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

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

o  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)

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

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

o  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 [phone] or by email to [e-mail].

Enquiries

musicMagpie plc Steve Oliver, CEO Ian Storey, COO	Tel: [phone]
Matthew Fowler, CFO
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]

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) (3,349) 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

 

END

 

 

IR VQLFLLDLLBBX