FULL YEAR RESULTS FOR THE YEAR ENDED 30 NOV 2022
08/03/2023 07:00
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RNS Number : 2213S musicMagpie plc 08 March 2023
8 March 2023
musicMagpie plc
("musicMagpie", or "the Group")
FULL YEAR RESULTS FOR THE YEAR ENDED 30 NOVEMBER 2022
Consumer Technology revenue growth of 12.2% and rental subscribers up to
36,000 at 28 February 2023
musicMagpie, a circular economy pioneer specialising in refurbished consumer
technology and disc media in both the UK and US, announces its audited full
year results for the year ended 30 November 2022 ("FY22").
Operational highlights
· Active subscribers to device rental service increased to 30,500
at year end (2021: 13,500) and 36,000 at 28 February 2023
· Rental book provides recurring revenues, with year-end active
renters providing c£3.1m of committed revenue into FY23
· 24 month rental contracts launched post period end
· Magpie Circular offering extended in October 2022 with the launch
of corporate renting, and Stagecoach as its first customer
· SMARTDrop kiosk programme completed with kiosks installed across
c290 Asda stores in the UK with over £10m paid out to date and with further
plans to install in other high footfall areas during 2023
· The Group closed its FY22 financial year with a record Black
Friday week
· Expanded third party platforms to four with Back Market added in
May 2022 and Walmart post year end (adding to long-standing relationships with
Amazon and eBay)
Financial highlights
· Consumer Technology revenue up 12.2% to £96.6m (2021: £86.1m),
representing 66% of Group revenue
· Gross margin of 26.3% (2021: 30.4%) with consistency across H1
and H2
· Net cash from operations £6.2m (2021: £2.6m); cash generative
before investing activities
· Committed three-year £30m revolving credit facility with HSBC UK
and Natwest entered in July 2022 to help drive future Rental growth
· Net Debt of £7.9m (2021: £1.8m cash) following key investment
in rental assets
FY22 FY21 Movement
£m £m(2)
Revenue 145.3 145.6 (0.2%)
- Consumer Technology 96.6 86.1 12.2%
- Disc Media and Books 48.7 59.5 (18.2%)
Gross profit 38.1 44.4 (14.2%)
Adjusted EBITDA(1) 6.5 12.2 (46.7%)
Loss before taxation (1.5) (14.8) n/a
Net (Debt)/ Cash (7.9) 1.8 n/a
Notes
1 Adjusted EBITDA is a non-GAAP measure and has been calculated as
earnings before interest, taxation, depreciation, amortisation, equity-settled
share-based payments and other non-underlying items.
2 H1 2021 benefitted from Covid related tailwinds
Q1 trading and outlook:
Following on from the record Black Friday close to FY22, the start of the new
financial year saw the Group having to navigate through the challenges of the
well-publicised postal strikes, in addition to the tough consumer environment
and continuing macroeconomic uncertainty. Looking beyond the first quarter
of the Group's financial year, which traditionally has a low contribution to
the full year performance, whilst the economic outlook remains unpredictable
the Board remains confident in the Group's strategy and in its medium-term
growth prospects, underpinned by the growing and differentiated rental
proposition.
Commenting on the results, Steve Oliver, Chief Executive Officer &
Co-Founder of musicMagpie, said:
"In common with many consumer-facing businesses, this has been a tough year
for musicMagpie in the face of a rapidly changing macroeconomic environment.
However, against this backdrop I am delighted with the performance of our core
Consumer Technology business, which grew by over 12% and now accounts for
nearly 70% of our total revenue. We achieved a huge amount in the year, from
completing the roll-out of our SMARTDrop kiosks with Asda, significantly
growing our consumer rental subscriber base, to adding our products to both
Back Market and Walmart and launching our consumer tech rental service for
corporates.
Our rental subscription service for phones, tablets and other products has
continued to grow strongly as both consumers and businesses alike have started
to recognise the outstanding value and flexibility that it offers. As of 28
February, we had 36,000 active renters on our books, and recently launched a
24-month rental contact which we believe will be even more attractive to
customers in the current economic climate.
While the short-term outlook continues to be challenging, we believe our
ability to help consumers raise cash and save money positions us well for
resilient trading. In the longer term, we remain very confident in
musicMagpie's future prospects - and especially those of our rental business."
- Ends -
Enquiries
musicMagpie plc Tel: +44 (0) 870 479 2705
Steve Oliver, CEO
Ian Storey, COO
Matthew Fowler, CFO
Shore Capital (Nominated Adviser and Broker) Tel: +44 (0) 20 7408 4090
Mark Percy
Malachy McEntyre
Daniel Bush
John More
Powerscourt (Financial Public Relations) Tel: +44 (0) 20 7250 1446
Rob Greening
Genevieve Ryan
Sam Austrums
Notes to Editors
About musicMagpie plc
Operating through two trusted brands - musicMagpie in the UK and decluttr in
the US - musicMagpie's core strategy is simple: to provide consumers with a
smart, sustainable and trusted way to buy, rent and sell refurbished consumer
technology and physical media products with sustainability running to the very
heart of its operations. Founded in 2007, the Group has an established
presence in the UK, with operations in Stockport, Greater Manchester, and
in the US in Atlanta, Georgia.
musicMagpie has a strong environmental and social focus, as demonstrated by
its trademarked 'smart for you, smart for the planet' ethos. Nearly 400,000
consumer technology products were resold in FY22. In addition, the Group
re-sells approximately 10m books and disc media each year that could have
ended up as waste. During 2022, musicMagpie's UK consumer tech and disc
media customers, along with its trade partners, helped to save over 43,000
tonnes of CO2 by buying, selling and renting with the Group - an amount
equivalent to providing heating for over 16,000 homes, or powering more than
50,000 flights from London to New York. The Group has been given the London
Stock Exchange's Green Economy Mark in recognition of its contribution to the
global green economy.
When selling to musicMagpie, the customer is offered a fixed valuation via the
website, provided with free logistics to ship the products and (subject to it
being 'as described') receives payment for their product on the day of arrival
at the Group's warehouse. The Group also recently partnered with Asda to give
customers the option of using its SMARTDrop Kiosks in store for a fast and
easy way to recycle phones for instant cash. Customers purchasing from
musicMagpie receive branded refurbished product for a fraction of the price of
buying new.
The Group has the highest number of seller reviews on both Amazon and eBay and
has consistently achieved extremely positive feedback scores. The Group also
has a 4.4* rating on UK Trustpilot with over 252,000 reviews.
For further information please visit: www.musicmagpieplc.com
(http://www.musicmagpieplc.com/)
Chief Executive Officer's review
We have a simple three-pillared strategic approach to driving growth in our
business:
1. 'Buy more':
Our model requires a steady flow of high-quality products entering our
ecosystem through various entry points for consumers and corporates. The
ability to buy more for less underpins our future profitability. Our strategy
is focused on making it even easier for consumers and, increasingly,
corporates to recycle their old devices. Our biggest competitor in both areas
is apathy, i.e. people doing nothing and simply putting an old device in a
drawer and forgetting about it. Our mission is to persuade consumers and
corporate organisations to do something 'smart for themselves and smart for
the planet' with the estimated £16bn worth of old devices that are currently
lying around their houses and businesses.
A key part of this strategy has been the successful roll-out of our estate of
nearly 300 SMARTDrop kiosks, mainly across the Asda estate, which provide an
even faster, even more trusted and even more convenient way for consumers to
sell their old devices for an instant payment to their bank account. In terms
of our Asda partnership, October 2022 saw the completion of our roll-out in
over 290 of its stores. This means that 90% of the UK's population now lives
within a 15-minute drive of a kiosk, making it even easier, faster and more
trusted to sell to us. Asda is proving to be a great partner in our mission to
make the recycling of old devices a mainstream activity. The 290 kiosks
provide its customers with a great way to 'pay for their shopping that day'
with their old device, an especially valuable service during the cost of
living crisis that we are currently experiencing. In addition to the Asda
network, we now also have kiosks in other locations including the Trafford
Centre in Manchester, with further plans to install in other high footfall
areas during 2023. Post-period end, we reached the milestone of paying out
over £10m to our customers through the kiosk network since its inception, and
our kiosks now account for around 40% of the total paid out traded value of
phones bought from consumers weekly.
Our kiosk strategy allows us to buy incremental devices and target a lower
average cost and our focus is now on how we can further develop awareness of
this fantastic service with more significant marketing and brand awareness
that emphasise the merits of this convenient service. Our customer journey,
pricing and operational processes are regularly enhanced to ensure we are
meeting the needs of our customers by ensuring that stock is quickly
transacted, processed, refurbished and ultimately resold (or rented) in a
timely manner. Looking ahead, we plan to enhance our grading ability still
further at the kiosks to better and more consistently identify blemishes in
the device and also intend to review our pricing model at kiosks to reflect
the highly convenient nature of the service and instant nature of the cash
received.
Following the successful launch of our corporate recycling service in 2021,
this strategic approach to buying incremental devices from businesses has
evolved to a corporate circular model similar to our overall circular economy
proposition for consumers. Magpie Circular was launched in 2022, which not
only enables corporates to recycle their old tech in return for funds that
they can put back into their business or donate to charity, but also allows
them to rent either refurbished or 'new' condition products.
We are positioning ourselves as being 'here to help'; by enabling corporates
to boost their ESG credentials by reducing e-waste. We provide e-waste
avoidance certificates and give them information on the equivalent carbon
saving for all the tech that they recycle with us. Critical to this is the
data governance involved and every transaction is accompanied by the offer of
a certificate of data wiping to give the corporate comfort that its old items
are being treated with the same responsibility and trust that our consumers
receive.
2. 'Sell more':
Despite the challenging trading environment for consumer-facing businesses,
Consumer Tech outright sales grew 8.3% year on year, (12.2% growth including
rentals). This was achieved by expanding our sales channels to be more
platform agnostic ensuring that maximum distribution of product is achieved
and by recognising that we need to service consumers on whatever channel they
wish to purchase from us. We are making it easier to buy refurbished
Consumer Tech, Disc Media and Books with confidence from musicMagpie, which is
the biggest and most trusted refurbished tech reseller in the UK.
In the first half of the financial year, we expanded our existing Amazon UK
and US relationship by extending our offering to Amazon Fulfilment by Amazon
and Seller Fulfilled Prime. In April, we added Back Market UK to complement
our existing third-party outlets of Amazon and eBay, followed by Back Market
US in the summer, giving us three major platforms for product sales in each
locale.
Selling through third-party platforms requires the payment of a selling
commission, with varying rates across the different platforms, and of course
the same level of consumer 'ownership' is not achieved as it is when selling
through the musicMagpie store. However, the benefit is that we do not have to
spend on marketing costs to acquire customers and we can access a wider pool
of consumers, a number of whom will be interacting with our brand for the
first time. By tactically using other selling platforms, we can select the
best outlet for our products based on demand, competitor behaviour and each
platform's promotional activity. Our preferred sales channel will always be
our own musicMagpie and decluttr stores, but managing platforms in this way
delivers profitable sales and will continue to be a key part of our growth
strategy.
Post-period end, we announced the addition of Walmart.com to our suite of
third-party platform partners. Whilst the initial launch is for Disc Media
only, Consumer Tech will be added during the current financial year, which
will most likely be launched on Walmart's dedicated refurbished programme,
Walmart Restored. It is unclear how much traction the recently launched
Restored programme will gain, but with the world's largest retailer creating a
dedicated refurbished electronics programme, it is further confirmation that
the circular trend is growing in the US.
3. 'Rent more':
Our monthly rental subscription offering continues to grow year on year and
its disruptive and differentiated nature continues to be a highly attractive
and flexible value offer for many consumers - especially in these uncertain
economic times. At year end, the active rental book was 30,500, an increase of
17,000. The book of rental agreements, which represents contracted future
cash flows, has become a significant asset for the business and something that
we are continuing to grow at pace. Throughout the year, renewal rates and
delinquency rates have been fairly consistent, and we are constantly exploring
different techniques to improve and enhance our offer.
Our rental offering also increased with the inclusion of wearables, games
consoles and MacBooks, including new Apple products at the time of launch to
market in September.
As outlined above, in the second half of the year, we launched Magpie Circular
which includes a corporate rental offering to sit alongside our
consumer-facing subscription service. Working in partnership with Utelize, we
provide corporates with a managed service to review and refresh devices and
call packages without being tied to network provider devices and costs.
Corporate renting, which is characterised by a larger number of devices in a
single transaction and a much lower risk of delinquency, has a number of
advantages over consumer renting. Customer acquisition will be less consistent
than consumer but we are confident that the offering will be attractive to an
increasing number of corporates - given the cost effectiveness, the
flexibility and, of course, the environmental benefits. We were pleased to
announce Stagecoach as our first corporate rental customer in October 2022,
contracted on a three-year term.
Post-period end, we launched a 24-month subscription service to coincide with
the Christmas 2022 period. In the current economic climate consumers are more
mindful of their monthly expenditure which is why we are helping them with an
even lower monthly price point. Longer-term contracts also provide us with
lower transactional costs. Whilst we expect lower overall average monthly
rentals from 24-month contracts, the impact in the first year of launch is a
higher renewal rate as none of the 24-month contracts come up for renewal at
the end of the first year.
The growth of both consumer and corporate rentals will underpin our future
growth and we see tremendous potential in this area; it is our major
differentiating factor as it deepens the relationship with our customers and
provides the business with high-quality recurring income and EBITDA. We have
seen strong and consistent demand for our rental subscription service and
believe that we can grow it with only relatively modest investment in
advertising to increase awareness. However, the service requires careful
management of the investment cost, as we substitute an outright sale and
immediate cash for a longer-term contractual cash flow. We have a three-year
committed RCF with NatWest and HSBC to help drive future growth in this area
and are excited about the potential of rental to help transform the business.
Sustainability
Sustainability is at the heart of everything we do. Our core mission is to
be 'here to help' bring the circular economy to all, to educate consumers on
waste reduction and to and to extend the life of products by preventing them
from ending up in landfill. We believe that as the market shifts towards
subscription and rental models, our business model stands us in good stead to
lead this sea-change towards a more sustainable economy.
In addition to the highly circular nature of our core services, to help
support our communities and environment, we have implemented a range of
sustainability measures to improve our environmental impact. These include
reducing our carbon footprint, limiting waste and decreasing resource
consumption. Additionally, we actively engage with customers, suppliers and
local communities to educate and collaborate on sustainable practices. By
taking a holistic approach to the circular economy and sustainability, we
strive to not only benefit our business, but also contribute to a more
sustainable future for all, in line with our 'smart for you, smart for the
planet' ethos, and ultimately to be 'here to help' make a difference.
Looking after our people
We care about our colleagues and Magpies care about each other. During the
year there have been exceptional highlights and contributions and I am proud
that every one of our colleagues continues to strive to make a difference in
all of our locales in many ways. Our Charity Committee continues to find
innovative and enjoyable activities to support our chosen charity, this year
being EGG: Engage, Grow, Go, which aims to provide permanent intervention to
find a home and employment for homeless individuals. In line with our core
values, innovating and collaborating to deliver new projects efficiently and
timely by working together drives us forward in achieving our goals and unites
us in our common purpose: to care about our customers, colleagues, community
and the environment. During the year we have seen 80 colleagues thrive by
receiving internal promotions and it is my greatest pride in leading the
business that we are able to consistently retain our top talent and attract
new talent into the business and that no Magpie should ever have to look to
leave the business to further their career.
I would also like to take this opportunity to thank all of our amazing Magpies
across the business, without whom musicMagpie would not be where it is today.
Cost base
The cost of living crisis has not only impacted our customers, but also our
colleagues. As part of our year-end wage review, we responded by increasing
wages for lower-paid colleagues in line with increases made to the minimum
wage. We did this ahead of the statutory date of April 2023 by introducing
these increases in December 2022 to help our lower paid colleagues through a
difficult winter as part of our deep-rooted belief in social and environmental
obligation. Whilst this will increase our underlying cost base year on year,
we are confident that we can mitigate the impact of this wage inflation
through a comprehensive review of spending, which has seen us review costs in
all areas of our business. This includes the Non-Executive Directors and me
agreeing to reduced fees for a minimum period of six months, for which I am
extremely grateful to my colleagues.
Although managing our buy and sell prices does provide some protection from
cost increases, inflation in our cost base is clearly a major consideration.
Energy costs have of course been a significant feature of inflation, but we
took steps to hedge against this by purchasing our demanded units of
electricity before the price increases occurred. As a result, our energy costs
for 2023 should be at very similar levels to 2022.
We are committed to leaving no stone unturned in our efforts to control costs,
make savings and support our margin aspirations and we expect to manage costs
at broadly the same level as 2022.
Looking ahead
Whilst the business has clearly not performed as well as we would have wished
in the last year, we are pleased with the growth in Consumer Tech in 2022,
which has helped to mitigate the expected decline in our Books and Disc Media
categories post pandemic. It is well documented that there are major
challenges in the global economy that will impact consumers in the months
ahead and the cost of living crisis is clearly going to make life tough for
many. As a retail business, we will inevitably be affected by these
challenges, but our circular economy model should provide some insulation.
musicMagpie was born and grew rapidly in the worst recession in a century
back in 2008 and being 'here to help' consumers raise cash for their old tech
and media whilst saving money when buying or renting refurbished technology is
a compelling offer for the current environment. It is our rental offer which
truly differentiates us and offers both consumers and now corporates an offer
'for the moment' of greater flexibility at a lower monthly cost. We anticipate
further significant growth from rental in the coming year.
Despite the short-term challenges, in the medium to longer term we remain
hugely excited about the prospects of the business and our rental model in
particular. The fundamentals of our business model have not changed and we
continue to be confident in the execution of our strategy.
We are very much 'here to help' in making a difference to the welfare of
consumers, corporates and our environment and I remain proud of the positive
impact we have on all.
Steve Oliver
Chief Executive Officer
Financial review
Revenue and gross profit
Group revenue for the year ended 30 November 2022 was relatively stable at
£145.3m (2021: £145.5m). Consumer Technology growth of £10.5m almost
entirely mitigates the declining revenues from Disc Media and Books of
£10.8m. Gross margin for the Group was 26.3% (2021: 30.4%). The year on year
reduction reflects both a change in mix toward Consumer Tech and a reduced
gross margin for this segment owing to a greater use of third party platforms
and more cost on sourced product.
Revenues for the musicMagpie brand which primarily trades in the UK were
£110.2m (2021: £115.4m), with £4.5m or 6.5% growth in Consumer Technology
unable to fully offset the declining revenues from Disc Media and Books. In
the US Decluttr revenues were £35.0m (2021: £30.1m). Significant growth was
seen on third party platforms, with increased focus and product range on
Amazon and eBay and the addition of BackMarket which contributed in the second
half of the year. The sales decline in Disc Media and Books in the US was less
marked than the UK at £1.3m, or 8.7%.
Consumer Technology
Consumer Technology revenue increased by 12.2% to £96.6m (2021: £86.1m) and
now represents the dominant category in the Group with 67% of total revenues.
The rental business grew from £1.8m to £5.3m as active renters increased
from 13,500 to 30,500 at the year end. At £5.3m of sales and with gross
margin of 78.7%, which excludes write offs and impairments, the rental
business is now a material and growing contributor to the Group.
Outright sales grew from £84.2m to £91.2m, or 8.3%, and the majority of this
growth came from third-party platform sales. With the addition of Back Market
in April 2022 to Amazon and eBay, the Group had three platforms to maximise
selling opportunities and take advantage of various alternating promotions and
platforms focus. While selling via the platforms incurs a commission, they
allow the Group to reduce its own marketing costs and leverage the platforms
spend and brand awareness. Post year end the Group added Walmart to its
global platform partnerships. Gross margin for Consumer Technology was 20.9%
(2021: 24.7%). The positive impact of an increasing mix of rental within the
category has been unable to offset the reduction owing to the cost increases
in sourced product seen at the end of 2021. Since the start of 2021 the traded
margins in the segment have remained fairly constant and with buying through
kiosks and growing rental, the expectation is that margin should increase
slowly over time.
Disc Media and Books
Revenue for the year was £48.7m (2021: £59.5m). The 2021 comparative
includes periods that benefitted from Covid-19 lockdowns and does not give a
true reflection of revenue performance. Comparing the 2021 H2 revenue of
£26.4m to the H2 revenue from 2022 of £23.3m gives a more reflective decline
rate for the segment of around 11.7%. The category is declining mainly owing
to the continued reduction in the purchase of both new and second-hand
physical media as consumers increasingly consume content in different ways,
for example streaming. Gross margin remains resilient at 36.9% (2021: 38.7%).
2022 2021 Movement
£m £m
Revenue 145.3 145.5 -
Consumer Technology 96.6 86.1 12.2%
- Outright Sales 91.2 84.2 8.3%
- Rental Income 5.3 1.8 300.0%
Disc Media & Books 48.7 59.5 -18.2%
Gross Profit 38.1 44.4 -14.2%
- Consumer Technology 20.9% 24.7% -
- Disc Media & Books 36.9% 38.7% -
Adjusted EBITDA(1) 6.5 12.2 -46.7%
Loss before tax (1.5) (14.8) -
Net cash from operations 6.2 2.6 -78.3%
1. Adjusted EBITDA is a non-GAAP alternative performance measure. See Note
28 to the financial statements for further definition and reconciliation.
2022 2021
Net cash from operations 6.2 2.6
Acquisition of PPE
- Rental assets (6.6) (3.7)
- Other (3.1) (0.7)
Development costs (4.6) (2.8)
Cash outflow from investing (14.2) (7.2)
New loan drawings 13.5 1.0
Interest and lease (1.6) (3.0)
Other 0.1 4.3
Cashflow from financing 11.9 2.3
Cash increase/ (decrease) 3.9 (2.3)
FX 0.1 -
Cash carried forward 6.8 2.8
Net (debt)/ cash (7.9) 1.8
Adjusted EBITDA1
Gross profit was £38.1m (2021: £44.4m). Operating Expenses were £31.7m
(2021: £32.2m) with the reduction owing to cost control, especially with
marketing where a greater mix of platform sales allows for lower spend
overall. Adjusted EBITDA was therefore £6.5m (2021: £12.2m).
Below EBITDA the main cost items relate to non-current assets: Depreciation
increased to £3.9m (2021: £1.8m) with rental assets being £2.4m (2021:
£0.5m) of the total charge and £1.9m of the increase year on year. Rental
assets are depreciated on a reducing balance basis at 33% per year and the
increased rental depreciation is simply a factor of the increased cost of
assets invested into rental. Impairment charges relate to the rental business
that experiences an element of loss of devices out on rent. The increase in
impairment to £0.8m (2021: £0.4m) is reflective of the growth in the rental
business. There are a number of recovery steps the business takes to recover
devices and manages to a rate of around 10%, of revenues (2021: 10%).
Amortisation was £1.9m (2021: £1.5m) with the increase on capitalised IT
development costs where the Group has increased the number of active IT
projects to remain innovative and effective in the market place. Share based
payment charges of £0.2m (2021: £17.4m) relate to Sharesave open to all
employees and an LTIP issued to certain senior managers during the year; the
large 2021 charge was an exceptional item related to AIM IPO.
Non-underlying items
The Group entered into forward purchase contracts during the spring of 2022 to
acquire electricity at a range of fixed prices for up to three years. The
purpose of these contracts was to provide certainty of future pricing for the
Group and this has been achieved by securing supply prices at broadly the same
levels as seen in the year to November 2022. Under IFRS accounting the value
of these contracts has been marked to the external market price of electricity
at 30 November 2022. As the contracted price that electricity will be supplied
is below the external market price, an asset has recorded and a gain reported
as non-underlying in the income statement. The £1.1m gain will reverse over
time as the electricity units are consumed or if the market price of
electricity falls.
During the year the Group incurred a number of expenses that have been treated
as non-underlying in line with historic treatments, or because they are large
and one-off in nature. These costs include dual running IT costs £0.9m (2021:
£0.2m), Covid costs of £0.2m (2021: £nil) and £0.2m (2021: £nil) of a tax
settlement relating to a pre-Brexit tax structure.
The Operating loss for the year was £0.5m (2021: £13.5m loss) and after
interest costs of £0.9m (2021: £1.3m) the statutory loss before tax was
£1.5m (2021: £14.8m). The taxation charge in the period was £3.3m (2021:
£2.7m credit) and is owing to the change in value of the share based payments
deferred tax asset on the balance sheet. The loss after taxation was £4.7m
(2021: £12.1m) and a basic loss per share of 4.4p (2021: 12.7p).
Net Assets and Cashflow
Non-current assets increased from £21.1m to £28.9m. The increase is mainly
owing to the increase in rental assets of £3.8m. In addition there was a
growth in both non-rental fixed assets of £1.8m related to the kiosk
programme, a new property lease in the UK of £2.0m and in capitalised
development costs of £3.0m as we continue to progress upgrades and
enhancements to our IT platforms. Deferred tax assets reduced from £5.3m to
£1.9m as share based items were re-valued using the share price at the
balance sheet date.
When a device is booked out to rental, the item is transferred from inventory
to non-current assets for the duration of the rental term. The value of rental
assets on the balance sheet is £6.6m, this represents 30,500 devices that are
contracted to come back into the business for outright sale or further rental.
Net debt at the balance sheet date was £7.9m (2021: £2.0m net cash) and bank
reported net debt, which ignores unamortised deal fees of £0.3m, was £8.2m
giving a covenant leverage figure of 1.3. The retained loss for the period was
£4.6m (2021: £12.1m) and net assets reduced from £24.3m to £19.5m.
Net cash generated from operating activities was £6.2m (2021: £2.6m).
Despite a lower EBITDA for the period, there was a £1.0m cash inflow on
working capital which compares to the £4.9m outflow in 2021. The reversal in
working capital cash flows is owing to tighter control around year end, helped
by a very strong end to Black Friday week. Adjusted operating cash flow
calculated as Adjusted EBITDA less movements in working capital, was £7.6m
(2021: £7.3m) giving a cash conversion ratio of 117% (2021: 60%) and
demonstrates the ability of the business to generate positive cashflows before
investing activities. Cash outflows on investing activities was £14.2m (2021:
£7.2m). The biggest single cash cost was the acquisition of rental assets of
£6.6m (2021: £3.7m). The increase in expenditure has supported the growth in
the rental book to 30,500 (2021: 13,500) active payers at the year end.
Capitalised development expenditure of £4.6m (2021: £2.8m) reflects the full
year impact of scaled up IT teams over recent periods to both retain our
technological advantage and accelerate our strategic initiatives. We expect
this cost to reduce gradually over the forthcoming year. Capital expenditure
was £3.1m (2021: £0.7m) with approximately £2.0m of the increase year on
year being the cost of installing the SMARTDrop kiosks in Asda stores.
In July 2022 the Group refinanced its existing £10m credit facility replacing
it with a £30m committed revolving credit facility with HSBC UK and NatWest.
The initial term is three years, with the potential to extend for a further 12
months. The main financial covenants on the lending are that leverage (EBITDA
to net debt) shall be less than 2.5 times and that interest cover (EBITDA
divided by interest) shall be greater than four times. The facility provides
the Group with the ability to grow the rental business. By changing the rate
of growth of the rental book there is an immediate impact on cash and
therefore on the facility's financial covenants. The rate of growth of rental
is an effective tool to manage the financial covenants of the facility.
Matthew Fowler
Chief Financial Officer
7 March 2023
Consolidated Statement of Comprehensive Income
Year ended Year ended
30 November 2022 30 November 2021
Note £000 £000
Turnover 4 , 5 145,279 145,566
Cost of sales (107,138) (101,211)
Gross profit 38,141 44,355
Operating expenses (38,478) (35,875)
Operating expenses - exceptional (174) (22,000)
Total operating expenses (38,652) (57,875)
Adjusted EBITDA* 29 6,471 12,174
Depreciation of property, plant and equipment 14 (3,877) (1,755)
Impairment of property, plant and equipment 14 (835) (410)
Loss on disposal of property, plant and equipment 14 (19) (12)
Amortisation of intangible assets 15 (1,910) (1,517)
Equity - settled share-based payments 25 (167) (17,379)
Other non - underlying items 6 (174) (4,621)
Operating loss (511) (13,520)
Financial expense 10 (946) (1,299)
Loss before taxation (1,457) (14,819)
Taxation 11 (3,278) 2,694
Loss for the period attributable to the equity holders of the parent
(4,735) (12,125)
Other comprehensive income
Items that may be reclassified to profit and loss
Foreign exchange differences on translation of foreign operations 145 38
Total comprehensive loss for the year attributable to the
equity holders of the parent (4,590) (12,087)
Pence Pence
- basic loss per share 13 (4.8)p (12.67)p
- diluted loss per share 13 (4.7)p (12.67)p
*Adjusted EBITDA is a non-GAAP measure. See note 28 for definition and
reconciliation.
Consolidated Statement of Financial Position
As at As at
30 November 2022 30 November 2021
Note £000 £000
Assets
Property, plant and equipment 14 13,995 6,118
Intangible assets 15 12,379 9,679
Deferred tax asset 12 1,909 5,333
Derivative financial asset 20 578 -
Total non-current assets 28,861 21,130
Inventories 18 8,824 8,019
Trade and other receivables 19 2,602 3,724
Derivative financial asset 20 555 -
Cash and cash equivalents 21 6,806 2,849
Total current assets 18,787 14,592
Total assets 47,648 35,722
Liabilities
Trade and other payables 22 9,340 8,359
Lease liabilities 23 687 366
Corporation tax payable - 269
Total current liabilities 10,027 8,994
Net current assets 8,760 5,598
Other interest-bearing loans and borrowings 23 14,675 887
Lease liabilities 23 3,403 1,557
Shares classified as debt 23 - -
Total non-current liabilities 18,078 2,444
Total liabilities 28,105 11,438
Net assets 19,543 24,284
Equity
Share capital 27 1,078 1,078
Share premium 27 14,449 14,449
Capital redemption reserve 27 1,108 1,108
Merger reserve 27 (991) (991)
Translation reserve 27 25 (120)
Retained earnings 3,874 8,760
Equity attributable to the equity holders of the parent 19,543 24,284
These financial statements were approved by the board of directors on 7 March 2023 and were signed on its behalf by:
S Oliver
CEO
Company Statement of Financial Position
Registered number 12977343
As at As at
30 November 2022 30 November 2021
Note £000 £000
Assets
Investments 16 14,333 14,285
Total non-current assets 14,333 14,285
Trade and other receivables 19 10,757 11,476
Total current assets 10,757 11,476
Total assets 25,090 25,761
Liabilities
Trade and other payables 22 37 -
Total liabilities 37 -
Net current assets 10,720
-
Net assets 25,053 25,761
Equity
Share capital 27 1,078 1,078
Share premium 27 14,449 14,449
Capital redemption reserve 27 1,108 1,108
Merger reserve 27 801 801
Retained earnings 7,617 8,325
Equity attributable to the equity holders of the parent 25,053 25,761
The Company has taken advantage of the exemption permitted by Section 408 of
the Companies Act 2006 not to present its own profit and loss account. The
Company made a loss of £876,000 (2021: loss of £8,959,000) for the period.
These financial statements were approved by the board of directors on 7 March
2023 and were signed on its behalf by:
S Oliver
CEO
Consolidated Statement of Changes in Equity
Capital redemption
Share Share Merger Translation Retained Total
capital premium reserve reserve reserve earnings Equity
note £000 £000 £000 £000 £000 £000 £000
As at 1 December 2020 14 1,690 - - (158) 874 2,420
Loss for the year - - - - - (12,125) (12,125)
Foreign currency translation - - - 38 38
Total comprehensive income/ (loss) for the year - - - - 38 (12,125) (12,087)
Cancellation of share premium 27 - (1,690) - - - 1,690 -
Reclassification of shares 27 1,100 - - - - - 1,100
Repurchase of deferred shares 27 (1,108) - 1,108 - - - -
Bonus issue of shares 991 - - (991) - - -
Shares issued 27 81 14,922 - - 15,003
Issue costs of shares 27 - (473) - - (473)
Interest on preference shares waived by the
owners 26 - - - 185 185
Share-based payments 25 - - - 17,379 17,379
Tax effects of share-based payment charge 757 757
Balance as at 30 November 2021 1,078 14,449 1,108 (991) (120) 8,760 24,284
Capital redemption
Share Share Merger Translation Retained Total
capital premium reserve reserve reserve earnings Equity
note £000 £000 £000 £000 £000 £000 £000
As at 1 December 2021 1,078 14,449 1,108 (991) (120) 8,760 24,284
Loss for the year - - - - - (4,735) (4,735)
Foreign currency translation - - - 145 145
Total comprehensive income/ (loss) for the year - - - - 145 (4,735) (4,590)
Share-based payments 25 - - - 167 167
Tax effects of share-based payment charge (318) (318)
Balance as at 30 November 2022 1,078 14,449 1,108 (991) 25 3,874 19,543
Company Statement of Changes in Equity
Share Share Capital redemption Merger Retained Total
capital premium Reserve reserve earnings Equity
note £000 £000 £000 £000 £000 £000
As at 27 October 2020 - - - - - -
Loss for the period - - - - (8,959) (8,959)
Total comprehensive loss for the period - - - - (8,959) (8,959)
Share based payments 25 - 17,284 17,284
Share for share exchange 27 14 - 1,792 - 1,806
Reclassification of shares 27 1,100 - - - 1,100
Repurchase of deferred shares 27 (1,108) 1,108 -
Bonus issue of shares 27 991 - (991) - -
Shares issued 27 81 14,922 - - 15,003
Issue costs of shares 27 - (473) - - (473)
Balance as at 30 November 2021 1,078 14,449 1,108 801 8,325 25,761
Company Statement of Changes in Equity
Share Share Capital redemption Merger Retained Total
capital premium Reserve reserve earnings Equity
note £000 £000 £000 £000 £000 £000
As at 1 December 2021 1,078 14,449 1,108 801 8,325 25,761
Loss for the year - - - - (875) (875)
Total comprehensive loss for the year - - - - (875) (875)
Share based payments 25 - 167 167
Balance as at 30 November 2022 1,078 14,449 1,108 801 7,617 25,053
Consolidated Cash Flow Statement
Year ended Year ended
30 November 2022 30 November 2021
£000 £000
Net cash flows from operating activities
Loss for the year (4,735) (12,125)
Adjustments for:
Financial expense 946 1,299
Taxation expense
Depreciation of property, plant and equipment 3,877 1,755
Impairment of property, plant and equipment 835 410
Loss on property, plant and equipment 19 12
Amortisation of intangible assets 1,910 1,517
Fair value gain on derivative instruments (1,133) -
Share-based payments expense 167 17,379
Taxation paid - -
Working capital adjustments
Increase in inventories
(805) (1,184)
Decrease/ (increase) in trade and other receivables 1,122 (1,216)
Increase/(decrease) in trade and other payables 712 (2,522)
Net cash from operations 6,193 2,631
Cash flows used in investing activities
Acquisition of property, plant and equipment (9,661) (4,404)
Capitalised development expenditure (4,555) (2,837)
Net cash used in investing activities (14,216) (7,241)
Cash flows from financing activities
Proceeds from new loan 21,026 1,000
Proceeds from shares issued - 15,002
Costs incurred on IPO charged to Share Premium (473)
-
Financial expenses paid (577) (2,275)
Lease liabilities paid (868) (618)
Interest paid on lease liabilities (169) (131)
Repayment of other loans (7,500) (6,000)
Repayment of shareholder loan notes - (4,200)
Net cash from financing activities 11,912 2,305
Net (decrease)/increase in cash and cash equivalents 3,889 (2,305)
Cash and cash equivalents brought forward 2,849 5,140
Effect of exchange rate fluctuations on cash 68 14
Cash and cash equivalents carried forward 6,806 2,849
Notes
1. CORPORATE INFORMATION
The Directors of musicMagpie plc (the "Company") present their full year
report and the audited Consolidated Financial Statements for the year ended 30
November 2022.
musicMagpie plc is a public limited company incorporated in the United Kingdom
whose shares are publicly traded on the Alternative Investment Market (AIM) of
the London Stock Exchange and is incorporated and domiciled in the UK. Its
registered office address is One Stockport Exchange, Railway Road, Stockport,
Cheshire, SK1 3SW.
The Company's financial statements are included in the consolidated financial
statements of musicMagpie plc, which can be obtained from its registered
office address. The Company has taken advantage of the exemption permitted by
Section 408 of the Companies Act 2006 not to present its own profit and loss
account.
The Company, musicMagpie plc is the ultimate Group company of the consolidated
Group.
2. ACCOUNTING POLICIES
2.1 Basis of Preparation
The consolidated financial statements have been prepared in accordance with UK
adopted International Accounting Standards and with those parts of the
Companies Act 2006 applicable to companies reporting under International
Accounting Standards. The Group has chosen to prepare the parent company
financial statements in accordance with Financial Reporting Standard 101:
Reduced Disclosure Framework ("FRS 101"). The financial statements have been
prepared under the historical cost convention, except for derivative financial
instruments which are measured at fair value through profit or loss.
The accounting policies that follow set out those policies that apply in
preparing the financial statements for the year ended 30 November 2022 and the
Group and Company have applied the same policies throughout the year.
The following exemptions from the requirements of IFRS have been applied in
the preparation of the Company's financial statements and, where relevant,
equivalent disclosures have been made in the Group accounts of the parent, in
accordance with FRS 101:
· Presentation of a Statement of Cash Flows and related notes;
· Disclosure of the future impact of new International Financial
Reporting Standards in issue but not yet effective at the reporting date;
· Financial instrument disclosures;
· A reconciliation of the number and weighted average exercise
prices of share options, how the fair value of share-based payments was
determined and their effect on profit or loss and the financial position;
· Related party disclosures for transactions between the parent
and wholly owned members of the Group;
· Disclosure of the objectives, policies and processes for managing
capital.
Basis of Consolidation
A subsidiary is an entity that is controlled by the parent. The results of
subsidiary undertakings are included in the consolidated statement of
comprehensive income from the date that control commences until the date that
control ceases. Control is established when the Group has the power to govern
the operating and financial policies of an entity so as to obtain benefits
from its activities. In assessing control, the musicMagpie Group takes into
consideration potential voting rights that are currently exercisable.
All intra-group assets and liabilities, equity, income, expenses and cash
flows relating to transactions between members of the Group are eliminated in
full on consolidation.
2.2 Going Concern
The financial statements are prepared on a going concern basis which the
directors believe to be appropriate for the following reasons. The Group made
a loss before taxation of £1,457,000 during the year ended 30 November 2022
(year ended 30 November 2021: loss of £14,819,000). At the year-end date it
had net current assets of £8,760,000 (year ended 30 November 2021:
£5,598,000). The Group has access to a £30m committed credit facility.
The Group presently meets its day to day working capital requirements through
cash reserves and its bank facilities which are subject to various facility
limits and covenants. The directors have reviewed the trading and cash flow
forecasts for the 12 month period from the date of approval of the financial
statements as part of their going concern assessment and having incorporated
reasonable downside sensitivities have confirmed that the Group will be able
to continue to meet quarterly covenant tests and remain within the borrowing
limits set out within its bank facility agreement.
The Directors therefore believe there is a reasonable expectation that the
Group can continue as a going concern for at least the next 12 months from the
date of approval of the financial statements. Accordingly, they continue to
adopt the going concern basis in preparing the financial statements.
2.3 Foreign currency
Transactions in foreign currencies are translated to the functional currency
at the foreign exchange rate ruling at the date of the transaction. Monetary
assets and liabilities denominated in foreign currencies at the reporting date
are retranslated to the functional currency at the foreign exchange rate
ruling at that date and the foreign exchange differences arising on
translation are recognised in profit or loss. The functional currency of the
Company is sterling.
The assets and liabilities of foreign operations are translated to the
presentational currency, sterling, at foreign exchange rates ruling at the
reporting date. The revenues and expenses of foreign operations are translated
at an average rate for the year where this rate approximates to the foreign
exchange rates ruling at the dates of the transactions. Foreign exchange
differences arising on retranslation are recognised in profit or loss.
2.4 Financial instruments
Financial assets
Financial assets comprise trade and other receivables (including intercompany
balances) and cash and cash equivalents.
Trade receivables are initially measured at transaction price, and
subsequently at their amortised cost subject to any impairment in accordance
with IFRS 9.
Trade and other receivables are recognised initially at the amount of
consideration that is unconditional. The Group holds these receivables with
the objective of collecting contractual cash flows and therefore measures them
subsequently at amortised cost using the effective interest method.
Cash and cash equivalents comprise cash in hand, cash at bank, cash in transit
and call deposits. Cash in transit comprise of cash collected from the
customers by third party e-commerce platforms but not yet received by the
Group. These balances are considered to be highly liquid, with minimal risk of
default and are typically received within a week.
The assessment of impairment of trade receivables and other receivables,
including intercompany balances is in accordance with IFRS 9. Impairment is
assessed by reference to expected recoverability of assets, including the
underlying profitability and cash flows from subsidiaries from whom
intercompany balances are owed. A loss allowance for expected credit losses
(ECL) is recognised on all receivable balances subsequently measured at
amortised cost as follows:
For trade receivables, lifetime ECLs are recognised using the 'simplified
approach' permitted under IFRS 9.
For other financial instruments, lifetime ECLs are recognised when there has
been a significant increase in credit risk since initial recognition. However,
if the credit risk on the financial instrument has not increased significantly
since initial recognition, the loss allowance for that financial instrument is
measured at an amount equal to 12-month ECL.
Lifetime ECL represents the expected credit losses that will result from all
possible default events over the expected life of a financial instrument. In
contrast, 12-month ECL represents the portion of lifetime ECL that is expected
to result from default events on a financial instrument that are possible
within 12 months after the reporting date.
Credit risk on a financial instrument (including intercompany balances), is
assumed not to have increased significantly since initial recognition if the
financial instrument is determined to have low credit risk at the reporting
date. A financial instrument is determined to have low credit risk if:
· the financial instrument has a low risk of default;
· the debtor has a strong capacity to meet its contractual cash
flow obligations in the near term; and;
· adverse changes in economic and business conditions in the longer
term may, but will not necessarily, reduce the ability of the borrower to
fulfil its contractual cash flow obligations.
Financial liabilities
Financial liabilities comprise trade and other payables, and interest-bearing
loans. These are measured at initial recognition at fair value and
subsequently at amortised cost using the effective interest rate method.
Interest expense and foreign exchange gains and losses are recognised in
profit or loss. Any gain or loss on derecognition is also recognised in profit
or loss.
Classification of financial instruments issued by the Group
Financial instruments issued by the Group are treated as equity only to the
extent that they meet the following two conditions:
a) they include no contractual obligations upon the Group to deliver cash or
other financial assets or to exchange financial assets or financial
liabilities with another party under conditions that are potentially
unfavourable to the musicMagpie Group; and
b) where the instrument will or may be settled in the Group's own equity
instruments, it is either a non- derivative that includes no obligation to
deliver a variable number of the musicMagpie Group's own equity instruments or
is a derivative that will be settled by the musicMagpie Group's exchanging a
fixed amount of cash or other financial assets for a fixed number of its own
equity instruments.
To the extent that this definition is not met, the proceeds of issue are
classified as a financial liability. Where the instrument so classified takes
the legal form of the musicMagpie Group's own shares, the amounts presented in
these financial statements for called up share capital and share premium
account exclude amounts in relation to those shares.
Inter-company balances are classified as current in the financial
statements. In arriving at this classification, management have looked at
the financial position of the subsidiary entities and their relative ability
to meet balances owing and considered scenarios where there are possible
issues with repayment.
2.5 Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation
and accumulated impairment losses. Property, plant and equipment includes
assets rented to customers (Rental Assets) which, as we retain ownership of
the device throughout the contractual term, the cost of the asset is
capitalised and depreciated over its expected remaining useful economic life.
Where parts of an item of property, plant and equipment have different useful
lives, they are accounted for as separate items of property, plant and
equipment.
The Company assesses at each reporting date whether property, plant and
equipment are impaired.
Depreciation is charged to profit and loss over the estimated useful lives of
each part of an item of Property, plant and equipment . Leased assets are
depreciated over the shorter of the lease term and their useful lives. The
estimated useful lives are as follows:
Plant and machinery 6 - 7 years Straight line
Motor vehicles 3 years Straight line
Fixtures and fittings 6 - 7 years Straight line
Computer and office equipment 3 years Straight line
Rental assets 33% Reducing balance
Depreciation methods, useful lives and residual values are reviewed at each
reporting date.
2.6 Business combinations
All business combinations are accounted for by applying the acquisition
method. Business combinations are accounted for using the acquisition method
as at the acquisition date, which is the date on which control is transferred
to the Group.
The Group measures goodwill at the acquisition date as:
• the fair value of the consideration transferred; plus
• the recognised amount of any non-controlling interests in the acquiree;
plus
• the fair value of the existing equity interest in the acquiree; less
• the net recognised amount (generally fair value) of the identifiable
assets acquired and liabilities assumed.
When the excess is negative, a bargain purchase gain is recognised immediately
in profit or loss. Costs related to the acquisition, other than those
associated with the issue of debt or equity securities, are expensed as
incurred.
2.7 Intangible assets
Goodwill
Goodwill is stated at cost less any accumulated impairment losses. This
represents Goodwill in the business as a whole and this is not amortised but
is tested annually for impairment.
Research and development
Expenditure on development activities is capitalised if the product or process
is technically and commercially feasible and the Group intends and has the
technical ability and sufficient resources to complete development, future
economic benefits are probable and if the Group can measure reliably the
expenditure attributable to the intangible asset during its development.
Development activities involve a plan or design for the production of new or
substantially improved products or processes. The expenditure capitalised
includes the cost of materials, direct labour and an appropriate proportion of
overheads. Capitalised development expenditure is stated at cost less
accumulated amortisation and less accumulated impairment losses. Research and
other development expenditure is expensed as incurred.
Other intangible assets
Expenditure on internally generated goodwill and brands is recognised in the
income statement as an expense as incurred.
Other intangible assets that are acquired by the Group are stated at cost less
accumulated amortisation and less accumulated impairment losses.
Amortisation
Amortisation is charged to the profit or loss on a straight-line basis over
the estimated useful lives of intangible assets unless such lives are
indefinite. Intangible assets with an indefinite useful life and goodwill are
systematically tested for impairment at each reporting date. Other intangible
assets are amortised from the date they are available for use. The estimated
useful lives are as follows:
· Website development 3 - 5 years
· Capitalised IT development costs 3 - 5 years
· Acquired intangibles (proprietary software) 10 years
· Domains 10 years
2.8 Investments
Investments in subsidiaries are held at cost, less any provision for
impairment
2.9 Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is
based on the first-in first-out principle. The cost of inventories includes
the average cost of purchase and other costs, such as inbound delivery and
direct labour, in bringing them to their existing location and condition.
Net realizable value is measured by reference to sales prices in the market or
products that can be readily sold and by an assessment of the harvestable
value of components of a device if sale is not possible.
2.10 Impairment of non-financial assets excluding inventories and deferred tax assets
The carrying amounts of the Group's non-financial assets, other than
inventories and deferred tax assets, are reviewed at each reporting date to
determine whether there is any indication of impairment. If any such
indication exists, then the asset's recoverable amount is estimated. For
goodwill, and intangible assets that have indefinite useful lives or that are
not yet available for use, the recoverable amount is estimated each year at
the same time.
The recoverable amount of an asset or cash-generating unit is the greater of
its value in use and its fair value less costs to sell. In assessing value in
use, the estimated future cash flows are discounted to their present value
using a pre-tax discount rate that reflects current market assessments of the
time value of money and the risks specific to the asset. For the purpose of
impairment testing, assets that cannot be tested individually are Grouped
together into the smallest Group of assets that generates cash inflows from
continuing use that are largely independent of the cash inflows of other
assets or Groups of assets (the "cash-generating unit"). For the purpose of
impairment testing, goodwill is allocated to a single cash-generating unit, or
("CGU"), being the Group as a whole reflecting the lowest level at which the
business is monitored for internal reporting purposes.
An impairment loss is recognised if the carrying amount of an asset or its CGU
exceeds its estimated recoverable amount. Impairment losses are recognised in
profit or loss. Impairment losses recognised in respect of the CGU are
allocated first to reduce the carrying amount of any goodwill allocated to the
units, and then to reduce the carrying amounts of the other assets in the unit
(Group of units) on a pro rata basis.
An impairment loss in respect of goodwill is not reversed. In respect of other
assets, impairment losses recognised in prior periods are assessed at each
reporting date for any indications that the loss has decreased or no longer
exists. An impairment loss is reversed if there has been a change in the
estimates used to determine the recoverable amount. An impairment loss is
reversed only to the extent that the asset's carrying amount does not exceed
the carrying amount that would have been determined, net of depreciation or
amortisation, if no impairment loss had been recognised.
2.11 Employee benefits
Defined contribution plans
A defined contribution plan is a post-employment benefit plan under which the
Group pays fixed contributions into a separate entity and will have no legal
or constructive obligation to pay further amounts. Obligations for
contributions to defined contribution pension plans are recognised as an
expense in profit or loss in the periods during which services are rendered by
employees.
Short-term benefits
Short-term employee benefit obligations are measured on an undiscounted basis
and are expensed as the related service is provided. A liability is recognised
for the amount expected to be paid under short-term cash bonus or
profit-sharing plans if the Group has a present legal or constructive
obligation to pay this amount as a result of past service provided by the
employee and the obligation can be estimated reliably.
Share based payments
Share-based payment arrangements in which the Group receives goods or services
as consideration for its own equity instruments are accounted for as
equity-settled share-based payment transactions, regardless of how the equity
instruments are obtained by the Company.
The grant date fair value of share-based payments awards granted to employees
is recognised as an employee expense, with a corresponding increase in equity,
over the period in which the employees become unconditionally entitled to the
awards. The fair value of the awards granted is measured using either Monte
Carlo option pricing model or Black Scholes model, taking into account the
terms and conditions upon which the awards were granted. The amount recognised
as an expense is adjusted to reflect the actual number of awards for which the
related service and non-market vesting conditions are expected to be met, such
that the amount ultimately recognised as an expense is based on the number of
awards that do meet the related service and non-market performance conditions
at the vesting date. See note 25 for details of employee share options
incentive plans operated by the Group.
2.12 Provisions
A provision is recognised in the statement of financial position when the
Group has a present legal or constructive obligation as a result of a past
event, that can be reliably measured and it is probable that an outflow of
economic benefits will be required to settle the obligation. Provisions are
determined by discounting the expected future cash flows at a pre- tax rate
that reflects risks specific to the liability.
2.13 Revenue
Revenue is income generated from the sale or rental of goods in the ordinary
course of the Group's business activities. In accordance with IFRS 15, revenue
is recognised when any performance obligations in a contract with a customer
has been satisfied. The Group's revenues are derived from the supply of
goods (technology, media and books) and the rental of mobile phones to
customers.
Sale of goods
Revenue represents the fair value of amounts receivable for goods and is
stated net of discounts, value added taxes and returns. The Group does not
operate any loyalty programmes. The supply of goods contains a single
performance obligation with the customer to deliver the goods and revenue is
recognised on dispatch of goods to the customer. For goods sold direct to
consumers, payment is usually received at the point of sale. For goods sold
via wholesale channels, a sales invoice is raised on dispatch.
Revenues for goods and services are recognised on despatch to the customer
instead of delivery to the customer for practical reasons.
Rental of devices
The Group also earns rental income on devices rented to customers over a fixed
term. The ownership of the device does not pass to the customer at the end
of the contract term and there is no option to purchase the device at any
point during the contract term. Rental payments are received on a monthly
basis and early termination charges are payable if the contract is terminated
before the end of the term by the customer.
The contracts for the rental of devices are classified as operating leases in
accordance with IFRS 16 'Leases'. The Group recognises lease payments
received under operating leases as income on a straight-line basis over the
lease term. Early termination charges are recognised as income in the period
in which the contract is terminated.
2.14 Financial expense
Financial expense includes interest payable..
2.15 Taxation
Tax on the profit or loss for the year comprises current and deferred tax. Tax
is recognised in the income statement except to the extent that it relates to
items recognised directly in equity, in which case it is recognised in equity.
Current tax is the expected tax payable or receivable on the taxable income or
loss for the year, using tax rates enacted or substantively enacted at the
reporting date, and any adjustment to tax payable in respect of previous
years. Current tax assets and tax liabilities are offset where the entity has
a legally enforceable right to offset and intends either to settle on a net
basis, or to realise the asset and settle the liability simultaneously.
Deferred tax is provided on temporary differences between the carrying amounts
of assets and liabilities for financial reporting purposes and the amounts
used for taxation purposes. The following temporary differences are not
provided for: the initial recognition of goodwill; the initial recognition of
assets or liabilities that affect neither accounting nor taxable profit other
than in a business combination, and differences relating to investments in
subsidiaries to the extent that they will probably not reverse in the
foreseeable future. The amount of deferred tax provided is based on the
expected manner of realisation or settlement of the carrying amount of assets
and liabilities, using tax rates enacted or substantively enacted at the
reporting date.
A deferred tax asset is recognised only to the extent that it is probable that
future taxable profits will be available against which the temporary
difference can be utilised. Deferred tax assets and liabilities are offset
where there is a legally enforceable right to offset current tax assets and
liabilities and where the deferred tax balances relate to the same taxation
authority.
2.16 Leases as lessee
At the commencement date of the lease, the Group assesses whether a contract
is, or contains, a lease. A contract is, or contains, a lease if the contract
conveys the right to control the use of an identified asset for a period of
time in exchange for consideration.
Recognition and measurement
At commencement or on modification of a contract that contains a lease
component, along with one or more other lease or non-lease components, the
Group accounts for each lease component separately from the non- lease
components. The Group allocates the consideration in the contract to each
lease component on the basis of its relative stand-alone price and the
aggregate stand-alone price of the non-lease components.
The Group recognises a right-of-use asset and a lease liability at the lease
commencement date. The right-of-use assets comprise the initial measurement of
the corresponding lease liability, lease payments made at or before the
commencement day, less any lease incentives received and any initial direct
costs. They are subsequently measured at cost less accumulated depreciation
and impairment losses.
The right-of-use asset is depreciated using the straight-line method from the
commencement date to the end of the lease term, unless the lease transfers
ownership of the underlying asset to the Group by the end of the lease term or
the cost of the right-of-use asset reflects that the Group will exercise a
purchase option. In that case, the right-of-use asset will be depreciated over
the useful life of the underlying asset, which is determined on the same basis
as those of property and equipment. In addition, the right-of-use asset is
periodically reduced by impairment losses, if any, and adjusted for certain
remeasurements of the lease liability.
The lease liability is initially measured at the present value of the lease
payments that are not paid at the commencement date, discounted using the
interest rate implicit in the lease or, if that rate cannot be readily
determined, the Group's incremental borrowing rate. The Group has applied the
incremental borrowing rate for calculating the lease liability of 5%. The
incremental borrowing rate is the rate of interest that the Group would have
to pay to borrow over a similar term, and with a similar security, the funds
necessary to obtain an asset of a similar value to the right-of-use assets in
a similar economic environment. The Group determines its incremental borrowing
rate with reference to its existing and historical cost of borrowing adjusted
for the term and security against such borrowings.
Lease payments included in the measurement of the lease liability comprise the
following:
• fixed payments, including in-substance fixed payments;
• variable lease payments that depend on an index or a rate, initially
measured using the index or rate as at the commencement date
• amounts expected to be payable under a residual value guarantee; and
• the exercise price under a purchase option that the Group is reasonably
certain to exercise,
• lease payments in an optional renewal period if the Group is reasonably
certain to exercise an extension option, and
• penalties for early termination of a lease unless the Group is
reasonably certain not to terminate early.
The lease liability is measured at amortised cost using the effective interest
method. It is remeasured when there is a change in future lease payments
arising from a change in an index or rate, there is a change in the Group's
estimate of the amount expected to be payable under a residual value
guarantee, if the Group changes its assessment of whether it will exercise a
purchase, extension or termination option or if there is a revised in-
substance fixed lease payment.
When the lease liability is remeasured in this way, a corresponding adjustment
is made to the carrying amount of the right-of-use asset, to the extent that
the right-of-use asset is reduced to nil, with any further adjustment required
from the remeasurement being recorded in profit or loss.
The Group presents right-of-use assets in 'property, plant and equipment' and
lease liabilities on the face of the statement of financial position. The
Group applies IAS 36 to determine whether a right-of-use asset is impaired and
accounts for any identified impairment loss as described in policy 2.10.
Short-term leases and leases of low-value assets
The Group has elected not to recognise right-of-use assets and lease
liabilities for lease of low-value assets and short-term leases. The Group
recognises the lease payments associated with these leases as an expense on a
straight-line basis over the lease term.
2.17 Derivative financial instruments
The Group accounts for derivative instruments under IFRS 9 Financial
Instruments. The Group does not hedge account. As such derivative
instruments are measured at fair value through the profit and loss at each
reporting date.
3.1 Significant accounting judgements and estimates
Judgements made by the Directors, in the application of these accounting
policies that have significant effect on the financial statements and
estimates with a significant risk of material adjustment in the next year are
discussed below.
Key sources of estimation uncertainty
• Impairment of assets - in testing for impairment of investments,
goodwill and other intangible assets, management have made certain assumptions
concerning the future development of the business that are consistent with its
annual budget and forecasts into perpetuity. Should these assumptions
regarding the discount rate or growth in the profitability be unfounded then
it is possible that investments and other assets included in the statement of
financial position could be impaired. See further details in note 15.
• Inventory provisioning - the Group carries significant amounts of
inventory against which there are provisions for slow moving lines. The
provisioning policies require a degree of judgement and the use of estimates
around future sales based on the historical demand for product lines. As
product is almost always in a condition ready for immediate sale, any costs
necessary to make stock sellable are immaterial. In addition, management make
use of this historical sales data regarding selling price of items in order to
ensure that inventories are valued at the lower of cost and net realisable
value. Inventories at the year-end were valued at £8,824,000 (Year ended 30
November 2021: £8,019,000) which included a provision for slow moving lines
of £729,000 (Year ended 30 November 2021: £529,000). If the estimate of
future demand for product were under or overstated by 25% the provision would
be impacted by £182,000 (£125,000).
• The Group has a derivative financial instrument in the Statement of
Financial Position in the form of a forward contract to purchase electricity
at a fixed price. The mark to market of the forward contract requires
various estimates to arrive at a fair value for the instrument at year end,
which was £1,133,000 (2021: nil). The valuation included a risk free fair
value, a credit valuation adjustment and a debit valuation adjustment. The
main assumptions used to value these were the expected SONIA interest rate,
the credit worthiness of both the Group and the electricity supplier, the
implied volatility of electricity and the forward price of electricity in the
market. See note 6. If the Group was assumed to have maximum
creditworthiness the debit value adjustment of the asset would reduce by
£394,000.
Critical accounting judgements in applying the Group's accounting policies
Certain critical accounting judgements (apart from those involving estimations
included above) in applying the Group's accounting policies are described
below.
· The Group has deferred taxation assets on the balance sheet of
£1,909,000 (2021: £5,333,000). In arriving at the carrying value
management have made judgments as to whether the deferred taxation will be
utilized in future periods. When concluding that the deferred taxation
assets will be utilized management have had regard to the board approved one
year budget and the group's five year plan,. These future forecasts show the
Group to profitable owing to the long term benefit to profits from the
investment and planned growth in Rental. Based on the growth plans of
Rental, and utilization of the deferred taxation assets occurs within 5-7
years.
3.2 New accounting standards and interpretations issued but not yet effective
The following Adopted IFRSs have been issued but have not been applied in
these financial statements. Their adoption is not expected to have a material
effect on the financial statements unless otherwise indicated:
• Amendments to IAS 8: Definition of Accounting Estimates (effective 1
January 2023).
• Amendments to IAS 1 and IFRS Practice Statement 2: Disclosures of
Accounting Policies (effective 1 January 2023).
• Amendments to IAS 12: Deferred Tax related to Assets and Liabilities
arising from a Single Transaction (effective 1 January 2023).
• Amendments to IAS 1 Presentation of Financial Statements: Classification
of Liabilities as Current or Non-current and Classification of Liabilities as
Current or Non-current (effective 1 Janaury 2024).
The Group has not early adopted any accounting standards.
4. Segmental reporting
The Chief Operating Decision Maker (CODM) has been determined to be the Chief
Executive Officer, with support from the Board. Information reported to the
Chief Executive Officer for the purposes of resource allocation and assessment
of segment performance is focused on product categories. The principal product
categories and the Group's reportable segments under IFRS 8 are Technology,
Media and Books.
An analysis of the results for the period by reportable segment is as follows:
Year ended 30 November 2022 Technology Media and books Total
Outright sales Rental income Total
£000 £000 £000 £000 £000
Revenue 91,213 5,345 96,558 48,721 145,279
Gross profit 15,944 4,207 20,151 17,990 38,141
Processing wages (4,428) - (4,428) (8,218) (12,646)
Contribution after direct labour 11,516 4,207 15,723 9,772 25,495
Trading margin (%) 26.8 100.0 30.9 82.4 48.2
Gross margin (%) 17.5 78.7 20.9 36.9 26.3
Trading margin is the sale proceeds less the cost of the product and is one
method used by the Company to assess profitability of segments and product
lines.
Contracted rental income outstanding at the year ended 30 November 2022
amounted to approximately £3,111,000 (Year ended 30 November 2021:
£1,864,805) which is due in the next 12 months.
Year ended 30 November 2021 Technology Media and books Total
Outright sales Rental income Total
£000 £000 £000 £000 £000
Revenue 84,245 1,809 86,054 59,512 145,566
Gross profit 19,973 1,311 21,284 23,071 44,355
Processing wages (3,988) - (3,988) (8,225) (12,213)
Contribution after direct labour 15,985 1,311 17,296 14,846 32,142
Trading margin (%) 32.5 100.0 33.9 81.7 53.4
Gross margin (%) 23.7 72.4 24.7 38.7 30.4
5. Revenue
Disaggregation of revenue
An analysis of revenue by geographical market is given below:
Year ended Year ended
30 November 2021
30 November 2022
£000
£000
United Kingdom 102,727 108,065
Within the European Community 4,086 4,225
United States of America 34,362 29,274
Outside the European Community (excluding the USA) 4,104 4,002
Total 145,279 145,566
An analysis of revenue by country of origination is given below:
Year ended Year ended
30 November 2021
30 November 2022
£000
£000
United Kingdom 110,233 115,453
United States of America 35,046 30,113
Total 145,279 145,566
Due to the nature of the Group's business, it is not materially affected by
seasonal or cyclical trading.
6. Other non-underlying items
Year ended Year ended
30 November 2021
30 November 2022
£000
£000
Non-underlying gain 1,133 -
IPO related costs - (3,998)
Other non-underlying costs (1,307) (623)
Total (174) 4,621
Underlying performance excludes the above gain and expenses which consist of
the following in line with historic treatments, or because they are large or
one-off in nature. For 2022 these consisted of:
- Mark to market gain made by the Group on various forward
contracts for the purchase of electricity. The purchase price for
electricity that the Group has contracted at is below the market price of
electricity at the reporting date and the resulting gain has been classified
as non-underlying.
- Dual running IT costs related to IPO £0.9m
- COVID related expenditure of £0.2m
- VAT settlement relating to a pre-Brexit tax structure of £0.2m
For 2021, IPO related costs related to costs incurred in admitting musicMagpie
plc onto the Alternative Investment Market ("AIM") on 22 April 2021. Other
non-underlying costs in 2021 costs related to non-recurring redundancy,
additional COVID related expenditure costs and non-executive monitoring fees.
Year ended Year ended
7. Operating loss 30 November 2022 30 November 2021
included in the loss are the following £000 £000
Amortisation of intangible assets 1,910 1,517
Depreciation of property, plant & equipment:
Owned assets 3,152 1,130
Right-of-use assets 725 627
Impairment of property, plant and equipment 835 410
Loss on disposal of property, plant and equipment 19 12
Auditor's remuneration:
Audit of these financial statements* 177 145
Other assurance services - -
Net forex gains in the period 145 38
* £15,000 (year ended 30 November 2021: £15,000) related to the audit of the
company.
The group undertook no R&D that needed to be expensed in the year (year
ended 30 November 2021: £nil)
8. Remuneration of directors
Year ended Year ended
30 November 2021
30 November 2022
Short term benefits
£000
£000
Directors' emoluments 664 626
Employers pension contributions 9 2
Amounts paid to third parties in respect of directors' services - 10
Total 673 638
Included in the above are amounts paid to Non-executive directors of £230,000
(year ended 30 November 2021: £183,000).
The aggregate of emoluments of the highest paid director were £311,000 (year
ended 30 November 2021: £326,000). Pension contributions paid on his behalf
were £7,000 (period ended 30 November 2021: £2,000).
The comparative information relates the amounts paid to the Directors for
qualifying services provided to the Company from the IPO combined with amounts
paid to the directors for services provided to former parent company
(Entertainment Magpie Group Limited) prior to that date.
Information on Directors' remuneration for the year ended 30 November 2022 is
set out on pages 51 to 54.
9. Staff numbers and costs
The average number of persons employed by the Group (including directors)
during each financial period, analysed by category, was as follows:
Group Group Company Company
2022 2021 2022 2021
Office and administration 202 198 12 11
Warehouse 481 449 - -
Total 683 647 12 11
The aggregate payroll costs of these persons were as follows:
Group Group Company 2022 Company
2022 2021 £000 2021
£000 £000 £000
Wages and salaries 17,790 18,083 1,094 1,027
Social security costs 1,317 1,188 143 164
Other pension costs 271 317 10 5
Equity-settled share-based payments (see note 25) 167 17,379 - 5,908
Total 19,545 36,967 1,247 7,104
In addition to the above payroll costs, a further £2,661,000 (Year ended 30
November 2021: £2,040,000) has been capitalised as they relate to website and
IT development costs.
Included in the above wages and salaries costs are temporary staff who were
paid £3,010,000 during the year (Year ended 30 November 2021: £3,024,000).
10. Financial expense
Year ended Year ended
30 November 2022 30 November 2021
£000 £000
Interest expense on loan notes - 176
Interest on bank and other loans 323 209
Interest expense on lease liabilities 169 107
Other non-underlying financial expense 152 438
Bank interest and similar charges 302 369
Interest expense on preference shares classified as liabilities - -
946 1,299
Other non-underlying financial expenses are finance costs written off that
relate to previous debt structures.
11. Taxation
Year ended 30 November 2022 Year ended 30 November 2021
£000 £000
Current tax expense
UK corporation tax on profits for the period 40 636
Adjustments in respect of previous periods 132 19
Total current tax expense 172 655
Deferred tax credit
Origination and reversal of timing differences 3,014 (2,372)
Adjustment in respect of previous periods 92 (18)
Effect of changes in tax rates - (959)
Total deferred tax charge/ (credit) 3,106 (3,349)
Total tax charge (credit) in the income statement 3,278 (2,694)
Equity items
Current tax - (439)
Deferred tax current year charge/(credit) 318 (318)
Total 318 (757)
Reconciliation of effective tax rate
Year ended 30 November 2022 Year ended 30 November 2021
£000 £000
Loss (1,457) (14,819)
Tax using the UK corporation tax rate of 19% (2021: 19%) (277) (2,816)
Other tax adjustments, reliefs and transfers 20 923
Adjustments in respect of prior periods - current tax 132 (52)
Adjustments in respect of prior periods - deferred tax 92 -
Tax rate changes - (959)
Research and Development Expenditure Credit 40 -
Share options 3,000 563
Deferred tax not recognised 271 (124)
Tax losses recognised in the period - (229)
Total tax charge/ (credit) in the income statement 3,278 (2,694)
12. Deferred tax
Tax losses Share options*
£000 Capital allowances £000 Others Total
£000 £000 £000
At 30 November 2021 1,357 102 3,735 139 5,333
Credited/(debited) to profit or loss 536 (712) (3,000) 70 (3,106)
Debited to equity - - (318) - (318)
At 30 November 2022 1,893 (610) 417 209 1,909
In the budget on 3 March 2021, the UK Government announced an increase in the
main UK corporation tax rate from 19% to 25% with effect from 1 April 2023.
The change in rate was substantively enacted on 24 May 2021.
The deferred tax asset is calculated at 25% (2021 25%) based on the rate
substantively enacted at the reporting date. Deferred tax assets and
liabilities are offset where there is a legally enforceable right to offset
*The deferred taxation asset is related to share-based payments has been
revalued using the share price at the balance sheet date. Owing to the
reduction in the share price from November 2021 to November 2022 the value of
the share based payments deferred taxation asset has fallen
In addition to the above, the group has un-recognised Deferred tax assets in
respect of carried forward losses amounting to £1,676,000 (Year ended 30
November 2021: £1,364,000).
13. Earnings per share
Year ended Year ended
note 30 November 2022 30 November 2021
£000 £000
Loss for the period (4,735) (12,125)
Number Number
Weighted average number of shares 1 , 2 98,588,041 95,680,242
Diluted number of shares 101,153,813 95,680,242
Pence Pence
Basic loss per share (pence) (4.8) (12.67)
Diluted loss per share (pence) (4.7) (12.67)
Notes:
1 The weighted average number of shares and
diluted number of shares excludes share held by the Employee Benefit Trust in
respect of share options outstanding and exercisable at the end of the year.
See note 25 for further details.
2 No adjustment has been made to the diluted
weighted average number of shares for the sharesave share option schemes as
these have an antidilutive effect. .
Adjusted earnings per share is disclosed in Note 29 (Alternative Performance
Measures) to show performance undistorted by adjusting items and is therefore
considered to show the underlying performance of the Group.
14. Property, plant and equipment
Computer and office equipment
Right of use lease assets Plant and machinery Motor vehicles Fixtures and fittings Rental assets
Total
£000 £000 £000 £000 £000 £000 £000
Cost
Balance at 1 December 2020 4,535 3,117 285 2,554 63 4,001 14,555
Additions - 339 - 113 3,657 295 4,404
Effect of movements in foreign currency
3 1 - 1 - 1 6
Impairment - - - - (462) - (462)
Disposals - - (285) - - - (285)
Balance at 30 November 2021 4,538 3,457 - 2,668 3,258 4,297 18,218
Additions 2,620 2,203 - 447 8,018 261 13,549
Effect of movements in foreign currency 161 24 - 30 - 8 223
Impairment - - - - (1,120) - (1,120)
Disposals (2,928) - (1,245) (1,395) (2,937) (8,505)
Balance at 30 November 2022 7,319 2,756 - 1,900 8,761 1,629 22,365
Depreciation
Balance at 1 December 2020 2,202 2,577 273 1,881 1 3,733 10,667
Charge for the year 627 297 - 196 471 164 1,755
Effect of movements in foreign currency
- 1 - 1 - - 2
Impairment - - - - (52) - (52)
Disposals - - (273) - - - (273)
Balance at 30 November 2021 2,829 2,875 - 2,078 420 3,897 12,099
Charge for the year 725 316 - 235 2,385 216 3,877
Effect of movements in foreign currency 78 12 - 20 - 5 115
Impairment - - - - (283) - (283)
Disposals - (2,839) - (1,262) (401) (2,936) (7,438)
Balance at 30 November 2022 3,632 364 - 1,071 2,121 1,182 8,370
Net book value
At 30 November 2022 3,687 2,392 - 829 6,640 447 13,995
At 30 November 2021 1,709 582 - 590 2,838 399 6,118
Once rental contracts pass a certain ageing of delinquency, the contracts are
considered irrecoverable and the value of the handsets on rent impaired down
to zero value.
Company
The Company has no tangible fixed assets.
15. Intangible assets
Website development IT development Proprietary software
Goodwill Domains Total
£000 £000 £000 £000 £000 £000
Cost
Balance at 1 December 2020 4,848 1,264 6,155 3,000 53 15,320
Additions - 195 2,643 - - 2,837
Disposals - - - - - -
Balance at 30 November 2021 4,848 1,459 8,798 3,000 53 18,158
Additions - 168 4,387 - - 4,555
Disposals - (1,081) (3,760) - - (4,841)
4,848 546 9,425 3,000 53 17,872
Balance at 30 November 2022
Amortisation
Balance at 1 December 2020 - 1,054 4,402 1,482 24 6,962
Charge for the year - 79 1,132 300 5 1,517
Disposals - - - - - -
Balance at 30 November 2021 - 1,133 5,534 1,782 29 8,479
Charge for the year - 120 1,485 300 5 1,910
Disposals - (1,047) (3,848) - - (4,895)
Balance at 30 November 2022 - 206 3,171 2,082 34 5,493
Net book value
At 30 November 2022 4,848 340 6,254 918 19 12,379
At 30 November 2021 4,848 325 3,263 1,218 24 9,679
All amortisation of intangible assets is charged to the consolidated statement
of comprehensive income and is included within operating expenses (see note
7).
Company
The Company has no intangible fixed assets.
Intangible assets and goodwill
The Group has two cash generating units (CGUs): a Rental CGU and a non-rental
CGU. Goodwill arising from the acquisition of Entertainment Magpie Holdings
Limited in September 2015 is allocated to the non-rental CGU. Intangible
assets are then allocated between the CGUs based on the specific nature of
cost.
Goodwill is tested annually for impairment on the basis of value in use
calculations using discounted cash flows. The key assumptions of these
calculations are shown below:
30 November 2022 30 November 2021
Period on which management approved forecasts are based 5 years 4 years
Growth rate applied beyond approved forecast period (10%) 2%
Discount rate Pre-tax 11.00% Post tax 8.17%
The method used to calculate the discounted cashflows for each CGU uses the
same model, but with different assumptions for each . The methodology for
each is as follows: A standard discounted cashflow model is used. The
discounted cashflow valuation uses the board approved budget and five year
plan for the first five years . For years six to ten there is an assumed
retraction in the model of 10% per annum, which is considered a prudent
allowance for the unpredictability of these out years. Year ten uses a
terminal value on the cashflow from that year for the non-rental CGU. Given
the rental CGU is a relatively new business, no terminal value is ascribed to
that CGU Inflation in the cost base is captured in the board approved plans,
however as noted in the strategic review the Group is somewhat insulated from
inflation owing to the buy-sell nature of the Consumer Technology segment and
the use of energy contracts entered into in summer of 2022.
The key assumptions upon which management have based their cash flow
projections are:
· The weighted average cost of capital (WACC) used to
discount the future cashflows
· the use of a terminal value in year ten.
.
The recoverable amount of the Rental CGU is estimated to exceed the carrying
amount of the CGU at 30 November 2022 by £34.9m.
The recoverable amount of the non-rental CGU is estimated to exceed the
carrying amount of the CGU at 30 November 2022 by £1.6m.
The comparative for 2021 was calculated using a single CGU and the recoverable
amount of the CGU was estimated to exceed the carrying amount of the CGU at 30
November 2021 by £85.5m."
The following sensitivities were run on the valuation approaches
· Increasing the WACC to 15% would not change the outcome of
the review
· Excluding the terminal valuation would not change the outcome
of the review
16. Investments
Company In subsidiaries
£000
Cost and net book value
At the beginning of the year 14,285
Additions 48
At the end of the year 14,333
17. Subsidiaries
The Group consists of the parent Company, musicMagpie plc, incorporated in the
UK and a number of subsidiaries held directly/indirectly by the parent. The
table below shows details of all subsidiaries of musicMagpie Plc as at 30
November 2022.
Principal place Class of shares Proportion of
Name of subsidiary of business held ownership Principal activity
Entertainment Magpie Group Limited ^ United Kingdom Ordinary 100% Intermediate holding company
Entertainment Magpie Holdings Limited*^ United Kingdom Ordinary 100% Intermediate holding company
Entertainment Magpie Limited* United Kingdom Ordinary 100%& Purchase & resale of electronic items and replay media
products
MM Guernsey Limited*^ Guernsey Ordinary 100% Refurbishment & dispatch of replay media products
Mozo Media Limited *^ United Kingdom Ordinary 100% Refurbishment & dispatch of replay media products
Entertainment Magpie, Inc* United States of America Ordinary 100% Refurbishment & dispatch of replay media products
*Held indirectly via Entertainment Magpie Group Limited
^ the company has met the relevant conditions for the directors to take
advantage of the exemption conferred by s479A of the Companies Act 2006
18. Inventories
Year ended Year ended
30 November 2021
30 November 2022
£000
£000
Goods for resale 8,824 8,019
Total 8,824 8,019
Goods for resale recognised as cost of sales in the year ended 30 November
2022 amounted to £75,336,000 (Year ended 30 November 2021: £67,840,000). The
write-down of inventories to net realisable value and reversals are included
in cost of sales.
The Company's closing stock value is £nil (2021 - £nil)
19. Trade and other receivables
Group Company Group Company
Current assets
2022 2022 2021 2021
£000 £000 £000 £000
Trade receivables 701 - 786 -
Amounts due from Group companies - 10,738 - 11,476
Other receivables 216 - 443 -
Prepayments and accrued income 1,685 19 2,496 -
Total 2,602 10,757 3,724 11,476
Information related to the Group's exposure to credit risk, market risk
and impairment losses on receivables are included in note 28. Due to the
short-term nature of the current receivables, their carrying amount is
considered to be the same as their fair value determined using level 3 inputs.
20. Derivative financial asset
2022 2021
£000 £000
Derivative financial asset
Derivatives not designated as hedging instruments 1,133 -
Total 1,133 -
Current and non-current:
Current 555 -
Non-current 578 -
Total 1,133 -
The derivative financial assets are all net settled; therefore, the maximum
exposure to credit risk at the reporting date is the fair value of the
derivative assets which are included in the consolidated financial statement
of financial position.
21. Cash and cash equivalents
2022 2021
£000 £000
Cash and cash equivalents 6,806 2,849
Total 6,806 2,849
22. Trade and other payables
Group Company Group Company
2022 2022 2021 2021
£000 £000 £000 £000
Trade payables 6,166 - 6,246 -
Other taxation and social security 542 - 601 -
Other payables and accruals 2,632 37 1,512 -
Total 9,340 37 8,359 -
Due to the short-term nature of the current payables, their carrying amount is considered to be the same as their fair value determined using level 3 inputs.
23. Interest-bearing loans and borrowings
This note provides information about the contractual terms of the Group's
interest-bearing loans and borrowings, which are measured at amortised cost.
For more information about the Group's exposure to interest rate and foreign
currency risk, see note 28.
2022 2021
£000 £000
Current liabilities
Lease liabilities 687 366
Total 687 366
Non-current liabilities
Bank loans 14,675 887
Lease liabilities 3,403 1,557
Total 18,078 2,444
Falling due within one year 687 366
Falling due after more than one year 18,376 2,557
Total 19,063 2,923
Unamortised debt issue costs (298) (113)
Total interest-bearing loans and borrowings 18,765 2,810
On 27 July 2022, the Group refinanced it loan with SVB with the introduction
of a £30m three year committed Revolving Credit Facility ("RCF") arrangement
with HSBC UK and Natwest banks. This agreement is potentially extendable by an
additional 12 months if elected before the first anniversary of the
facility. The financial covenants of the facility are that leverage,
measured as net debt divided by EBITDA, must be less than 2.5 times and that
interest cover, measured as EBITDA divided by finance charges, must be grater
than 4 times.
The terms of the facility include debentures over the assets of the company
and a deposit control agreement over cash balances in the US entity.
The Company has no borrowings.
Terms and debt repayment schedule
30 November 2022
Currency Interest rate Year of maturity Face value Carrying value
£000 £000
Bank loans GBP SONIA + 1.95 -2.5% 2025 (+1 year) 14,973 14,675
Lease liabilities GBP 5% 2023 - 2027 3,194 3,194
Lease liabilities USD 5% 2027 896 896
Total 19,063 18,765
Interest on the RCF is dependent on leverage.
30 November 2021 Currency Interest rate Year of maturity Face value Carrying value
£000 £000
Bank loans GBP SONIA + 2.0-2.5% 2024 1,000 887
Lease liabilities GBP 5% 2018 - 2027 835 835
Lease liabilities USD 5% 2027 1,088 1,088
Total 2,923 2,810
Changes in liabilities from financing activities
Shares
30 November 2022 Loan notes Other loans Bank loan classified as Lease liabilities Total
debt
£000 £000 £000 £000 £000 £000
Balance at 30 November 2021 - - 887 - 1,923 2,810
Changes from financing cash flows
Lease additions - - - - 3,035 3,035
Proceeds from new loan - - 21,026 - - 21,026
Repayment of existing loans - - (7,500) - - (7,500)
Interest paid - - (207) - (169) (376)
Payment of lease liabilities - - - - (868) (868)
Total - - 14,206 - 3,921 18,127
Other changes
Interest expense 323 - 169 492
Interest waived by the shareholders - - - - - -
Other movements - 146 - - 146
Share reorganisation - - - - - -
Total - - 469 - 169 638
Balance at 30 November 2022 - - 14,675 - 4,090 18,765
Shares
30 November 2021 Loan notes Other loans Bank loan classified as Lease liabilities Total
debt
£000 £000 £000 £000 £000 £000
Balance at 30 November 2020 5,432 5,803 - 1,240 2,565 15,040
Changes from financing cash flows
Repayment of borrowings (4,200) (6,000) - - - (10,200)
Proceeds from new loan - - 1,000 - - 1,000
Interest paid (1,408) (345) (105) - (131) (1,989)
Payment of lease liabilities - - - - (618) (618)
Total (5,608) (6,345) 895 - (749) (11,807)
Other changes
Interest expense 176 345 105 45 107 778
Interest waived by the shareholders - - - (185) - (185)
Other movements - 197 (113) - - 84
Share reorganisation - - - (1,100) - (1,100)
Total 176 542 (8) (1,240) 107 (423)
Balance at 30 November 2021 - - 887 - 1,923 2,810
Other movement in other loans and bank loans represents additional loan fees
paid during the year and amortisation of those loan fees.
24. Right of use assets and lease liabilities
All leases where the Group is a lessee are accounted for by recognising a
right of use asset and a lease liability. There are no short term or low
value leases.
Amounts recognised in the consolidated statement of financial position
Right of use assets Land and buildings
£000
Balance at 1 December 2020 2,333
Additions to right of use assets -
Effect of movements in foreign currency 3
Depreciation (627)
Balance at 30 November 2021 1,709
Additions to right of use asset 2,620
Effect of movements in foreign currency 83
Depreciation (725)
Balance at 30 November 2022 3,687
Lease liabilities Land and buildings
£000
Balance at 1 December 2020 2,565
Additions to lease liabilities -
Interest expense 107
Lease payments (749)
Balance at 30 November 2021 1,923
Additions to lease liabilities 3,035
Interest expense 169
Lease payments (1,037)
Balance at 30 November 2022 4,090
Amounts recognised in the consolidated income statement
Land and buildings Year ended 30 November 2022 Year ended November 2021
£000 £000
Depreciation charge on right of use assets 725 627
Interest on lease liabilities 169 107
Total 894 734
Lease liabilities - Maturity analysis of contractual undiscounted cash flows
Carrying Contractual More than
amount cash flows 1 year or less 1-2 years 2-5 years 5 years
£000 £000 £000 £000 £000 £000
30 November 2022 4,090 4,916 867 969 2,357 723
30 November 2021 1,923 2,205 454 346 1,316 89
25. Employee benefits
Defined contribution pension
The Group operates defined contribution pension schemes. The pension cost
charge for the year represents contributions payable by the Group to the
schemes and amounted to £271,000 (Year ended 30 November 2021: £317,000).
Share based payments
EBT
On 8 February 2021, the Group adopted a new employee share option plan
granting options to employees which would vest and become exercisable only on
the occurrence of an exit event (including an IPO). The non-cash fair value
charge recognised in relation to these in the period to 30 November 2021 under
IFRS 2 'Share-based Payment' was £17,284,000.
In August 2018, the Group granted equity-settled share options to certain
employees. The non-cash fair value charge recognised in the period in respect
of these equity-settled share options under the same vesting criteria as above
was £95,000 (Year ended 30 November 2020: £381,000). Both the February
2021 and August 2018 options are fully expensed and covered in total by shares
held in the musicMagpie Employee Benefit Trust.
Sharesave
The Group has issued two sharesave schemes in an attempt to encourage share
ownership by employees. The 2021 scheme was not disclosed in the prior year
owing to materiality and is shown here for the first time to give
comparability with the 2022 scheme. Both schemes were open to all employees
of the Group. A maximum of up to £500 per month can be invested into the
schemes for a three year period starting on the grant date. The option price
of each award was set three days prior to the grant date. The options have a
ten year life. Each option vests after 36 months and there are no
performance criteria attached to vesting. Vesting and exercise are subject
to various conditions around individual service. Participants do not need to
exercise the options and can alternatively take cash out of the scheme at any
time.
Long Term Incentive Plan (LTIP)
The Group operates an LTIP scheme for the Directors and certain senior
managers. There was one grant of options during the year and this is the
only grant outstanding at the year end. The number of options granted and
their vesting criteria are determined by the Group's Remuneration Committee.
The vesting criteria are performance related and are set out in detail within
the Directors Remuneration Report.. The options vest over three years
(subject to the vesting criteria) and have a ten year life. Vesting and
exercise are subject to various conditions around individual service.
Details of the share options outstanding during the period are as follows:
Number Weighted exercise price Weighted average remaining contracted life
Sharesave 2022 2021 2022 2021 2022 2021
Outstanding at 1 December 48,672 -
Granted during the year 508,720 103,391
Exercised - -
Forfeited (3,200) (54,719)
Outstanding at 30 November 554,192 48,672 £0.56 £1.82 9.75 yrs 8.75 yrs
Number Weighted exercise price Weighted average remaining contracted life
EBT 2022 2021 2022 2021 2022 2021
Outstanding at 1 December 9,195,902 29,900
Granted during the year - 116,734
Reclassification and bonus issue - 11,065,979
Exercised - (2,016,711)
Outstanding at 30 November 9,195,902 9,195,902 £0.00 £0.00 5.4yrs 6.4yrs
Number Weighted exercise price Weighted average remaining contracted life
LTIP 2022 2021 2022 2021 2022 2021
Outstanding at 1 December - -
Granted during the year 2,565,772 -
Exercised -
Forfeited - -
Outstanding at 30 November 2,565,772 - nil p n/a 9.25 n/a
Fair value of share options and assumptions
As at 30 November 2022 As at 30 November 2021
LTIP EBT Sharesave LTIP EBT Sharesave
Fair value at measurement date £0.45 - £nil - £1.88 £0.35
Share price at grant £0.45 - £0.31 - £1.88 £1.82
Exercise price £0.00 - £0.45 - nil £1.82
Expected volatility 25.0% - 25.0% - 45.0% 25.0%
Expected dividends 0.0% - 0.0% - 0.0% 0.0%
Risk free interest rate 2.0% - 2.0% - 0.6% 1.25%
Option life 3.25 years - 3.25 years - 0.2 years 3.25 years
The sharesave and LTIP were calculated using a Black Scholes option pricing
model. The EBT was valued using a Monte Carlo option pricing model.
Volatility has been calculated using the standard deviation of the Group's
daily share price since IPO in April 2021. An additional 3% was added to the
calculated volatility to account for the share price history being less than
the valuation period. Volatility in the prior year was calculated by
reference to a peer group as there was insufficient data to calculate
volatility for the Group independently.
Staff costs - equity settled share-based payments
Year ended 30 November 2022 Year ended 30 November 2021
£000 £000
Sharesave 27 -
EBT - 17,379
LTIP 140 -
167 17,379
26. Related parties
Transactions with key management personnel
The Directors of musicMagpie plc together with the Senior Leadership Team
(SLT) are considered to be the key management personnel of the Group for the
purposes of this disclosure. The Directors of musicMagpie plc and their
immediate relatives control 12.3% percent of the voting shares of the Group.
Group
The compensation of the Directors, including amounts paid for services
provided to the directors of the former parent company (Entertainment Magpie
Group Limited) totalled £673,000 (Year ended 30 November 2021: £638,000).
See note 8 for further details.
Compensation for other members of the Senior Leadership Team not included in
the above totalled £1,095,000. (Year ended 30 November 2021: £986,000)
In addition, Equity-settled share-based payment charges and Employers NI with
key management personnel totalled £371,000 (Year ended 30 November 2021:
£17,276,000).
Other related party transactions
The below transactions related to Northern Entities
Year ended Year ended
30 November 2022 30 November 2021
£000 £000
Interest on loan and non-executive director fee charges - 176
Waived interest on preference shares - (185)
Non-executive and monitoring fees - 20
Transactions with the Employee Benefit Trust
There were no movements in EBT during the year (2021: issue of shares and
satisfaction of exercised options (see notes 26 and 25 respectively)) and at
the year end date, the EBT holds 9,195,902 shares representing 8.53% of the
share capital of the Company to satisfy future exercises of outstanding and
exercisable share option awards.
Company
The compensation of the Directors totalled £664,000 (Year ended 30 November
2021: £408,000) and compensation for other members of the Senior Leadership
Team £865,000 (Year ended 30 November 2021: £624,000).
In addition, Equity-settled share-based payment charges and Employers NI with the Directors totalled £138,000 (Year ended 30 November 2021: £5,970,000,000) and Equity-settled share-based payment charges and Employers NI for other members of the Senior Leadership Team £176,000 (Year ended 30 November 2021: £11,230,000).
Other related party transactions
The below transactions related to Northern Entities (shareholder)
Year ended Year ended
30 November 2022 30 November 2021
£000 £000
Interest on loan and non-executive director fee charges - 37
Non-executive and monitoring fees - 4
27. Capital and reserves Share capital
The authorised, issued and fully paid number of shares are set out below:
Ordinary Shares issued Subdivision Shares issued Exercise Subdivision Ordinary Share Reclassification Shares Ordinary Cancel Ordinary
shares on of shares to Employee of warrant of shares shares issued reclassification into Deferred issued shares Deferred sh
ar
es
30 Nov 2020 incorporation Benefit Trust Shares issued on IPO Shares 30
No
v
20
21
Number Number Number Number Number Number Number Number Number Number Number Number Nu
mb
er
A Ordinary shares of £0.01 each 375,000 (375,000) -
B Ordinary shares of £0.01 each - 175,000 (175,000) -
C1 Ordinary shares of £0.01 each 100 9,900 (10,000) -
C2 Ordinary shares of £0.01 each 341,500 100 (341,600) -
D1 Ordinary shares of £0.01 each 11,000 34,400 (45,400) -
D1(A) Ordinary shares of £0.05 each 16,600 66,400 (83,000) -
D2 Ordinary shares of £0.05 each 35,000 140,000 (175,000) -
E Ordinary Shares of £2.00 each 1,500 298,500 (300,000) -
F Ordinary Shares of £0.05 each 20,000 80,000 (100,000) -
G Ordinary Shares of £0.01 each - 56,117 (56,117) -
H Ordinary Shares of £0.01 each - 56,117 (56,117) -
Preference shares of £1.00 each 1,100,000 108,900,000 (110,000,000) -
Deferred Shares 110,790,017 (110,790,017) -
Ordinary Shares of £1 each Ordinary Shares of £0.01 each - 1 (1)
- - - 111,717,234 (110,790,017) 99,072,783 7,772,020 - 107,772,020
Total Share Capital (£'000) 14 - - 1 2 1,100 - - - 991 78 (1,108) 1,078
Ordinary Shares issued Subdivision Shares issued Exercise Subdivision Ordinary Share Reclassification Shares Ordinary Cancel Ordinary
shares on of shares to Employee of warrant of shares shares issued reclassification into Deferred issued shares Deferred sh
ar
es
30 Nov 2021 incorporation Benefit Trust Shares issued on IPO Shares 30
No
v
20
22
Number Number Number Number Number Number Number Number Number Number Number Number Nu
mb
er
Ordinary Shares of £0.01 each
107,772,050 - - - - - - - 36,237 - - 107,808,287
Total Share Capital (£'000) 1,078 - - - - - - - - - - - - 1,078
The ordinary shares have full voting, dividend and capital distribution
rights, including on winding up. They are non-redeemable.
The Company was incorporated on 27 October 2020 as a private company limited
by shares in England and Wales to act as a holding company for the Group with
the allotment of 1 share of £1. Prior to this, the share capital of the Group
was represented by the share capital of the previous parent, Entertainment
Magpie Group Limited ('EMGL'). The Company was re-registered as a public
limited company on 12 April 2021.
The following steps were taken in connection with the Group Reorganisation
since the incorporation of the Company. On 5 February 2021:
- the one ordinary share of £1.00 in issue was subdivided into 100 ordinary
shares of £0.01 each and redesignated as 100 C2 ordinary shares of £0.01
each.
On 8 February 2021:
- EMGL established a Jersey resident Employee Benefit Trust ('EBT') and issued
34,400 D1 ordinary shares of £0.01 each, 56,117
G ordinary shares of £0.01 each and 56,117 H ordinary shares of £0.01 each
to the trustees of the EBT. EMGL provided the funds to purchase by way of a
gift of £1,466.34 to the EBT, which was then held on its behalf by EMGL in
satisfaction of the subscription price.
On 11 February 2021:
- EMGL undertook a capital reduction (supported by a solvency statement)
pursuant to which the share premium account of the company was reduced from
£1,689,834 to nil.
On 30 March 2021:
- Lloyds Development Capital (Holdings) Limited ('LDC') exercised its warrant
over 175,000 B ordinary shares of £0.01 each with EMGL issuing shares of
the corresponding denomination and value.
On 31 March 2021:
- the Company acquired the entire issued share capital of EMGL from the
existing shareholders by way of share for share exchange for an equivalent
number and class of shares in the capital of the Company.
On 15 April 2021:
- the 16,600 D1 (A) ordinary shares of £0.05 each, the 35,000 D2 ordinary
shares of £0.05 each, the 1,500 E ordinary shares of £2.00 each, the 20,000
F ordinary shares of £0.05 each and the 1,100,000 preference shares of £1.00
each were subdivided into 83,000 D1(A) ordinary shares of £0.01 each, 175,000
D2 ordinary shares of £0.01 each, 300,000 E ordinary shares of £0.01 each,
100,000 F ordinary shares of £0.01 each and 110,000,000 preference shares of
£0.01 each respectively.
- the Company issued and credited as fully paid 9,900 C1 ordinary shares of
£0.01 each as a bonus issue to the existing holders pro-rata to their
existing shareholdings at nominal value;
- the entire issued share capital of the Company was reclassified entirely
into ordinary shares of £0.01 each;
- 110,790,117 ordinary shares of £0.01 each were reclassified into
110,797,017 deferred shares of £0.01 each;
- the Company issued and credited as fully paid 99,072,783 ordinary shares of
£0.01 each in the Company as a bonus issue to the existing holders pro rata
to their existing shareholdings at nominal value. This included 11,065,979
shares issued to the EBT in recognition of the shares held by it to settle
outstanding share options when these are exercised;
- all of the deferred shares were repurchased by the Company for an aggregate
consideration of £1.00 in accordance with the Articles and such deferred
shares were cancelled.
Following completion of all of the aforementioned steps, the Company's
existing shareholders held 100,000,000 shares.
On 22 April 2021, the Company issued 7,772,020 ordinary shares of £0.01 each
in an IPO for consideration of £15,000,000 at an issue price of £1.93 per
share, taking the number of ordinary shares in issue to 107,772,020.
On the 4 August 2022 the Company issued 36,237 ordinary shares.
Share premium
The share premium reserve represents the excess amount of value received on
the issuance of share capital above the nominal value per share. Costs
associated with the issue of new share capital have been offset against this
balance.
Capital redemption reserve
The capital redemption reserve represents a non-distributable reserve into
which amounts are transferred following the redemption or purchase of own
shares.
Translation reserve
The translation reserve comprises all foreign currency differences arising
from the translation of the financial statements of foreign operations.
Merger reserve
The merger reserve in the Company represents the fair value of consideration
given in excess of the nominal value of the ordinary shares issued in the
acquisition share for share exchange with Entertainment Magpie Group Limited,
net of the nominal value of the bonus shares issued.
The merger reserve in the Group represents the nominal value of the bonus
shares issued.
28. Financial instruments and Risk Management
The Group has exposure to the following risks arising from financial
instruments: Credit risk
Liquidity risk
Market risk, including currency risk and interest rate risk
The Group's overall risk management programme focuses on the unpredictability
of financial markets and seeks to minimise potential. Adverse effects on the
Group's financial performance. Other than for energy costs, the Group does not
use derivative financial instruments to manage risk exposures. This note
presents information about the Group's exposure to each of the above risks,
the Group's objective, policies and processes for measuring and managing risk,
and the Group's management of capital.
Risk management framework
The Board of Directors has overall responsibility for the establishment and
oversight of the Group's risk management framework. The Group's risk
management policies are established to identify and analyse the risks faced by
the Group, to set appropriate risk limits and controls, and to monitor risks
and adherence to limits. Risk management policies and systems are reviewed
regularly to reflect changes in market conditions and the Group's activities.
Capital risk management
musicMagpie plc considers its capital comprises share capital, share premium
and retained earnings.
The Group's objectives when managing capital are to safeguard its ability to
continue as a going concern in order to optimise its return to shareholders.
The Board's policy is to retain a strong capital base so as to maintain
investor, creditor, and market confidence and to sustain future growth. The
Directors regularly monitor the level of capital in the Group to ensure that
this can be achieved. In order to maintain or adjust the capital structure,
the Group may adjust the amount of dividends paid to shareholders, return
capital to shareholders, issue new shares or sell assets to reduce debt.
Credit risk
Credit risk is the risk of financial loss to the Group if a counterparty to a
financial instrument fails to meet its contractual obligation. Credit risk
arises from cash and cash equivalents, deposits with banks and financial
institutions, as well as credit exposures to wholesale and retail customers,
including outstanding receivables and committed transactions.
As the principal business of the Group is cash sales direct with consumers,
the Group's trade receivables are small. Accordingly, the Group does not
systematically report outstanding receivables analysed by credit quality, in
particular with respect to the credit quality of financial assets that are
neither past due nor impaired. The carrying amount of financial assets
recorded in the financial statements represents the Group's maximum exposure
to credit risk and any associated impairments are immaterial. The Company
has trade receivables and intercompany debtors, the expected credit loss on
these balances is immaterial.
Exposure to credit risk
Year ended Year ended
30 November 2022 30 November 2021
£000 £000
Trade and other receivables 917 1,228
Cash and cash equivalents 6,806 2,849
Total 7,723 4,077
Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting
the obligations associated with its financial liabilities that are settled by
delivering cash or another financial asset. The Group's approach to managing
liquidity is to ensure, as far as possible, that it will always have
sufficient liquidity to meet its liabilities when due, both under normal and
stressed conditions, without incurring unacceptable losses or risking damage
to the Group's reputation.
All financial instruments other than borrowings and lease liabilities have
contractual maturities within one year. The following are contractual
undiscounted cash flows:
Contractual cash flows
30 November 2022 Carrying 1 Year or Between 1 Between 2 More than 5
amount Total Less and 2 years and 5 years years
£000 £000 £000 £000 £000 £000
Trade and other payables 8,798 8,798 8,798 -
Bank loans 14,675 14,973 177 - 14,796
Lease liabilities 4,090 4,916 867 969 2,357 723
Total 27,563 28,687 9,842 969 17,153 723
Contractual cash flows
30 November 2021 Carrying 1 Year or Between 1 Between 2 More than 5
amount Total Less and 2 years and 5 years years
£000 £000 £000 £000 £000 £000
Trade and other payables 7,758 7,758 7,758 - -
Loan notes - - - - -
Other loans - - - - -
Bank loans 887 946 59 887 -
Shares classified as debt - - - - -
Lease liabilities 1,923 2,205 454 346 1,316 89
Total 10,567 10,909 8,271 1,233 1,316 89
Market risk
Market risk is the risk that changes in the market prices, such as foreign
exchange rates and interest rates will affect the Group's net income. The
Group's exposure to market risk predominantly relates to interest and currency
risk.
Interest rate risk
The Group's interest rate risk arises from its variable and fixed rate
instruments being borrowings and finance lease liabilities. Borrowings issued
at variable rates exposes the Group to cash flow interest rate risk.
Borrowings issued at fixed rates expose the Group to fair value interest rate
risk. The Group monitors the levels of fixed to floating debt held to manage
these risks and aims to ensure that it has appropriate cash facilities to meet
liabilities as they fall due.
At the reporting date, the interest rate profile of the Group's
interest-bearing financial instruments was as follows:
30 November 30 November
2022 2021
£000 £000
Fixed rate instruments
Loan notes - -
Lease liabilities 4,090 1,923
Shares classified as debt - -
Total 4,090 1,923
Variable rate instruments
Bank loans 14,973 946
Other loans - -
Total 14,973 946
Sensitivity analysis
A change of 150 basis points in interest rates at the reporting date would
have decreased equity and profit or loss by £106,000 (2021: 100 basis points
£74,000). This calculation assumes that the change occurred at the reporting
date and had been applied to risk exposures existing at that date.
This analysis assumes that all other variables, in particular foreign currency
rates, remain constant and considers the effect of financial instruments with
variable interest rates. The analysis is performed on the same basis for all
the periods presented.
Currency risk
The Group operates in the UK and US; revenue and costs are typically
denominated in local currency. Gains and losses arising on retranslation of
monetary assets and liabilities that are not denominated in the functional
currency of individual companies are recognised in the consolidated statement
of comprehensive income. The Group does not hedge these transaction
differences.
Gains and losses arising on the retranslation of US operations' net assets
into the consolidation currency are recognised in other comprehensive income
and held separately in a translation reserve in equity. The Group does not
hedge these translation differences.
The Group's exposure to foreign currency risk is as follows:
30 November 2022 30 November
2021
GBP Sterling US Dollars Total GBP Sterling US Dollars Total
£000 £000 £000 £000 £000 £000
Cash and cash equivalents 5,834 972 6,806 2,348 501 2,849
Trade and other receivables 836 81 917 783 445 1,228
Trade and other payables (7,915) (883) (8,798) (6,734) (1,024) (7,758)
Borrowings (14,675) - (14,675) (887) - (887)
Lease liabilities (3,194) (896) (4,090) (835) (1,088) (1,923)
Total (19,114) (726) (19,840) (5,325) (1,166) (6,491)
The following significant exchange rates were applied:
30 November 2022 30 November 2021
Average rate for the financial period
US Dollars 1.26 1.38
Balance sheet rate
US Dollars 1.21 1.33
Sensitivity analysis
A 10 percent weakening of the US Dollar against the pound sterling at 30
November 2022 would have decreased equity and profit or loss by £20k (2021:
Increased equity and profit and loss by £134k). This calculation assumes that
the change occurred at the balance sheet date and had been applied to risk
exposures existing at that date.
A 10 percent strengthening of the US Dollar against the pound sterling would
have had the equal but opposite effect on the US Dollar to the amounts shown
above, on the basis that all other variables remain constant.
Fair values
IFRS 7 'Financial Instruments: Disclosure' requires fair value· measurements
to be undertaken using a fair value hierarchy that reflects the significance
of the inputs used in the measurements, according to the following levels:
Level 1: quoted prices (unadjusted) in active markets for identical assets or
liabilities
Level 2: inputs other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly (i.e., as prices) or
indirectly (i.e., derived from prices)
Level 3: inputs for the asset or liability that are not based on observable
market data (unobservable inputs).
2022 2021
Carrying Carrying
amount Fair value amount Fair value
£000 £000 £000 £000
Borrowings 14,675 14,973 887 1,000
Total 14,675 14,973 887 1,000
29. Alternative Performance Measures
Management assess the performance of the Group using a variety of alternative
performance measures. In the discussion of the Group's reported operating
results, alternative performance measures are presented to provide readers
with additional financial information that is regularly reviewed by
management. However, this additional information presented is not uniformly
defined by all companies including those in the Group's industry.
Accordingly, it may not be comparable with similarly titled measures and
disclosures by other companies. Additionally, certain information presented is
derived from amounts calculated in accordance with IFRS but is not itself an
expressly permitted GAAP measure. Such measures are not defined under IFRS and
are therefore termed 'non-GAAP' measures and should not be viewed in isolation
or as an alternative to the equivalent GAAP measure.
The following are the key non-GAAP measures used by the Group.
Adjusted profit before tax
Adjusted profit before tax means (loss)/profit before tax before
equity-settled share-based payments and other non- underlying items including
non- underlying financial expense relating to deal and early termination fees
from previous financing.
Year ended Year ended
30 November 2022 30 November 2021
£000 £000
Loss before tax (1,457) (14,819)
Equity-settled share-based payments 167 17,379
Other non-underlying items 174 4,621
Non-underlying financial expense 152 718
Adjusted (loss) / profit before tax (964) 7,899
Non-underlying financial expense includes finance costs in relation to the
previous debt structure.
Adjusted EBITDA
Adjusted EBITDA means Adjusted (loss)/ profit before tax before depreciation,
impairment of property, plant and equipment and amortisation of intangible
assets and financial expense.
Year ended Year ended
30 November 2022 30 November 2021
£000 £000
Adjusted (loss) / profit before tax (964) 7,899
Depreciation of property, plant and equipment 3,877 1,755
Impairment of property, plant and equipment 835 410
Loss on disposal of property, plant and equipment 19 12
Amortisation of intangible assets 1,910 1,517
Financial expense 794 581
Adjusted EBITDA 6,471 12,174
Adjusted operating cash flow
Adjusted operating cash flow is calculated as Adjusted EBITDA adjusted for
movements in working capital.
Year ended 30 November 2022 Year ended
£000 30 November 2021
£000
Adjusted EBITDA 6,471 12,174
Movements in working capital 1,029 (4,922)
Adjusted operating cash flow 7,500 7,252
Cash conversion %
This is calculated as cash generated from operating activities in the
Consolidated Cash Flow Statement, adjusted to exclude cash payments for
exceptional items, as a percentage of Adjusted EBITDA.
Year ended 30 November 2022 Year ended
£000 30 November 2021
£000
Net cash generated from operations (from Consolidated Cash Flow
Statement) 6,193 2,631
Other non-underlying items 174 4,621
Cash generated from operations before non-underlying items paid 6,367 7,252
Adjusted EBITDA 6,471 12,174
Cash conversion % 98.4% 59.6%
Net (debt)/ cash
This is calculated as cash and cash equivalent balances less outstanding
external loans. Unamortised loan arrangement fees are netted against the loan
balance in the financial statements but are excluded from the calculation of
net cash/(debt). Lease liabilities and hire purchase are not included in the
calculation of net debt.
Year ended Year ended
30 November 2022 30 November 2021
£000 £000
Cash and cash equivalents 6,806 2,849
Loans and accrued loan interest (14,675) (887)
Unamortised loan arrangement fees (298) (113)
External loans (14,973) (1,000)
Net (debt) / cash (8,167) 1,849
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