareas follows:	30November 2021		30November2020
	Number of share options	Weighted average exercise price (£)	Number of share options	Weighted average exercise price (£)
Outstanding at beginningof year	29,900	£0.01	29,900	£0.01
Grantedduringtheyear	116,734	£0.01	-	-
Reclassification and bonus issueofshareoptions onGroupreorganisation(note25)	11,065,979	£0.01	-	-
Exercisedduringtheyear	(2,016,711)	£0.01	-	-
Outstandingat theendof theyear	9,195,902	£0.01	29,900	£0.01
Exercisableatthe endofthe year	9,195,902	£0.01	-	-

The fair value of the share options at the grant date was calculated using a Monte Carlo option pricing model.

Measurementinputsandassumptionsareasfollows:	30November	30November
	2021	2020
Fairvalueatgrant date (£)	17,283,941	952,016
Expectedvolatility(%)	45	30
Optionlife(years)	0.2	2.5
Expecteddividends(%)	-	-
Risk-freeinterestrate(%basedonzerocouponUKGovernmentbonds)	0.6	0.8

The expected volatility is based on group of quoted comparator companies over a two and three year historical period prior to the grant date.

The Group recognised total expenses of £17,379,000 related to equity-settled share-based payment transactions during the year (Year ended 30 November 2020: £381,000).

25.  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 9.65 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 £638,000 (Year ended 30 November 2020: £491,000). See note 8 for further details.

Compensation for other members of the Senior Leadership Team not included in the above totalled £986,000. (Year ended 30 November 2020: £501,000)

In addition, Equity-settled share-based payment charges and Employers NI with key management personnel totalled £17,276,000. (Year ended 30 November 2020: £499,000)

Otherrelatedpartytransactions ThebelowtransactionsrelatedtoNorthernEntities(shareholder)	Yearended	Yearended
	30November2021	30November2020
	£000	£000
Interest onloanandnon-executive directorfeecharges	176	474
Waivedinterestonpreferenceshares	(185)	-
Non-executive andmonitoring fees	20	53

Transactions with the Employee Benefit Trust

On 8 February 2021, the Intertrust Employee Benefit Trust Limited (Company No. 78262 resident in Jersey) was established to act as trustee of the musicMagpie Employee Benefit Trust ('EBT').  The trustee entered into a Linking Agreement under which the EBT agreed to satisfy share options award to directors and employees. 

Details of the transactions with, and the shares issued to the EBT can be found in note 26.  On the Initial Public Offering, the EBT transferred 2,016,711 shares to individuals exercising share options that had vested.  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 £408,000 (Year ended 30 November 2020: £0) and compensation for other members of the Senior Leadership Team £624,000.

In addition, Equity-settled share-based payment charges and Employers NI with the Directors totalled £17,200,000

Otherrelatedpartytransactions ThebelowtransactionsrelatedtoNorthernEntities(shareholder)	Yearended	Yearended
	30November2021	30November2020
	£000	£000
Interest onloanandnon-executive directorfeecharges	37	-
Non-executive andmonitoring fees	4	-

  Transactions with the Employee Benefit Trust

On 8 February 2021, the Intertrust Employee Benefit Trust Limited (Company No. 78262 resident in Jersey) was established to act as trustee of the musicMagpie Employee Benefit Trust ('EBT').  The trustee entered into a Linking Agreement under which the EBT agreed to satisfy share options award to directors and employees. 

Details of the transactions with, and the shares issued to the EBT can be found in note 26.  On the Initial Public Offering, the EBT transferred 2,016,711 shares to individuals exercising share options that had vested.  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. 

26.  Capital  and reserves 

Share capital

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

	Ordinary		Ordinary		Sharesissued				Sharesissued					Reclassification		Ordinary	Cancel	Ordinary
	shares		shares		on		Subdivision		toEmployee	Exercise	Subdivision	Ordinary	Share	intoDeferred	Shares	shares	Deferred	shares
	1Dec2019		30Nov2020		incorporation		ofshares		BenefitTrust	ofwarrant	ofshares	sharesissued	reclassification	Shares	issued	issuedonIPO	Shares	30Nov2021
	Number		Number		Number		Number		Number	Number	Number	Number	Number	Number	Number	Number	Number	Number
AOrdinarysharesof£0.01each	375,000		375,000										(375,000)					-
BOrdinarysharesof£0.01each	-		-							175,000			(175,000)					-
C1Ordinarysharesof£0.01each	100		100									9,900	(10,000)					-
C2Ordinarysharesof£0.01each	341,500		341,500				100						(341,600)					-
D1Ordinarysharesof£0.01each	11,000		11,000						34,400				(45,400)					-
D1(A)Ordinarysharesof£0.05each	16,600		16,600								66,400		(83,000)					-
D2Ordinarysharesof£0.05each	35,000		35,000								140,000		(175,000)					-
EOrdinarySharesof£2.00each	1,500		1,500								298,500		(300,000)					-
FOrdinarySharesof£0.05each	20,000		20,000								80,000		(100,000)					-
GOrdinarySharesof£0.01each	-		-						56,117				(56,117)					-
HOrdinarySharesof£0.01each	-		-						56,117				(56,117)					-
Preferencesharesof£1.00each	1,100,000		1,100,000								108,900,000		(110,000,000)					-
DeferredShares														110,790,017			(110,790,017)	-
OrdinarySharesof£1eachOrdinarySharesof£0.01each	- -		- -		-	1	-	(1)				111,717,234		(110,790,017)	99,072,783	7,772,020	-	107,772,020
TotalShareCapital(£'000)		14		14	-		-		1	2	1,100	-  -		-	991	78	(1,108)	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 capital of the previous parent, Entertainment Magpie Group Limited ('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 purchase by way of a gift of £1,466.34 to the EBT, which was then held on its behalf 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 83,000 D1(A) ordinary shares of £0.01 each, 175,000 D2 ordinary 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.

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.

27.  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. 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 management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are 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 and to sustain future growth. The Directors regularly monitor the level of capital in the Group to ensure that this can be achieved. 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 of financial assets that are neither past due nor impaired. The carrying amount of financial assets recorded in the financial statements represents the Group's maximum exposure to credit risk and any associated impairments are immaterial.

Exposure to credit risk

	Year ended	Year ended
	30 November 2021	30 November 2021
	£000	£000
Trade and other receivables	1,228	957
Cash and cash equivalents	2,849	5,140
Total	4,077	6,097
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 2021					1 Year	Between 1	Between	More than
			Carrying amount	Total	Or Less	and 2 years	2 and 5 years	5 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
				Contractual cash flows
30 November 2020					1 Year	Between 1	Between	More than
			Carrying amount	Total	Or Less	and 2 years	2 and 5 years	5 years
			£000	£000	£000	£000	£000	£000
Trade and other payables			8,794	8,794	8,794	-	-	-
Loan notes			5,432	5,432	-	5,432	-	-
Other loans			5,803	6,523	6,523	-	-	-
Bank loans			-	-	-	-	-	-
Shares classified as debt			1,240	1,265	-	-	1,265	-
Lease liabilities			2,565	2,954	729	454	1,223	548
Total			23,834	24,968	16,046	5,886	2,488	548

Market risk is the risk that changes in the market prices, such as foreign exchange rates and interest rates will affect the Group's 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 had 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:

	30November	30 November
	2021	2020
Fixedrateinstruments	£000	£000
Loannotes	-	4,200
Leaseliabilities	1,923	2,565
Sharesclassifiedasdebt	-	1,240
Total	1,923	8,005
Variablerateinstruments Bankloans	946	-
Otherloans	-	5,803
Total	946	5,803
Sensitivityanalysis

A change of 100 basis points in interest rates at the reporting date would have decreased equity and profit or loss by £74,000 (2020: £100,000). 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 2021  30 November 2020

	GBPSterling	USDollars	Total	GBPSterling	USDollars	Total
	£000	£000	£000	£000	£000	£000
Cashandcashequivalents	2,348	501	2,849	4,309	831	5,140
Tradeandotherreceivables	783	445	1,228	548	409	957
Tradeandother payables	(6,734)	(1,024)	(7,758)	(7,084)	(1,710)	(8,794)
Borrowings	(887)	-	(887)	(11,235)	-	(11,235)
Preferenceshares classedas debt	-	-	-	(1,240)	-	(1,240)
Leaseliabilities	(835)	(1,088)	(1,923)	(1,235)	(1,330)	(2,565)
Total	(5,325)	(1,166)	(6,491)	(15,937)	(1,800)	(17,737)
Thefollowingsignificantexchangerateswereapplied:
	30 November		30 November
	2021		2020
Averagerateforthefinancialperiod
USDollars	1.38		1.29
Balancesheetrate
USDollars	1.33		1.33
Sensitivityanalysis

A 10 percent weakening of the US Dollar against the pound sterling at 30 November 2021 would have increased equity and profit or loss by £0.1 million (2020: £0.2 million). 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).

Basis for determining fair value

All financial assets and liabilities of the Group are categorised as Level 3. The fair value of each class of financial assets and liabilities is the carrying amount, based on the following assumptions:
Interest bearing loans and borrowings and lease liabilities	Fair value is calculated based on the discounted expected future principal and interest cash flows.
Trade receivables, trade and other payables and cash and cash equivalents	The fair value approximates to the carrying value because of the short-term maturity of these instruments.

Thecarryingandfair valueoffinancialassetsandliabilitiesareasfollows:	30November	30November
	2021	2020
	£000	£000
Tradeandotherreceivables	1,228	957
Cashandcashequivalents	2,849	5,140
Totalfinancialassets	4,077	6,097
Bankoverdraft	-	-
Borrowings	(887)	(11,235)
Preferenceshares classedas debt	-	(1,240)
Leaseliabilities	(1,923)	(2,565)
Tradeandother payables	(7,758)	(8,794)
Totalfinancialliabilities	(10,568)	(23,834)

28. 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.

	Yearended30November2021 £000	Yearended 30 November 2020 £000
(Loss)/profit beforetax	(14,819)	6,958
Equity-settledshare-basedpayments	17,379	381
Othernon-underlyingitems	4,621	1,282
Non-underlyingfinancialexpense	718	605
Adjustedprofitbeforetax	7,899	9,226

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

Adjusted EBITDA

Adjusted EBITDA means Adjusted profit before tax before depreciation and amortisation of intangible assets and financial expense.

	Year ended30November2021 £000	Yearended 30 November 2020 £000
Adjusted profitbeforetax	7,899	9,226
Depreciationofproperty,plantandequipment	1,755	1,300
Impairmentofproperty,plantandequipment	410	-
Lossondisposalofproperty,plantandequipment	12	-
Amortisation of intangible assets	1,517	1,261
Financial expense	581	2,086
AdjustedEBITDA	12,174	13,873

Adjusted earnings per share

Adjusted EPS represents adjusted profit before tax divided by a weighted average number of shares in issue, and is disclosed to indicate the underlying profitability of the Group.

	Note	Year ended30November2021 £000	Yearended 30 November 2020 £000
Adjusted profitbeforetax	1	7,899	9,226
Weighted average number ofshares	2	107,772,020	107,772,020
Adjustedearningspershare (pence)		7.33	8.56
Notes:

1.  Adjusted profit before tax means (loss)/profit before tax before equity-settled share-based payments and other non-underlying items.

2.  The number of ordinary shares as at 30 November 2021 have been used as the basis for the current and prior periods adjusted EPS calculation. This represents an indication of the future weighted average number of ordinary shares for evaluating performance of the Group .

Adjusted operating cash flow

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

	Year ended30November2021 £000	Yearended 30 November 2020 £000
AdjustedEBITDA	12,174	13,873
Movementsinworkingcapital	(4,922)	(612)
Adjustedoperatingcashflow	7,252	13,261

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 ended30November2021 £000	Yearended 30November2020 £000
Net cash generated fromoperations(fromConsolidatedCashFlow Statement)	2,631	11,979
Other non-underlying items	4,621	1,282
Cashgeneratedfromoperationsbeforenon-underlyingitemspaid	7,252	13,261
AdjustedEBITDA	12,174	13,873
Cashconversion%	59.6%	95.6%

Net cash/(debt)

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 30 November 2021	Year ended 30 November 2020
	£000	£000
Cashandcashequivalents	2,849	5,140
Loansandaccruedloaninterest	(887)	(11,235)
Unamortised loanarrangementfees	(113)	(197)
Externalloans	(1,000)	(11,432)
Netcash/(debt)	1,849	(6,292)
29.Subsequentevents
On 17 December 2021, the Group entered into a lease assignment in respect of its leased property at Galleon House, Newby Road, Hazel Grove.  The assignment saw it take on all rights and obligations under a 63 year lease dated 21 December 1967 and ending on 21 December 2030, securing its tenancy and removing the previous tenant, Oxendale & Company Limited, from whom it previously sublet, from the lease.  The lease liability, not reflected in these financial statements, measured at the present value of the lease payments that are not paid at the commencement date, discounted using the current incremental borrowing rate of 4% has been calculated as £1,831,215

 

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[1] Adjusted operating cash flow and adjusted EBITDA are non-GAAP alternative performance measures.  See note 28 to the financial statements for further definitions and reconciliations. 

 

END

 

 

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