INTERIM RESULTS

musicMagpie plc

13 July 2023

 

13 July 2023

musicMagpie plc

("musicMagpie", or "the Group")

INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 MAY 2023

EBITDA up 7.7% with good momentum into the seasonally important H2; trading in line with Board expectations

musicMagpie, a circular economy pioneer specialising in refurbished consumer technology, follows its half year trading update of 19 June 2023 with the announcement of its unaudited interim results for the six months ended 31 May 2023.

Financial highlights

·     Following a challenging start to H1, with postal strikes and low consumer confidence impacting December and January, trading performance strengthened from February onwards, driving a strong Q2 EBITDA which was up 42% on Q2 2022

·      Group H1 2023 revenue of £61.9m (H1 2022: £71.3m)

o Consumer Technology revenue of £41.1m (H1 2022: £46.0m), as the Group prioritised higher margin sales

o  Disc Media and Books revenue of £20.9m (H1 2022: £25.3m)

·    Consumer Technology gross profit increased 13.5% to £10.9m (H1 2022: £9.6m), contributing 59% (H1 2022: 50%) of total Group gross profit

·     Gross margin increased 3.1% to 29.7% (H1 2022: 26.6%) driven by a combination of direct from consumer product sourcing, a higher proportion of sales through the musicMagpie store and an increasing contribution from rental subscriptions

·      Adjusted EBITDA¹ of £2.8m, up 7.7% (H1 2022: £2.6m)

·      Diluted loss per share of 2.8 pence (H1 2022: loss per share 3.2 pence)

·      Net debt of £13.6m (30 Nov 2022: £7.8m), consistent with Board expectations, with £4.5m invested into Consumer Technology rental assets during the period (H1 2022: £3.6m)

·      Post period end, extended the committed £30m Revolving Credit Facility by 12 months to July 2026

Operational highlights

·    Percentage of UK Consumer Technology sales on the musicMagpie store, versus third party marketplaces, increased to 79%, up from 72% in FY22

·  Strong progress from the Group's device rental subscription service, increasing to c39,000 active subscriptions as at 31 May 2023 (31 May 2022: 24,000)

o  Near-term corporate customer pipeline building and 2,200 devices currently under rental to businesses

o  Entered H2 2023 with c£4.0m contractually committed forward revenue, before renewals or growth in new subscriptions

·      SMARTDrop Kiosks now account for 45% of musicMagpie's Consumer Technology sourcing in the UK

·      Cost reduction measures reduced overheads by £0.8m in H1 2023 versus H1 2022

Outlook

As usual, the majority of the Group's full year profits are expected in the seasonally important second half. Current trading conditions remain challenging due to the prevailing macro-economic factors in the market, but the strong momentum seen in Q2 has thus far been carried into the early part of Q3 of our 2023 financial year and this combined with the focus on gross margin by continuing to buy for less and sell for more, and cost savings introduced, mean the Board is confident of the Group meeting its full year expectations.

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

"After a challenging first quarter, I am pleased with the performance of the business during Q2 and the momentum that has been carried over into H2, which is traditionally the seasonally more important half for musicMagpie. By focusing on 'buying and selling for more margin', which includes sourcing more products directly from consumers and increasing the proportion of sales made through the musicMagpie store, we have delivered a strong improvement in Consumer Technology gross profit.

Looking ahead, we have a clear plan for our rental business and for our enhanced Buy Now Pay Later offering, which should drive sales and make our offering even more attractive to consumers looking to save cash. 

Despite the tough consumer environment, we expect consumers to increasingly look to the refurbished tech market and are confident that the business has the right strategy in place for future profit growth."

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

Analyst conference call

Steve Oliver (CEO and co-founder) and Matthew Fowler (CFO) will host an analyst presentation at 9:15am GMT today, Thursday 13 July 2023, 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 Matthew Fowler, CFO	Tel: [phone]
Shore Capital (Nominated Adviser and Broker) Mark Percy Malachy McEntyre Daniel Bush	Tel: [phone]
Powerscourt (Financial Public Relations) Rob Greening Genevieve Ryan Sam Austrums	Tel: [phone]

About musicMagpie

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

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

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

The Group has the highest number of seller reviews on both Amazon and eBay and has consistently achieved extremely positive feedback scores. The Group also has a 4.4* rating on UK Trustpilot with over 260,000 reviews, and is honoured to have won Best Refurbished in the Uswitch Telecoms Awards 2023 as well as Best Online Retailer and Best Secondary Market Provider at the Mobile News Awards 2023. 

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 2023, which has seen a period of strong gross margin improvement.

Buying sufficient and appropriate product allows the business to both sell and rent, thereby underpinning our financial performance. Buying has been boosted in the period by the SMARTDrop Kiosks that are now installed across approximately 290 Asda stores in the UK.  Since launch approximately 55,000 devices have been purchased through the kiosks equating to over £15m paid out to consumers, and we continue to see an encouraging trend of growth in consumers using the kiosks to sell their devices to musicMagpie.  As well as providing a unique route for us to access devices, the kiosks also provide an indirect benefit in terms of brand marketing and customer awareness - being effectively a prominent musicMagpie advert across much of the Asda estate and providing cost of acquisition synergies on marketing spend.  Kiosks also form a key part of the trend towards direct from customer sourcing, as opposed to business-to-business (B2B) sourcing.  Sourcing from our intermediary wholesale partners will continue to form part of the musicMagpie supply chain as it provides a range and volume of devices that a pure consumer-focused strategy cannot, but only where the right margin contribution can be achieved.

Gross margin for the period increased 3.1% to 29.7% owing to a focus on buying and selling for greater margin.  During the period, the percentage of UK Consumer Technology sales made on the musicMagpie store (i.e. as opposed to third-party marketplaces) was 79% up from 72% in the financial year 2022.  The increase is due to a focus on driving customers to the store through marketing.  As well as enhancing gross margin, as there are no third-party platform fees, this builds a direct relationship with the customer and permits greater up-selling and on-selling when we control the customer journey.  However, musicMagpie's long standing relationships with third party platforms eBay and Amazon remain as important as ever.  Furthermore, in the last 12 months the Group launched on Walmart and Back Market, the refurbished tech marketplace, where we have seen positive progress as we seek to maximise consumer visibility of our product offering. Overall Consumer Technology sales declined in the period by 10.4% due to the concerted focus on higher margin sales and a decline in the lower margin sales of product sourced from B2B. Gross profit from Consumer Technology increased 13.5% from £9.6m to £10.9m.

Revenue from our legacy category, Disc Media and Books, continued its anticipated decline, albeit the 17.4% fall was greater than the expected level of decline of around 10% that has been seen over recent reporting periods.  The largest component of the segment, CDs, has consistently seen a decline rate in the high single figures.  However, the segment has been impacted recently by DVDs and gaming sales that are being particularly affected by streaming and have declined in excess of 22% during the period.  Despite the revenue decline in this category, margin has been maintained. The category contributes around 40% of total Group gross profit.

The rental offering grew particularly strongly during Q1, with the growth rate easing somewhat during Q2, leaving a closing rental book of 39,000 (May 2022: 24,000).  To optimise the return on capital, we are choosing to segment the rental model for those customers with higher credit ratings, better renewal rates and more interest in the upgrade journey.  Those customers who previously chose a rental for the low monthly costs, but who may not meet the new segmentation criteria, will now be directed down an enhanced Buy Now Pay Later ("BNPL") route.  This approach satisfies those customers coming into the musicMagpie store with value aspirations while also giving the business outright sales and certainty of cash from the BNPL provider.  This approach is expected to further grow Consumer Technology sales and deliver overall better near-term cash generation.

Sitting alongside the consumer subscription offering is the direct to corporate subscription service that forms part of musicMagpie Circular.  We now have approximately 2,200 devices on rental subscriptions to corporate customers and a strong pipeline that gives us confidence in the growth potential of this segment.

Focus on margins and cash

The cost-of-living crisis provides both an opportunity for the business as people look to turn their old tech and media products into cash, but also a threat as inflation puts pressure on our cost base and squeezes margins.  To control the cost base, we began a comprehensive review of costs in late 2022 and have continued this cost focus into 2023.  Overheads have reduced by £0.8m in H1 2023 over the same period last year, with half the reduction from more effective marketing and half from the general overhead base after a review of costs and headcount. 

As detailed above, in addition to overhead reductions, we have improved the gross margin of the business by managing our buy and sell activities with a focus on profitability, sourcing more product directly from consumers, as well as benefitting from both the addition of rental sales in the Consumer Technology mix, and a reduction of third party platform sales. In combination, closely managing buy-sell margins has helped increase total gross margin by 3.1% to 29.7%, and Consumer Technology margin from 20.9% to 26.6%.  The improvement in Consumer Technology margin means the segment contributed £10.9m or approximately 60% of total Group gross profit.  We are working hard to continue the activities that have delivered this improvement.

FINANCIAL PERFORMANCE REVIEW

Group revenue for the six months ended 31 May 2023 was £61.9m (H1 2022: £71.3m). 

Gross margin for Consumer Technology increased, despite the drop in revenues that now make up approximately two thirds of total Group revenue of £41.1m (H1 2022: £46.0m).  Gross margin in this segment grew from 20.9% in H1 2022 to 26.6% in H1 2023.  The improvement saw overall gross profit for the segment increase £1.3m to £10.9m (H1 2022: £9.6m).  Despite lower volumes, margin was positively impacted by the richer mix of higher margin rental sales and improvements in margin percentages driven from strategic steps taken to buy for less and sell for more.

Sales of Disc Media and Books fell, with revenue of £20.9m (H1 2022: £25.3m), with the impact of streaming accelerating the decline in DVD and gaming sales despite the relative resilience of the largest segment, CDs.  Gross margin from this segment was 35.9% (H1 2022: 37.0%),  giving gross profit of £7.5m (H1 2022: £9.4m).  As the Disc Media and Books segment continues its anticipated decline, it is gratifying to see the increased gross profit from Consumer Technology that sees it now contribute 59% of the Group's total gross profit.

Total gross profit for the Group was £18.4m (H1 2022: £19.0m) giving a gross margin of 29.7% (H1 2022: 26.6%).  As documented above, the margin improvements came from concerted efforts on buy side activities and a strategic move to channel revenues to the musicMagpie store.

Operating expenses, excluding depreciation and amortisation, were lower at £15.6m (H1 2022: £16.4).  Half of the reduction was due to lower marketing spend, and half was from lower overhead as a result of an ongoing review of costs and spend activity.  Typically, the momentum of the market around Black Friday means that Q4 of the Group's financial year requires less overall marketing spend than other times of the year.  However, spend will continue to be incurred into H2 at H1 rates if this drives profitable revenue into the musicMagpie store.

Exceptional costs in the period were £0.5m (H1 2022: £0.3m), with the majority related to the long-term energy contract that was entered into in 2022.  An exceptional gain of £1.1m was recognised at 30 November 2022 because the energy contract secured pricing well below market price.  The cost reported in the period represents an unwind of that gain based both on usage and subsequent changes in market rates for electricity prices.  The remaining £0.8m derivative financial asset will be amortised into the Income Statement over future reporting periods to the contracts end date in September 2025.

Finance costs were £0.8m (H1 2022: £0.3m), with the increase coming from both the rise in interest rates over the period and the increased drawings on the facility being used to fund the rental assets.

The Group's loss before tax was £3.2m (H1 2022: loss before tax £1.0m).  After estimating the full year tax rate and adjusting for deferred tax, the tax credit for the period is £0.3m (H1 2022: £2.2m charge) and the loss after tax is £2.9m (H1 2022: loss after tax £3.2m).  The diluted loss per share was 2.8p (H1 2022: loss per share 3.2p).

Net cash from operating activities was £2.4m (H2 2022: £2.3m) with working capital movements consuming a small £0.1m of cash (H1 2022: £0.1m increase).  The cash conversion rate, net cash from operations divided by adjusted EBITDA less movements in working capital, was 106.5% (H1 2022: 103.1%).

Below operating activities, cash used in investing activities was £6.9m (H1 2022: £6.7m), with acquisition of property plant and equipment increasing to £4.7m (H1 2022: £4.5m), and the majority of this spend was investment in rental assets of £4.5m (H1 2022: £3.6m).  Capex spend on non-rental assets declined to £0.2m (H1: 2022: £0.9m) following the completion of the ASDA kiosk roll-out programme.  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 2022: £2.2m).

Interest payments were £0.7m (H1 2022: £0.3m).  Loan drawing increased by £3.7m, giving gross debt of £18.4m.  With closing cash of £4.8m (H1 2022: £4.2m) net debt was £13.6m, or £13.7m for bank reporting (H1 2022: £3.3m).

The balance sheet has remained strong and overall movements between May 2023 and May 2022 were relatively small.  Working capital levels have remained fairy static, contributing to net current assets of £6.5m (H1 2022: £7.2m).  Non-current assets and liabilities saw the biggest changes with assets increasing to £31.3m (H1 2022: £25.0m) and liabilities to £21.3m (H1 2022: £11.3m).  Non-current assets grew owing to the continued investment in rental assets of £5.5m (H1 2022: £3.8m) and IT development spend of £2.2m (H1 2022: £2.2m), with these investments being funded by an increase in borrowings from £7.4m to £18.4m.  Net assets at the end of the period were £16.5m (31 May 2022: £20.9m).

Post period end, the Group extended its £30m committed Revolving Credit Facility with HSBC UK and NatWest out to July 2026 to provide greater certainty of funding.

Martin Hellawell                                   Steve Oliver

Chairman                                              Chief Executive Officer

Consolidated Condensed Statement of Comprehensive Income

	Note	Unaudited 6 months ended 31 May 2023            £'000	Unaudited 6 months ended 31 May 2022 £'000	Audited Year ended 30 Nov 2022 £'000
Revenue	4,5	61,929	71,288	145,279
Cost of sales		(43,533)	(52,298)	(107,138)
Gross profit		18,396	18,990	38,141
Operating expenses		(20,424)	(19,318)	(38,478)
Operating expenses - exceptional		(372)	(328)	(174)
Total operating expenses		(20,796)	(19,646)	(38,652)
Adjusted EBITDA*	10	2,759	2,561	6,471
Depreciation of property, plant and equipment		(2,697)	(1,740)	(3,877)
Impairment of property, plant and equipment		(897)	(240)	(835)
Loss on disposal of property, plant and equipment		-	-	(19)
Amortisation of intangible assets		(1,193)	(909)	(1,910)
Equity - settled share-based payments		137	-	(167)
Other non - underlying items		(509)	(328)	(174)
Operating loss Financial expense		(2,400) (776)	(656) (346)	(511) (946)
Loss before taxation		(3,176)	(1,002)	(1,457)
Taxation	6	325	(2,157)	(3,278)
Loss for the period		(2,851)	(3,159)	(4,735)
Other comprehensive expense
Items that may be reclassified to profit and loss Foreign exchange differences on translation of foreign operations		(100)	68	145
Total comprehensive loss for the period		(2,951)	(3,091)	(4,590)
		Pence	Pence	Pence
Basic loss per share for the period		(2.9)	(3.2)	(4.8)
Diluted loss per share for the period		(2.8)	(3.2)	(4.7)

Consolidated Condensed Statement of Financial Position

	Note	Unaudited As at 31 May 2023 £'000	Unaudited As at 31 May 2022 £'000	Audited As at 30 Nov 2022 £'000
Assets Property, plant and equipment Intangible assets and goodwill	8 9	15,165 13,339	11,316 10,967	13,995 12,379
Deferred tax		2,234	2,708	1,909
Derivative financial asset		578	-	578
Total non-current assets		31,316	24,991	28,861
Inventories		7,522	8,658	8,824
Trade and other receivables		2,476	3,172	2,602
Derivative financial asset		240		555
Cash and cash equivalents		4,755	4,179	6,806
Total current assets		14,993	16,009	18,787
Total assets		46,309	41,000	47,648
Liabilities Trade and other payables Other interest-bearing loans and borrowings Lease liabilities Corporation tax payable		(7,775) - (746) -	(8,038) - (621) (120)	(9,340) - (687) -
Total current liabilities		(8,521)	(8,779)	(10,027)
Net current assets		6,472	7,230	8,760
Borrowings Lease liabilities Shares classified as debt		(18,408) (2,925) -	(7,413) (3,933) -	(14,675) (3,403) -
Total non-current liabilities		(21,333)	(11,346)	(18,078)
Total liabilities		(29,854)	(20,125)	(28,105)
Net assets		16,455	20,875	19,543
Equity
Share capital		1,078	1,078	1,078
Other reserves		14,491	14,514	14,591
Retained earnings	10	886	5,283	3,874
Equity attributable to owners of the company		16,455	20,875	19,543

Consolidated Condensed Statement of Changes in Equity

	Share capital £'000	Other reserves £'000	Retained earnings £'000	Total equity £'000
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
Loss for the period	-	-	(1,576)	(1,576)
Foreign currency translation		77	-	77
Total comprehensive profit for the period	-	77	(1,576)	(1,499)
Transactions with shareholders:
Share-based payments	-	-	167	167
As at 30 November 2022	1,078	14,591	3,874	19,543
Loss for the period	-		(2,851)	(2,851)
Foreign currency translation	-	(100)	-	(100)
Total comprehensive loss for the period	-	(100)	(2,851)	(2,951)
Transactions with shareholders:
Share-based payments	-	-	(137)	(137)
As at 31 May 2023	1,078	14,491	886	16,455

Consolidated Condensed Cash Flow Statement

		Unaudited 6 months ended 31 May 2023 £'000	Unaudited 6 months ended 31 May 2022 £'000	Audited Year ended 30 Nov 2022 £'000
Net cash flow from operating activities
Loss for the period Adjustments for:		(2,851)	(3,159)	(4,735)
Finance costs		776	346	946
Income tax expense Depreciation of property, plant and equipment Impairment of property, plant and equipment Loss on property, plant and equipment Amortisation Fair value gain on derivative instruments Share-based payments expense Working capital adjustments (Increase)/decrease in inventories Decrease/ (increase) in trade and other receivables (Decrease)/increase in trade and other payables		(325) 2,697 897 - 1,193 315 (137) 1,302 126 (1,565)	2,157 1,740 240 - 909 - (637) 984 (268)	3,278 3,877 835 19 1,910 (1,133) 167 (805) 1,122 712
Net cash from operations		2,428	2,312	6,193
Cash flows used in investing activities Acquisition of property, plant and equipment  Capitalised development expenditure		(4,765) (2,153)	(4,524) (2,196)	(9,661) (4,555)
Net cash used in investing activities		(6,918)	(6,720)	(14,216)
Cash flows used in financing activities Proceeds from new loan Interest paid Repayment of lease liabilities Interest paid on lease liabilities Repayment of borrowings		3,704 (656) (419) (91) -	6,500 (305) (404) (68) -	21,026 (577) (868) (169) (7,500)
Net cash used in finance activities		2,538	5,723	11,912
Net increase in cash and cash equivalents Cash and cash equivalents brought forward Exchange losses on cash and cash equivalents		(1,952) 6,806 (99)	1,315 2,849 15	3,889 2,849 68
Cash and cash equivalents carried forward		4,755	4,179	6,806

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 2023 ("Condensed Consolidated Interim Financial Statements").

musicMagpie plc is a public limited company incorporated in the United Kingdom whose shares are publicly traded on the AIM market 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 May 2023. The Group's accounting reference date is 30 November. 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 2023 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 2023.  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 2022 has been extracted from the annual financial statements of musicMagpie plc. These interim results for the period ended 31 May 2023, 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 27-28 of the Group's Annual Report and Accounts to 30 November 2022, 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 2023	Outright sales	Rental	Consumer Technology		Media and Books	Total
	£'000	£'000	£'000		£'000	£'000
Revenue Gross profit Processing wages	37,061 7,536 (2,264)	3,993 3,373 (75)	41,054 10,909 (2,339)		20,875 7,487 (3,352)	61,929 18,396 (5,691)
Contribution after direct labour	5,272	3,298	8,570		4,135	12,705

Trading margin (%) Gross profit (%)

31.4 20.3

100.0   84.5

38.1 26.6

82.8 35.9

53.2 29.7

6 months ended 31 May 2022			Consumer Technology		Media and Books	Total
	Outright  sales	Rental	Total
	£'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)		25,337 9,372 (3,614)	71,288 18,990 (5,735)
Contribution after direct labour	5,736	1,761	7,497		5,758	13,255

Trading margin (%) Gross profit (%)

27.0 18.0

100.0   78.0

30.5 20.9

90.4 37.0

48.5 26.6

Year ended 30 November 2022			Technology		Media and Books	Total
	Outright sales	Rental	Total
	£'000	£'000	£'000		£'000	£'000
Revenue Gross profit Processing wages	91,213 15,944 (4,428)	5,345 4,207 -	96,558 20,151 (4,428)		48,781 17,990 (8,218)	145,279 38,141 (12,646)
Contribution after direct labour	11,516	4,207	15,723		9,772	25,495
Trading margin (%) Gross profit (%)	26.8 17.5	100.0 78.7	30.9 20.9		82.4 36.9	48.2 26.3

5.   Revenue

Disaggregation of revenue

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

	Unaudited 6 months ended 31 May 2023 £'000	Unaudited 6 months ended 31 May 2022 £'000	Audited Year  ended 30 Nov 2022 £'000
United Kingdom Within the European Community other than United Kingdom United States of America Outside the European Community	44,259 1,181 14,746 1,743	49,302 2,162 18,441 1,383	102,727 4,086 34,362 4,104
Total	61,929	71,288	145,279

6.   Taxation

	Unaudited 6 months ended 31 May 2023 £'000	Unaudited 6 months ended 31 May 2022 £'000	Audited Year ended 30 Nov 2022 £'000
Current tax expense Charge for the year	-	149	40
Adjustments in respect of previous periods	-	-	132
Total Current tax expense	-	149	172
Deferred tax credit
Origination and reversal of temporary differences	(325)	2,008	3,014
Adjustment in respect of previous periods	-	-	92
Total deferred tax (credit)/ charge	(325)	2,008	3,106
Total tax (credit)/ charge in the income statement	(325)	2,157	3,278

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

25%

25%

25%

7.   Earnings per share

	note	Unaudited 6 months ended 31 May 2023 £'000	Unaudited 6 months ended 31 May 2022 £'000	Audited Year ended 30 Nov 2022 £'000
Loss for the period		(2,851)	(3,159)	(4,735)
		Number	Number	Number
Weighted average number of shares in issue Diluted number of shares	1	98,612,385 101,070,385	98,576,118 98,576,118	98,588,041 101,153,813
		Pence	Pence	Pence
Basic loss per share		(2.9)	(3.2)	(4.8)
Diluted loss per share		(2.8)	(3.2)	(4.7)

Notes:
1	There were no dilutive or potentially dilutive shares in issue at 31 May 2023

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 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
Additions	35	1,523	338	4,432	112	6,440
Foreign currency adjustment	105	18	25	-	7	155
Impairment and returns	-	-	-	(837)	-	(837)
Disposals	-	(2,928)	(1,245)	(1,395)	(2,937)	(8,505)
Balance at 30 November 2022	7,319	2,756	1,900	8,761	1,629	22,365
Additions	-	56	79	5,535	50	5,725
Foreign currency adjustment	(49)	(7)	(7)	-	(3)	(66)
Impairment and returns	-	-	-	(2,304)	-	(2,304)
Balance at 31 May 2023	7,270	2,805	1,972	11,992	1,681	25,720
Depreciation
Balance at 1 December 2021	2,829	2,875	2,078	420	3,897	12,099
Charge for the period	355	132	108	1,045	100	1,740
Impairment and returns	-		-	(43)	-	(43)
Balance at 31 May 2022	3,184	3,007	2,186	1,422	3,997	13,796
Charge for the period	370	184	127	1,340	116	2,137
Foreign currency adjustment	78	12	20		5	115
Impairment and returns				(240)		(240)
Disposals		(2,839)	(1,262)	(401)	(2,936)	(7,438)
Balance at 30 November 2022	3,632	364	1,071	2,121	1,182	8,370
Charge for the period	357	219	146	1,853	122	2,697
Foreign currency adjustment	(28)	(4)	(6)		(2)	(40)
Impairment and returns				(472)		(472)
Balance at 31 May 2023	3,961	579	1,211	3,502	1,302	10,555
Net book value
At 31 May 2023	3,309	2,226	761	8,490	379	15,165
At 30 November 2022	3,687	2,392	829	6,640	447	13,995
At 31 May 2022	3,995	1,136	596	5,139	450	11,316

9.   Intangible assets and goodwill

	Good will £'000	Website development £'000	IT development £'000	Proprietary software £'000	Domains £'000	Total £'000
Cost
Balance at 1 December 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
Additions	-	15	2,344	-	-	2,359
Disposals	-	(1,081)	(3,760)	-	-	(4,841)
Balance at 30 November 2022	4,848	546	9,425	3,000	53	17,872
Additions	-	45	2,108	-	-	2,153
Disposals	-	-	-	-	-	-
Balance at 31 May 2023	4,848	591	11,533	3,000	53	20,025
Amortisation
Balance at 1 December 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
Charge for the period	-	68	781	150	2	1,001
On disposals	-	(1,047)	(3,848)	-	-	(4,895)
Balance at 30 November 2022	-	206	3,171	2,082	34	5,493
Charge for the period	-	65	975	150	3	1,193
On disposals	-	-	-	-	-	-
Balance at 31 May 2023	-	271	4,146	2,232	37	6,686
Net book value
At 31 May 2023	4,848	320	7,387	768	16	13,339
At 30 November 2022	4,848	340	6,254	918	19	12,379
At 31 May 2022	4,848	427	4,603	1,068	21	10,967

10. Other Reserves

	Share Premium £'000	Capital Redemption £'000	Merger Reserve £'000	Translation reserve £'000	Total £'000
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
Foreign currency translation	-	-	-	77	201
As at 30 November 2022	14,449	1,108	(991)	25	14,591
Foreign currency translation	-	-	-	(100)	(100)
As at 31 May 2023	14,449	1,108	(991)	(75)	14,491

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 2023 £'000	Unaudited 6 months ended 31 May 2022 £'000	Audited Year ended 30 Nov 2022 £'000
Loss before tax	(3,176)	(1,002)	(1,457)
Equity settled share-based payments	(137)	-	167
Other non-underlying items	509	328	174
Adjusted Loss before tax	(2,804)	(674)	(1,116)

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 2023 £'000	Unaudited 6 months ended 31 May 2022 £'000	Audited Year ended 30 Nov 2022 £'000
Adjusted loss before tax	(2,804)	(674)	(1,116)
Depreciation of property, plant and equipment	2,697	1,740	3,877
Impairment of property, plant and equipment	897	240	835
Loss on disposal of property, plant and equipment	-	-	19
Amortisation of intangible assets	1,193	909	1,910
Financial expense	776	346	946
Adjusted EBITDA	2,759	2,561	6,471

Adjusted Operating Cash flow

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

	Unaudited 6 months ended 31 May 2023 £'000	Unaudited 6 months ended 31 May 2022 £'000	Audited Year ended 30 Nov 2022 £'000
Adjusted EBITDA	2,759	2,561	6,471
Movements in working capital	(137)	79	(104)
Adjusted Operating Cash flow	2,622	2,640	6,367

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 2023 £'000	Unaudited 6 months ended 31 May 2022 £'000	Audited Year ended 30 Nov 2022 £'000
Cash generated from operations before tax payments (from Consolidated Cash Flow Statement)	2,428	2,312	6,193
Other non-underlying items	509	328	174
Cash generated from operations before tax payments and exceptional items paid	2,937	2,640	6,367
Adjusted EBITDA	2,759	2,561	6,471
Cash conversion %	106.5%	103.1%	98.4%

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 2023 £'000	Unaudited 6 months ended 31 May 2022 £'000	Audited Year ended  30 Nov 2022 £'000
Cash and cash equivalents	4,755	4,179	6,806
Loans and accrued loan interest	(18,408)	(7,413)	(14,675)
Unamortised loan arrangement fees	(247)	(87)	(298)
External loans	(18,655)	(7,500)	(14,973)
Net debt	(13,900)	(3,321)	(8,167)

 

END