INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 MAY 22

RNS Number : 8347T
musicMagpie plc
27 July 2022
 

27 July 2022

musicMagpie plc

("musicMagpie", or "the Group")

INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 MAY 2022

Consumer Technology revenue up 15.9%. Strong progress made in the Group's device rental subscription service, with future growth to be supported by new £30m bank facility

musicMagpie, a circular economy pioneer specialising in refurbished consumer technology in both the UK and US, follows its half year trading update from 16 June 2022 with announcement of its unaudited interim results for the six months ended 31 May 2022.

 

 

 

H1 22

£m

H1 21

£m

Revenue

71.3

72.8

 

 

 

Gross Profit

19.0

23.7

Gross Margin

26.6%

32.6%

 

 

 

Adjusted EBITDA 1

2.6

6.2

 

 

 

Adjusted (Loss)/ Profit Before Tax 2

(0.7)

4.0

 

 


Adjusted (Loss)/ Earnings per Share 3

(0.6p)

3.7p

 

 

 

 

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, all net of taxation, and is therefore considered to show the underlying performance of the Group

 

Financial highlights

 

· Group revenue of £71.3m (H1 2021: £72.8m) with growth in Consumer Technology largely offsetting the expected post-pandemic reduction in Disc Media and Books

Consumer Technology revenue (65% of Group), including subscriptions, was up 15.9% to £46.0m (H1 2021: £39.7m)

Disc Media and Books revenue fell 23.6% to 25.3m (H1 2021: 33.1m) with the prior year H1 benefitting from pandemic lockdowns

·   Gross profit of £19.0m (H1 2021: £23.7m) with gross margin reducing to 26.6% (H1 2021: 32.6%) as a result of the change in overall product mix towards Consumer Technology, with an increased proportion of these products being sourced from intermediary wholesale partners

· Net debt of £3.3m (Nov 2021: £1.8m net cash), consistent with Board expectations, with an investment into Consumer Technology rental assets of £3.6m (H1 2021:  £1.4m) and IT platforms of £2.2m (H1 2021: £0.9m)

· New committed 3-year £30m revolving credit facility with HSBC UK and NatWest signed post period end to drive future Rental growth

 

 

Operational highlights

 

· Strong progress from the Group's device rental subscription service, increasing to 24,000 active subscriptions as at 31 May 2022 (31 May 2021: 7,500)

Expanded the subscription service from phones to include MacBooks, tablets and games consoles in February 2022

Subscription revenues of £2.3m in H1 (H1 2021: £0.4m)

Entered H2 2022 with c£2.0m in contractually committed revenues for the second half, before renewals or growth in new subscriptions

· Expanded sales channels by launching on Back Market, the online marketplace dedicated to refurbished devices

· Expansion of listings following Amazon re-opening refurbished B grade ('Very Good') and C grade ('Good') conditioned products in the UK and US, as well as the placing of stock in Amazon FBA ('Fulfilled by Amazon') warehouses 

· Continued roll-out of SMARTdrop Kiosk concept with 170 now in place and around 12,700 devices sold and bought to date: still on track to be in 295 Asda stores across the UK by October 2022, meaning 90% of the UK's population will be within 15-minute drive of a kiosk

· Matthew Fowler joined from genedrive plc as CFO in April

· Matt Harrison joined from Asda to be Chief Development & Partnership Officer in June 2022, with responsibility for leading the Group's offering to the corporate market (under the 'Magpie Circular' banner)

 

Outlook

The current economic environment is of course uncertain for many consumer-facing businesses, with numerous well-documented headwinds in the market and squeezed wallets for consumers. 

For our strategically important Consumer Technology segment (which represents 65% of Group revenue) we expect an increased contribution in the second half of the year from our growing base of rental subscribers. In addition to sales and rentals through the musicMagpie store, we also expect continued sales revenue growth from the recent expansion of 'marketplace' sales through our new partnership with Back Market, and from additional listings with long-term partners such as Amazon.  These factors, along with the expectation of lower marketing spend as a percentage of higher revenues, not least owing to the expected contribution from the Black Friday sales period, mean that we have confidence going into the second half of our financial year. 

Disc Media and Book sales are expected to perform broadly in-line with the first half and we will start to see softer comparatives as the abnormal pandemic lockdown periods from 2021 fall away. Gross margins across Disc Media and Books are expected to remain resilient.

Th e Board continues to be confident that the business is well positioned for future growth and Adjusted EBITDA remains in line with its expectations for the full year.

Commenting on the results, Steve Oliver, Chief Executive Officer of musicMagpie, said:

" I am pleased that the business has delivered a strong performance in our strategically important Consumer Technology division, which now represents two-thirds of our total revenue.

I am also delighted with the progress being made in our device rental subscription service. In light of the continuing squeeze on consumer spending, we believe that this will become an increasingly attractive option to a wider range of consumers seeking to replace their non-discretionary technology products in a cost-effective way. Whilst the successful growth of this offering has a short-term compression on the financial performance of the business relative to a one-off sale, it will deliver higher revenue and EBITDA over the life of the device. It therefore remains our overriding growth strategy for the medium term, and we are delighted to announce HSBC UK and NatWest's support in the form of a new £30m three-year revolving credit facility to further support our investment in this area. 

Notwithstanding the challenges presented by the current macroeconomic uncertainty, we expect consumers will continue to seek ways to raise cash and save money and as a result, we are confident that the business is well positioned for future growth in H2 2022 and beyond."


Analyst Conference Call

Steve Oliver (CEO), Matthew Fowler (CFO) and Ian Storey (COO) will host an analyst presentation at 9:00am GMT today, Wednesday 27 July 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 +44 (0) 20 7250 1446 or by email to musicmagpie@powerscourt-group.com.

Enquiries

musicMagpie plc

Steve Oliver, CEO

Ian Storey, COO

Tel: +44 (0) 870 479 2705

Matthew Fowler, CFO

 

 

Peel Hunt (Nominated Adviser and Joint Broker)

Edward Knight

Paul Gillam

Tom Ballard

Tel: +44 (0) 20 7418 8900

 

 

 

Shore Capital (Joint Broker)

Malachy McEntyre

Mark Percy

Daniel Bush

John More

Tel: +44 (0) 20 7408 4090

 

 

Powerscourt (Financial Public Relations)

Rob Greening

Genevieve Ryan

Sam Austrums

Tel: +44 (0) 20 7250 1446


 

Notes to Editors

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

 

musicMagpie has a strong environmental and social focus, as demonstrated by its trademarked 'smart for you, smart for the planet' ethos. Over 400,000 consumer technology products were resold 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 CO 2  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. The Group also recently partnered with Asda to give customers the option of using its SMARTdrop Kiosks in store for a fast and easy way to recycle phones for instant cash. Customers purchasing from musicMagpie receive branded refurbished product for a fraction of the price of buying new.

 

The Group has the highest number of seller reviews on both Amazon and eBay and has consistently achieved extremely positive feedback scores. The Group also has a 4.5* rating on UK Trustpilot with over 230,000 reviews.  

 

For further information please visit :   www.musicmagpieplc.com



INTERIM STATEMENT

We are pleased to report our interim results for the six months ended 31 May 2022, which has seen a period of strong growth in our key Consumer Technology segment (now representing 65% of Group revenue).

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 - the Group's 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 growing, supported by a number of positive tailwinds including the environmental benefits of reducing e-waste and the cost benefits for consumers. 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.  Rent More

The Group's rental subscription service continues to grow strongly with active subscribers at 24,000 as at 31 May 2022, an increase of 320% (16,500) compared to 31 May 2021. 

Our renewal data continues to build and shows a retention rate with customers of well over 70% - with retained customers opting for a broadly equal mix of (i) upgrading the device, (ii) keeping their rental static and (iii) renewing with the same device at a lower rental cost.  Renewals form an important part of our model with no customer acquisition costs and very low transactional costs.  With £7.3m of investments into rental handsets to date, the Group has a strong base, alongside its extended £30m banking facility, from which to grow this highly profitable recurring revenue stream.

In addition to the individual consumer offering, H2 will see us launch a direct to corporate subscription service as part of Magpie Circular. This provides a single source service for companies wishing to upgrade their mobile phone and tablets and recycle their existing stock. The expectation is for larger bulk subscriptions of higher value handsets and we believe that this has the potential to significantly enhance the value of the rental portfolio while simultaneously providing a supply of incremental refurbished phones for the musicMagpie store.

 

2.  Buy More

The Group continues to successfully roll-out its SMARTdrop Kiosk installation programme with Asda which will see around half of its stores fitted with a kiosk. As at 31 May 2022, the Group was approximately half-way through the programme and remains on target to have a kiosk installed in 295 stores by October 2022 at which point it is estimated that 90% of the population in England will live within a 15-minute drive of a SMARTdrop Kiosk. 

For customers, the kiosks offer an even faster and easier way to recycle unwanted phones, allowing customers to take their phone to a kiosk, deposit it, receive a valuation and get paid to their bank account within minutes - thereby enabling customers to 'pay for their shopping today'.  For the Group, the kiosk network gives us greater opportunities to buy incremental phones at a better overall margin.

In addition, progress continues to be made with Magpie Circular, our Corporate offering that provides technology recycling services to businesses wishing to increase their sustainability efforts.  The Group recently recruited Matt Harrison from Asda where he was a Senior Director of Business Development & Partnerships, to be Chief Development & Partnership Officer. Matt will lead our Magpie Circular sales and marketing strategy.


3.  Sell More

Whether through our own direct to consumer websites or through third-party marketplaces such as Amazon, eBay and Back Market, we remain focused on expanding the sales reach for our products. 

Historically the musicMagpie store has contributed the overwhelming majority (over 80% in the UK) of Consumer Technology sales.  However, given the clear benefits of leveraging the reach, scale and marketing investment of third-party marketplaces, we have seen sales from those marketplaces increase as a proportion of total sales as we expand our sales channels and grow our listings on their platforms.

In April 2022 we announced the launch of our products on Back Market, a dedicated marketplace for refurbished phones and tablets.  Initial sales performance has been strong and we expect continued growth during H2.  With existing partnerships we have focused on extending our listings.  For example, we have recently increased product availability on Amazon as a result of it re-opening the ability to list refurbished B grade ('Very Good') and C grade ('Good') conditioned products in the UK and US. This opens up the entire musicMagpie Consumer technology stockholding to be sold on Amazon, thereby greatly increasing the sales potential for this platform. In addition, we have also begun using Amazon's fulfilment service (Fulfilment by Amazon) which provides additional reach, scale and speed of execution.

As this strategy progresses, platform fees will be increasingly offset by reductions in our direct marketing costs as a percentage of overall sales as we leverage third-party platforms' extensive brand awareness and marketing spend.

 


FINANCIAL PERFORMANCE REVIEW

Group revenue for the six months ended 31 May 2022 was slightly below the previous year at £71.3m (H1 2021: £72.8m). 

Consumer Technology revenue, which now makes up approximately two thirds of total revenue, was up 15.9% to £46.0m (H1 2021: £39.7m), driven by further growth in outright sales (up 11.2% versus the prior period) and continued strong growth in rentals.  The year-on-year growth in outright product sales has been intentionally tempered by promoting our contracted monthly rental subscription service over outright purchase. Rental subscriptions are 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, which will become more visible in the Group's performance in the medium-term.

The absolute value of Rental subscription revenues included within Consumer Technology was £2.3m (H1 2021: £0.4m) and continues to deliver a high (>70%) EBITDA margin.  We are now starting to see the benefit of a growing rental book with both high margins and recurring revenues and estimate that we are entering the second half of our financial year with committed rental subscription revenue of c£2.0m in the next six months. This will grow as we add new subscribers daily and as we maintain our renewal retention rate at above 70%.

As expected, sales of Disc Media and Books fell 23.6% to £25.3m (H1 2021: £33.1m) with the prior year benefiting from increased sales owing to periods of pandemic lockdowns.  After normalising the impact of pandemic lock downs there is modest sales decline within the core of the segment (based on a 3 year 'pre v post' pandemic comparison) which has resilient margins and continues to provide support for the growth strategies for Consumer Technology.

Gross profit for the Group was £19.0m (H1 2021: £23.7m).  Gross margin was 26.6% compared to the 12 months to 30 November 2021 of 30.4%. This was in line with the expectations set out at the time of the Group's final results in March 2022 given the change in the product mix towards Consumer Technology and a greater number of purchases from intermediary wholesale partners and higher overall sales prices.

Operating expenses, excluding depreciation and amortisation, were £19.3m (H1 2021: £19.0m).  As with the prior year, the second half cost for marketing spend is anticipated to be substantially below the first six-month period as the momentum of FYQ4 requires less overall spend.  Exceptional operating expenses were £0.3m (H1 2021: £21.5m, including £17.4m of share payments and £4.1m of IPO and other non-underlying items), consistent with the treatment of one-off items from the prior year.  Adjusting for these expenses and the trading dynamics referred to above, EBITDA was £2.6m (H1 2021: £6.2m) 

Finance costs were £0.3m (H1 2021: £1.0m), with the prior year including early termination charges as part of the refinancing that was completed in February 2021.

The Group's loss before tax was £1.0m (H1 2021: a loss of £17.7m), with the prior period including one-off costs of around £22.9m.  After estimating the full year tax rate and adjusting the share-based payments deferred tax asset, the tax charge for the period is £2.2m (H1 2021: £0.1m credit) and the loss after tax is £3.2m (H1 2021: loss £17.7m).  The basic and diluted loss per share was 2.9p (H1 2021: loss per share 17.3p).

Net cash from operating activities was £2.3m (H1 2021: £1.9m).  Working capital movements were neutral (H1 2021: £0.2m consumption) with the majority of EBITDA falling to net cash from operations after an adjustment for lease interest of £0.3m (H1 2021: £1.0m).  Cash conversion rate, being net cash from operations divided by adjusted EBITDA less movements in working capital, was 103.1% (H1 2021: 96.4%).

Below operating activities, cash used in investing activities increased from £2.5m for the same period in 2021 to £6.7m.  The largest component of this increase was the investment in rental assets and this is a key features of our growth strategy.  The cash investment in the six months to May 2021 was £1.4m, the six months to November 2021 was £2.3m and the six months to May 2022 was £3.6m demonstrating both the growth in the subscriptions and the investment required to fund the assets being rented. In addition to physical assets, we continue to invest in the underlying IT platforms of the business, which drive and enable our competitive market position, and that investment in the period was £2.2m (H1 2021: £0.9m).

Interest payments were £0.3m (H1 2021: £2.0m).  During the period loan drawings were £6.5m (30 November 2021: £1.0m).  Total drawings against the loan at 31 May 2022 were £7.5m and net debt was £3.3m (November 2021: £1.8m net cash).

The balance sheet has remained strong and overall movements from May 2021, November 2021 and May 2022 were relatively small.  There was a continued increase in property plant and equipment from the investment in rental assets, with a £6.6m increase from £4.7m in May 2021 to £11.3m in May 2022. Net assets at the end of the period were £23.4m (31 May 2021: £17.8m).

Post period end the Group refinanced its existing £10m committed Revolving Credit Facility.  On 26 July 2022 a club arrangement was entered into with HSBC UK and NatWest banks to provide a £30m revolving credit facility to the Group.  The initial term is three years, with the potential to extend by a further 12 months.  The facility provides the Group with the appropriate funding to exploit the growth in the Rental subscription service.

 

 

 

Martin Hellawell  Steve Oliver

Chairman  Chief Executive Officer

 

 

 

 

 

 

 

Consolidated Condensed Statement of Comprehensive Income

 

 

 

 

 

 

Note

Unaudited

6 months ended
31 May 2022

  £'000

Unaudited

6 months ended
31 May 2021

£'000

Audited

Year

ended

30 Nov 2021

£'000

Revenue

4,5

  71,254

  72,772

  145,506

Cost of sales


(52,298)

(49,023)

(101,211)

Gross profit

 


  18,956

  23,749

  44,295

Operating expenses


(19,318)

(18,980)

(35,875)

Operating expenses - exceptional


(328)

(21,491)

(22,000)

Total operating expenses


(19,646)

(40,471)

(57,875)

Other operating income


  34

  20

  60



 



Adjusted EBITDA*

10

  2,561

  6,240

  12,174

Depreciation of property, plant and equipment


(1,740)

(713)

(1,755)

Impairment of property, plant and equipment


(240)


(410)

Loss on disposal of property, plant and equipment


 

-

 

-

 

(12)

Amortisation of intangible assets


(909)

(738)

(1,517)

Equity - settled share-based payments


-

(17,379)

(17,379)

Other non - underlying items


(328)

(4,112)

(4,621)



 



Operating loss


Financial expense

 


(656)

 

(346)

  (16,702)

 

(1,028)

  (13,520)

 

(1,299)

Loss before taxation

 


(1,002)

  (17,730)

  (14,819)

Taxation

6

   (2,157)

  69

  2,694

Loss for the period


(3,159)

  (17,661)

  (12,125)

 

Other comprehensive expense


 



Items that may be reclassified to profit and loss

Foreign exchange differences on translation of foreign operations

 

 

 

68

 

(163)

 

  38

Total comprehensive loss for the period


(3,091)

  (17,824)

  (12,087)

 

 


 





Pence

Pence

Pence

Basic and diluted loss per share for the period

 

(2.9)

(16.4)

(12.7)

 


 



 

 

 




 

*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.

Consolidated Condensed Statement of Financial Position

 

 

 

 

Note

Unaudited

As at
31 May 2022

£'000

Unaudited

As at
31 May 2021

£'000

Audited

As at

30 Nov 2021

£'000

Assets

Property, plant and equipment

Intangible assets and goodwill


8

9

 

1 1,316

10,967

 

4 ,742

8,538

 

6,118

9,680

Deferred tax


2,708

1,735

5,333

Total non-current assets


2 4,991

15,015

21,131

Inventories


8 ,658

6,321

8,018

Trade and other receivables


3 ,172

3,468

3,724

Cash and cash equivalents


4 ,179

6,372

2,849

Total current assets

 


16,009

16,161

14,591

Total assets


41,000

31,176

35,722

 

Liabilities

Trade and other payables

Other interest-bearing loans and borrowings

Lease liabilities

Corporation tax payable




 

 

 

 

 

(8,038)

-

(621)

(120)

 

 

(11,149)

-

(638)

(54)

 

 

(8,359)

-

(366)

(269)

Total current liabilities

 


(8,779 )

(11,841)

(8,994)

Net current assets

 


  7,2 30

  4,32 0

  5,597

Borrowings

Lease liabilities

Shares classified as debt


( 7,413)

(3 ,933 )

-

-

(1,546)

-

(887)

(1,557)

-

Total non-current liabilities



(11,346)

(1,546)

(2,444)

Total liabilities

 


(20,125)

(13,387)

(11,438)

Net assets


  2 0,875

17,789

  24,284

 


 



Equity


 



Share capital


1,078

1,078

1,078

Other reserves


14,514

14,245

14,446

Retained earnings

10

5,283

2,466

8,760

Equity attributable to owners of the company


  20,875

17,789

  24,284


 

 


 

 

 

Consolidated Condensed Statement of Changes in Equity

 

 

 

 

Share capital

£'000

Other reserves

£'000

Retained earnings

£'000

Total

equity

£'000

As at 30 November 2020

14

1,532

874

2,420

Loss for the period

-

-

(17,661)

(17,661)

Foreign currency translation

-

(163)

-

(163)

Total comprehensive loss for the period

 

(163)

(17,661)

(17,824)

Transactions with shareholders:

 

 

 

 

Cancellation of share premium

-

(1,690)

1,690

-

Reclassification of shares

1,100

-

-

1,100

Repurchase of deferred shares

(1,108)

1,108

-

-

Bonus issue of shares

991

(991)

-

-

Shares issued

81

14,922

-

15,003

Issue cost of shares

-

(473)

-

(473)

Interest of preference shares waived by the owners

-

-

185

185

Share-based payments

-

-

17,378

17,378

As at 31 May 2021

1,078

14,245

2,466

17,789

Profit for the period

-

-

5,536

5,536

Foreign currency translation


201

-

201

Total comprehensive profit for the period

-

201

5,536

5,737

Transactions with shareholders:





Tax effects of share-based payment charge

-

-

758

758

 





As at 30 November 2021

1,078

14,446

8,760

24,284

Loss for the period

-

 

(3,159)

(3,159)

Foreign currency translation

-

68

-

68

Total comprehensive loss for the period

-

68

(3,159)

(3,091)

Transactions with shareholders:

 

 

 

 

Tax effects of share-based payment charge

-

-

(318)

(318)

 

 

 

 

 

As at 31 May 2022

1,078

14,514

5,283

20,875

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated Condensed Cash Flow Statement

 

 

Unaudited

6 months

ended
31 May 2022

£'000

Unaudited

6 months

ended
31 May 2021

£'000

Audited

Year

ended

30 Nov 2021

£'000

Net cash flow from operating activities





Loss for the period

Adjustments for:


(3,159)

(17,661)

(12,125)

Finance costs


346

1,028

1,299

Income tax expense

Depreciation of property, plant and equipment

Impairment of property, plant and equipment

Loss on property, plant and equipment

Amortisation

Share-based payments

Income taxes paid

 

Working capital adjustments
(Increase)/decrease in inventories

Decrease/ (increase) in trade and other receivables

(Decrease)/increase in trade and other payables


2,157

1,740

240

-

909

-

-

 

 

(637)

984

(268)

(69)

713

-

-

738

17,379

-

 

 

519

(981)

236

(2,694)

1,755

410

12

1,517

17,379

-

 

 

(1,184)

(1,216)

(2,522)

Net cash from operations


2,312

1,902

2,631

 

Cash flows used in investing activities

Acquisition of property, plant and equipment   Capitalised development expenditure


 

 

(4,524)

(2,196)

 

 

(1,565)

(888)

 

 

(4,404)

(2,837)

Net cash used in investing activities


(6,720)

(2,453)

(7,241)

 

Cash flows used in financing activities

Proceeds from new loan

Issue of share capital

Costs incurred on IPO charged to Share Premium

Interest paid

Repayment of lease liabilities

Interest paid on lease liabilities

Repayment of borrowings

 


 

 

6,500

-

-

(305)

(404)

(68)

-

 

 

-

15,002

(473)

(1,967)

(414)

-

(10,200)

 

 

1,000

15,002

(473)

(2,275)

(618)

(131)

(10,200)

 

Net cash used in finance activities


5,723

1,948

2,305

 

Net increase in cash and cash equivalents

Cash and cash equivalents brought forward

Exchange losses on cash and cash equivalents

 

 

 

 

 

1,315

2,849

15

 

1,397

5,140

(165)

 

(2,305)

5,140

14

Cash and cash equivalents carried forward

 

4,179

6,372

2,849




 

Notes to the Interim Results

 

1.  General Information

 

The Directors of musicMagpie plc (the "Company") present their Interim Report and the unaudited Condensed Consolidated Interim Financial Statements for the six months ended 31 May 2022 ("Condensed Consolidated Interim Financial Statements").

 

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.

 

2.  Basis of Preparation

 

The Group's half-yearly financial information, which is unaudited, consolidates the results of musicMagpie plc and its subsidiary undertakings up to 31 December 2021. The Group's accounting reference date is 30 November. musicMagpie plc's shares are listed on the Alternative Investment Market of the London Stock Exchange (AIM).  The Company is a public limited liability company incorporated and domiciled in England & Wales. The presentational and functional currency of the Group is Sterling. Results in this consolidated financial information have been prepared to the nearest £1,000.

 

musicMagpie plc and its subsidiary undertakings have not applied IAS 34, Interim Financial Reporting, which is not mandatory for UK AIM listed groups, in the preparation of this half-yearly financial report.

The accounting policies used in the preparation of the financial information for the six months ended 31 May 2022 are in accordance with the recognition and measurement criteria of UK adopted International Financial Reporting Standards ('IFRS') and are consistent with those which will be adopted in the annual financial statements for the year ending 30 November 2021.  The profit before interest, tax, depreciation, amortisation and share-based payment charge is presented in the statement of total comprehensive income as the Directors consider this performance measure provides a more accurate indication of the underlying performance of the Group and is commonly used by City analysts and investors.

 

While the financial information included has been prepared in accordance with the recognition and measurement criteria of UK adopted IFRS, these interim financial statements do not contain sufficient information to comply with IFRS. The comparative financial information for the year ended 30 November  2021 has been extracted from the annual financial statements of musicMagpie plc. These interim results for the period ended 31 May 2022, which are not audited, do not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006. The financial information does not therefore include all of the information and disclosures required in the annual financial statements. Full audited accounts of the Group in respect of the year ended 30 November 2022, which received an unqualified audit opinion and did not contain a statement under section 498(2) or (3) of the Companies Act 2006, have been delivered to the Registrar of Companies.

 

Accounting Policies

 

The accounting policies adopted in the preparation of the Condensed Consolidated Interim Financial Statements are consistent with those followed in the preparation of the Historical Financial Information. The Group has not early adopted any standard, interpretation or amendment that has been issued but is not yet effective. Their adoption is not expected to have a material effect on the Condensed Consolidated Interim Financial Statements.

 

Critical accounting judgements and key sources of estimation and uncertainty

 

   The preparation of the Condensed Consolidated Interim Financial Statements requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. In preparing these Condensed Consolidated Interim Financial Statements, the key sources of estimation  uncertainty and  the critical accounting judgements made by management are as follows:

 

 

Key sources of estimation uncertainty

 

The Group makes an estimate of the useful economic life of acquired intangible assets being the proprietary software acquired. 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.

 

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.

 

Impairment of assets - in testing for impairment of goodwill and other assets, management have made certain assumptions concerning the future development of the business that are consistent with its 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 balance sheet could be impaired.

 

Critical accounting judgements

 

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

 

Going Concern

 

  The Directors have reviewed the Group's forecast and projections, including assumptions concerning capital expenditure and expenditure commitments and their impact on cash flows, and have a reasonable expectation that the group has adequate financial resources to continue in operational existence for at least 12 months from the date of approval of the interim statements. For this reason, they have continued to adopt the going concern basis in preparing the financial statements.


3.  Principal Risks and Uncertainties

 

The Directors consider that the principal risks and uncertainties, which could have a material impact on the Group's performance in the remaining six months of the financial year, remain substantially the same as those stated on pages 39-41 of the Group's Annual Report and Accounts to November 2021, which is available on the Group's website, www.musicmagpieplc.com .

 

 

 

4.  Segmental reporting

 

Information reported to the Group's 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:

 

6 months ended 31 May 2022

 

 

 

Technology

 

Media

 

Books

 

Total

 

Outright

Rental

Total

 

 

 

 

£'000

£'000

£'000

£'000

£'000

£'000

Revenue

 

Gross profit

Processing wages

43,694

 

7,857

(2,121)

2,257

 

1,761

-

45,951

 

9,618

(2,121)

22,213

 

8,248

(3,271)

3,090

 

1,123

(343)

71,254

 

18,989

(5,735)

Contribution after direct labour

5,736

1,761

7,497

4,977

780

13,254

 

Trading margin (%)

Gross profit (%)

27.0

18.0

100.0

78.0

30.5

20.9

79.8

37.1

90.4

36.3

48.5

26.6

 

 

 

6 months ended 31 May 2021

 

 

 

 

 

 

Technology

 

 

 

Media

 

 

 

Books

 

 

 

Total

 

Outright

Rental

Total

 

 

 

 

£'000

£'000

£'000

£'000

£'000

£'000

Revenue

 

Gross profit

Processing wages

39,324

 

10,105

(2,036)

357

 

208

-

39,681

 

10,313

(2,036)

27,966

 

11,317

(4,090)

5,125

 

2,093

(444)

72,772

 

23,723

(6,570)

Contribution after direct labour

8,069

208

8,277

7,227

1,649

17,153

 

Trading margin (%)

Gross profit (%)

35.4

25.7

100.0

58.3

35.9

26.0

81.0

40.5

90.2

40.8

57.1

32.6

 

 

 

Year ended 30 November 2021

 

 

 

Technology

 

Media

 

Books

 

Total

 

Outright

Rental

Total

 

 

 

 

£'000

£'000

£'000

£'000

£'000

£'000

Revenue

 

Gross profit

Processing wages

84,245

 

19,973

(3,988)

1,809

 

1,311

-

86,054

 

21,284

(3,988)

50,716

 

19,673

(7,423)

8,736

 

3,338

(802)

145,506

 

44,295

(12,213)

Contribution after direct labour

15,985

1,311

17,296

12,250

2,536

32,082

 

Trading margin (%)

Gross profit (%)

32.5

23.7

100.0

72.4

33.9

24.7

80.3

38.8

90.0

38.2

53.4

30.4

 

 

 

 

5.  Revenue

 

Disaggregation of revenue

 

An analysis of revenue by geographical location of customer is given below:

 

 

 

Unaudited

6 months ended
31 May 2022

£'000

Unaudited

6 months ended
31 May 2021

£'000

Audited

Year

 ended

30 Nov 2021

£'000

United Kingdom

Within the European Community other than United Kingdom

United States of America

Outside the European Community

49,302

2,162

 

18,407

1,383

51,919

3,987

 

15,727

1,139

108,005

4,225

 

29,274

4,002

Total

71,254

72,772

145,506

 

 

 

 

6.  Taxation

 

Unaudited

6 months ended
31 May 2022

£'000

Unaudited

6 months ended
31 May 2021

£'000

Audited

Year

ended

30 Nov 2021

£'000

Current tax expense

Charge for the year

 

149

 

-

 

636

Adjustments in respect of previous periods

-

-

19

Total Current tax expense

149

-

655





Deferred tax credit




Origination and reversal of temporary differences

2,008

(69)

(2,372)

Adjustment in respect of previous periods

-

-

(18)

Effect of changes in tax rates

-


(959)

Total deferred tax charge/ (credit)

2,008

(69)

 

Total tax charge/(credit) in the income statement

 

2,157

 

(69)

 

(2,694)

 

UK Corporation tax rate used to calculate the estimated tax due and deferred tax timing differences:

25%

19%

25%

 

 

 

7.  Earnings per share

 

 

 

 

 

note

 

Unaudited

6 months ended
31 May 2022

£'000

Unaudited

6 months ended
31 May 2021

£'000

Audited

Year

ended

30 Nov 2021

£'000

Loss for the period


(3,159)

(17,661)

(12,125)



Number

Number

Number

Weighted average number of shares in issue
Diluted number of shares

1

107,772,020

107,772,020

101,975,210

101,975,210

95,680,242

95,680,242








Pence

Pence

Pence

Basic loss per share


(2.93)

(16.38)

(12.67)

Diluted loss per share


(2.93)

(16.38)

(12.67)






 

Notes:


  1

There were no dilutive or potentially dilutive shares in issue at 31 May 2022



 

Adjusted earnings per share is disclosed in Note 11 (Alternative Performance Measures) to show performance undistorted by adjusting items and is therefore considered to show the underlying performance of the Group.

 

 

 

 

8.  Property, plant and equipment

 

 

Right of use lease asset

£'000

 

Plant and machinery

£'000

Fixtures and fittings

£'000

 

Rental assets

£'000

Computer and office equipment

£'000

 

 

Total

£'000

Cost







Balance at 1 December 2020

4,535

3,408

2,561

63

3,989

14,556

Additions

-

19

80

1,393

156

1,648

Foreign currency adjustment

(55)

(8)

(6)

-

-

(69)

Disposals

-

(285)

-

-

-

(285)








Balance at 31 May 2021

4,480

3,134

2,635

1,456

4,145

15,850

Additions

-

323

33

2,264

152

2,772

Foreign currency adjustment

58

-

-

-

-

58

Impairment

-

-

-

(462)

-

(462)








Balance at 30 November 2021

4,538

3,457

2,668

3,258

4,297

18,218

Additions

2,585

680

109

3,586

149

7,109

Foreign currency adjustment

  56

6

5

-

1

68

Disposals

-

-

-

(283)

-

(283)

Balance at 31 May 2022

7,179

4,143

2,782

6,561

4,447

25,112








Depreciation







Balance at 1 December 2020

2,203

2,859

1,857

-

3,749

10,668

Charge for the period

320

89

105

100

99

713

On disposals

-

(273)

-

-

-

(273)








Balance at 31 May 2021

2,523

2,675

1,962

100

3,848

11,108

Charge for the period

306

200

116

372

49

1,043

Impairment




(52)


(52)








Balance at 30 November 2021

2,829

2,875

2,078

420

3,897

12,099

Charge for the period

355

132

108

1,045

100

1,740

On disposals

-


-

(43)

-

(43)

Balance at 31 May 2022

3,184

3,007

2,186

1,422

3,997

13,796








Net book value







At 31 May 2022

3,995

1,136

596

5,139

450

11,316

At 30 November 2021

1,709

582

590

2,838

400

6,119

At 31 May 2021

1,957

459

673

1,356

297

4,742

 

 

 







9.  Intangible assets and goodwill

 

 

 

 

Goodwill

£'000

 

Website

development

£'000

 

IT development

£'000

 

Proprietary software

 

£'000

 

 

Domains

 

£'000

 

 

Total

 

£'000

Cost







Balance at 1 December 2020

4,848

1,261

6,158

3,000

53

15,320

Additions

-

45

873

-

-

918

Disposals

-

-

-

-

-

-








Balance at 31 May 2021

4,848

1,306

7,031

3,000

53

16,238

Additions

-

153

1,767

-

-

1,920

Disposals

-

-

-

-

-

-








Balance at 30 November 2021

4,848

1,459

8,798

3,000

53

18,158

Additions

-

153

2,043

-

-

2,196

Disposals

-

-

-

-

-

-








Balance at 31 May 2022

4,848

1,612

10,841

3,000

53

20,354








Amortisation







Balance at 1 December 2020

-

1,053

4,402

1,482

25

6,962

Charge for the period

-

43

542

150

3

738

On disposals

-

-

-

-

-

-








Balance at 31 May 2021

-

1,096

4,944

1,632

28

7,700

Charge for the period

-

37

590

150

1

778

On disposals

-

-

-

-

-

-








Balance at 30 November 2021

-

1,133

5,534

1,782

29

8,478

Charge for the period

-

52

704

150

3

909

On disposals

-

-

-

-

-

-








Balance at 31 May 2022

-

1,185

6,238

1,932

32

9,387








Net book value







At 31 May 2022

4,848

427

4,603

1,068

21

10,967

At 30 November 2021

4,848

326

3,263

1,218

24

9,680

At 31 May 2021

4,848

210

2,087

1,368

25

8,538

 

 

 

10. Other Reserves

 

 

 

Share Premium

£'000

 Capital

Redemption

£'000

Merger Reserve

£'000

Translation reserve

£'000

 

Total

£'000

As at 30 November 2020

1,690

0

0

(158)

1,532

Foreign currency translation

-

-

-

(163)

(163)

Cancellation of share premium

(1,690)

-

-

-

(1,690)

Repurchase of deferred shares

-

1,108

-

-

1,108

Bonus issue of shares

-

-

(991)

-

(991)

Shares issued

14,922

-

-

-

14,922

Issue cost of shares

(473)

-

-

-

(473)

As at 31 May 2021

14,449

1,108

(991)

(321)

14,245

 

Foreign currency translation

-

-

-

201

201

 

As at 30 November 2021

14,449

1,108

(991)

(120)

14,446

 

Foreign currency translation

-

-

-

68

68

 

As at 31 May 2022

14,449

1,108

(991)

(52)

14,514

 

 

 

 

 

 

 

 

 

 

 

11. 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.

 

 

 

Unaudited

6 months ended
31 May 2022

£'000

Unaudited

6 months ended
31 May 2021

£'000

Audited

Year

ended

30 Nov 2021

£'000

Loss before tax

(1,002)

(17,730)

(14,819)

Equity settled share-based payments

-

17,378

17,379

Other non-underlying items

328

4,112

4,621

Non-underlying financial expense

-

240

718

Adjusted (Loss)/ Profit before tax

(674)

4,000

7,899

 

 

Adjusted EBITDA

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

 

 

Unaudited

6 months ended
31 May 2022

£'000

Unaudited

6 months ended
31 May 2021

£'000

Audited

Year

ended

30 Nov 2021

£'000

Adjusted (loss)/ profit before tax

(674)

4,000

7,899

Depreciation of property, plant and equipment

1,740

714

1,755

Impairment of property, plant and equipment

240

-

410

Loss on disposal of property, plant and equipment

-

-

12

Amortisation of intangible assets

909

738

1,517

Financial expense (net of non-underlying items above)

346

788

581

Adjusted EBITDA

2,561

6,240

12,174

 

 

 

Adjusted earnings per share

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

 

 

 

 

 

 

note

Unaudited

6 months ended
31 May 2022

£'000

Unaudited

6 months ended
31 May 2021

£'000

Audited

Year

ended

30 Nov 2021

£'000

Adjusted (loss)/ profit before tax

1

(674)

4,000

7,899








Number

Number

Number

Weighted average number of shares

2

107,772,020

107,772,020

107,772,020








Pence

Pence

Pence

Adjusted (loss)/ earnings per share


(0.63)

3.71

7.33

 

 

 

Notes:


  1

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

  2

The basic and diluted number of ordinary shares as at 31 May 2022 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.

 

 

Unaudited

6 months ended
31 May 2022

£'000

Unaudited

6 months ended
31 May 2021

£'000

Audited

Year

ended

30 Nov 2021

£'000

Adjusted EBITDA

2,561

6,240

12,174

Movements in working capital

79

(226)

(4,922)

Adjusted Operating Cash flow

2,640

6,014

7,252

 

 

 

Cash conversion %

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

 

 

 

Unaudited

6 months ended
31 May 2022

£'000

Unaudited

6 months ended
31 May 2021

£'000

Audited

Year

ended

30 Nov 2021

£'000

Cash generated from operations before tax payments (from Consolidated Cash Flow Statement)

2,312

1,902

2,631

Other non-underlying items

328

4,112

4,621

Cash generated from operations before tax payments and exceptional items paid

2,640

6,014

7,252

Adjusted EBITDA

2,561

6,240

12,174

Cash conversion %

103.1%

96.4%

59.6%

 




 

 

 

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.

 

 

Unaudited

6 months ended
31 May 2022

£'000

Unaudited

6 months ended
31 May 2021

£'000

Audited

Year

ended

 30 Nov 2021

£'000

Cash and cash equivalents

4,179

6,372

2,849





Loans and accrued loan interest

(7,413)

-

(887)

Unamortised loan arrangement fees

(87)

-

(113)

External loans

(7,500)

-

(1,000)





Net (debt)/ cash

(3,321)

6,372

1,849


 

 

 


 

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