INTERIM RESULTS
13/07/2023 07:00
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RNS Number : 8466F musicMagpie plc 13 July 2023
13 July 2023
musicMagpie plc
("musicMagpie", or "the Group")
INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 MAY 2023
EBITDA up 7.7% with good momentum into the seasonally important H2; trading in
line with Board expectations
musicMagpie, a circular economy pioneer specialising in refurbished consumer
technology, follows its half year trading update of 19 June 2023 with the
announcement of its unaudited interim results for the six months ended 31 May
2023.
Financial highlights
· Following a challenging start to H1, with postal strikes and low
consumer confidence impacting December and January, trading performance
strengthened from February onwards, driving a strong Q2 EBITDA which was up
42% on Q2 2022
· Group H1 2023 revenue of £61.9m (H1 2022: £71.3m)
o Consumer Technology revenue of £41.1m (H1 2022: £46.0m), as the Group
prioritised higher margin sales
o Disc Media and Books revenue of £20.9m (H1 2022: £25.3m)
· Consumer Technology gross profit increased 13.5% to £10.9m (H1
2022: £9.6m), contributing 59% (H1 2022: 50%) of total Group gross profit
· Gross margin increased 3.1% to 29.7% (H1 2022: 26.6%) driven by a
combination of direct from consumer product sourcing, a higher proportion of
sales through the musicMagpie store and an increasing contribution from rental
subscriptions
· Adjusted EBITDA(1) of £2.8m, up 7.7% (H1 2022: £2.6m)
· Diluted loss per share of 2.8 pence (H1 2022: loss per share 3.2
pence)
· Net debt of £13.6m (30 Nov 2022: £7.8m), consistent with Board
expectations, with £4.5m invested into Consumer Technology rental assets
during the period (H1 2022: £3.6m)
· Post period end, extended the committed £30m Revolving Credit
Facility by 12 months to July 2026
Operational highlights
· Percentage of UK Consumer Technology sales on the musicMagpie store,
versus third party marketplaces, increased to 79%, up from 72% in FY22
· Strong progress from the Group's device rental subscription service,
increasing to c39,000 active subscriptions as at 31 May 2023 (31 May 2022:
24,000)
o Near-term corporate customer pipeline building and 2,200 devices currently
under rental to businesses
o Entered H2 2023 with c£4.0m contractually committed forward revenue,
before renewals or growth in new subscriptions
· SMARTDrop Kiosks now account for 45% of musicMagpie's Consumer
Technology sourcing in the UK
· Cost reduction measures reduced overheads by £0.8m in H1 2023
versus H1 2022
Outlook
As usual, the majority of the Group's full year profits are expected in the
seasonally important second half. Current trading conditions remain
challenging due to the prevailing macro-economic factors in the market, but
the strong momentum seen in Q2 has thus far been carried into the early part
of Q3 of our 2023 financial year and this combined with the focus on gross
margin by continuing to buy for less and sell for more, and cost savings
introduced, mean the Board is confident of the Group meeting its full year
expectations.
Commenting on the results, Steve Oliver, Chief Executive Officer of
musicMagpie, said:
"After a challenging first quarter, I am pleased with the performance of the
business during Q2 and the momentum that has been carried over into H2, which
is traditionally the seasonally more important half for musicMagpie. By
focusing on 'buying and selling for more margin', which includes sourcing more
products directly from consumers and increasing the proportion of sales made
through the musicMagpie store, we have delivered a strong improvement in
Consumer Technology gross profit.
Looking ahead, we have a clear plan for our rental business and for our
enhanced Buy Now Pay Later offering, which should drive sales and make our
offering even more attractive to consumers looking to save cash.
Despite the tough consumer environment, we expect consumers to increasingly
look to the refurbished tech market and are confident that the business has
the right strategy in place for future profit growth."
Notes
1 Adjusted EBITDA is a non-GAAP measure and has been calculated as earnings
before interest, taxation, depreciation, amortisation, equity-settled
share-based payments and other non-underlying items
Analyst conference call
Steve Oliver (CEO and co-founder) and Matthew Fowler (CFO) will host an
analyst presentation at 9:15am GMT today, Thursday 13 July 2023, to talk
through the Group's operational and financial performance.
Please advise whether you and/ or a colleague would like to attend to
Powerscourt, either by phone on +44 (0) 20 7250 1446 or by email to
musicmagpie@powerscourt-group.com (mailto:musicmagpie@powerscourt-group.com) .
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
Powerscourt (Financial Public Relations) Tel: +44 (0) 20 7250 1446
Rob Greening
Genevieve Ryan
Sam Austrums
About musicMagpie
Operating through two trusted brands - musicMagpie in the UK and decluttr in
the US - musicMagpie's core strategy is simple: to provide consumers with a
smart, sustainable and trusted way to buy, rent and sell refurbished consumer
technology and physical media products with sustainability running to the very
heart of its operations. Founded in 2007, the Group has an established
presence in the UK, with operations in Stockport, Greater Manchester, and
in the US in Atlanta, Georgia.
musicMagpie has a strong environmental and social focus, as demonstrated by
its trademarked 'smart for you, smart for the planet' ethos. Nearly 400,000
consumer technology products were resold in FY22. In addition, the Group
re-sells approximately 10m books and disc media each year that could have
ended up as waste. During 2022, musicMagpie's UK consumer tech and disc
media customers, along with its trade partners, helped to save over 43,000
tonnes of CO2 by buying, selling and renting with the Group - an amount
equivalent to providing heating for over 16,000 homes, or powering more than
50,000 flights from London to New York. The Group has been given the
London Stock Exchange's Green Economy Mark in recognition of its contribution
to the global green economy.
When selling to musicMagpie, the customer is offered a fixed valuation via the
website, provided with free logistics to ship the products and (subject to it
being 'as described') receives payment for their product on the day of arrival
at the Group's warehouse. The Group also recently partnered with Asda to give
customers the option of using its SMARTDrop Kiosks in store for a fast and
easy way to recycle phones for instant cash. Customers purchasing from
musicMagpie receive branded refurbished product for a fraction of the price of
buying new.
The Group has the highest number of seller reviews on both Amazon and eBay and
has consistently achieved extremely positive feedback scores. The Group also
has a 4.4* rating on UK Trustpilot with over 260,000 reviews, and is
honoured to have won Best Refurbished in the Uswitch Telecoms Awards 2023 as
well as Best Online Retailer and Best Secondary Market Provider at the Mobile
News Awards 2023.
For further information please visit: www.musicmagpieplc.com
(https://url.avanan.click/v2/___http:/www.musicmagpieplc.com/___.YXAxZTpzaG9yZWNhcDphOm86MmVhMWEwZTkwZjZlZTI4YTYzMmVjYzNlYzA4ZjFiNmQ6Njo1OGU3OjllMDBiNjdkNjA1ZjI5ZDM3NGU2NzEwNzkzMDQxMTQ5NDZmNzVjOGUzMTVjZGE1YmY3ZGEzYjFkNzY4MjVmYzc6cDpG)
INTERIM STATEMENT
We are pleased to report our interim results for the six months ended 31 May
2023, which has seen a period of strong gross margin improvement.
Buying sufficient and appropriate product allows the business to both sell and
rent, thereby underpinning our financial performance. Buying has been boosted
in the period by the SMARTDrop Kiosks that are now installed across
approximately 290 Asda stores in the UK. Since launch approximately 55,000
devices have been purchased through the kiosks equating to over £15m paid out
to consumers, and we continue to see an encouraging trend of growth in
consumers using the kiosks to sell their devices to musicMagpie. As well as
providing a unique route for us to access devices, the kiosks also provide an
indirect benefit in terms of brand marketing and customer awareness - being
effectively a prominent musicMagpie advert across much of the Asda estate and
providing cost of acquisition synergies on marketing spend. Kiosks also form
a key part of the trend towards direct from customer sourcing, as opposed to
business-to-business (B2B) sourcing. Sourcing from our intermediary
wholesale partners will continue to form part of the musicMagpie supply chain
as it provides a range and volume of devices that a pure consumer-focused
strategy cannot, but only where the right margin contribution can be achieved.
Gross margin for the period increased 3.1% to 29.7% owing to a focus on buying
and selling for greater margin. During the period, the percentage of UK
Consumer Technology sales made on the musicMagpie store (i.e. as opposed to
third-party marketplaces) was 79% up from 72% in the financial year 2022.
The increase is due to a focus on driving customers to the store through
marketing. As well as enhancing gross margin, as there are no third-party
platform fees, this builds a direct relationship with the customer and permits
greater up-selling and on-selling when we control the customer journey.
However, musicMagpie's long standing relationships with third party platforms
eBay and Amazon remain as important as ever. Furthermore, in the last 12
months the Group launched on Walmart and Back Market, the refurbished tech
marketplace, where we have seen positive progress as we seek to maximise
consumer visibility of our product offering. Overall Consumer Technology sales
declined in the period by 10.4% due to the concerted focus on higher margin
sales and a decline in the lower margin sales of product sourced from B2B.
Gross profit from Consumer Technology increased 13.5% from £9.6m to £10.9m.
Revenue from our legacy category, Disc Media and Books, continued its
anticipated decline, albeit the 17.4% fall was greater than the expected level
of decline of around 10% that has been seen over recent reporting periods.
The largest component of the segment, CDs, has consistently seen a decline
rate in the high single figures. However, the segment has been impacted
recently by DVDs and gaming sales that are being particularly affected by
streaming and have declined in excess of 22% during the period. Despite the
revenue decline in this category, margin has been maintained. The category
contributes around 40% of total Group gross profit.
The rental offering grew particularly strongly during Q1, with the growth rate
easing somewhat during Q2, leaving a closing rental book of 39,000 (May 2022:
24,000). To optimise the return on capital, we are choosing to segment the
rental model for those customers with higher credit ratings, better renewal
rates and more interest in the upgrade journey. Those customers who
previously chose a rental for the low monthly costs, but who may not meet the
new segmentation criteria, will now be directed down an enhanced Buy Now Pay
Later ("BNPL") route. This approach satisfies those customers coming into
the musicMagpie store with value aspirations while also giving the business
outright sales and certainty of cash from the BNPL provider. This approach
is expected to further grow Consumer Technology sales and deliver overall
better near-term cash generation.
Sitting alongside the consumer subscription offering is the direct to
corporate subscription service that forms part of musicMagpie Circular. We
now have approximately 2,200 devices on rental subscriptions to corporate
customers and a strong pipeline that gives us confidence in the growth
potential of this segment.
Focus on margins and cash
The cost-of-living crisis provides both an opportunity for the business as
people look to turn their old tech and media products into cash, but also a
threat as inflation puts pressure on our cost base and squeezes margins. To
control the cost base, we began a comprehensive review of costs in late 2022
and have continued this cost focus into 2023. Overheads have reduced by
£0.8m in H1 2023 over the same period last year, with half the reduction from
more effective marketing and half from the general overhead base after a
review of costs and headcount.
As detailed above, in addition to overhead reductions, we have improved the
gross margin of the business by managing our buy and sell activities with a
focus on profitability, sourcing more product directly from consumers, as well
as benefitting from both the addition of rental sales in the Consumer
Technology mix, and a reduction of third party platform sales. In combination,
closely managing buy-sell margins has helped increase total gross margin by
3.1% to 29.7%, and Consumer Technology margin from 20.9% to 26.6%. The
improvement in Consumer Technology margin means the segment contributed
£10.9m or approximately 60% of total Group gross profit. We are working
hard to continue the activities that have delivered this improvement.
FINANCIAL PERFORMANCE REVIEW
Group revenue for the six months ended 31 May 2023 was £61.9m (H1 2022:
£71.3m).
Gross margin for Consumer Technology increased, despite the drop in revenues
that now make up approximately two thirds of total Group revenue of £41.1m
(H1 2022: £46.0m). Gross margin in this segment grew from 20.9% in H1 2022
to 26.6% in H1 2023. The improvement saw overall gross profit for the
segment increase £1.3m to £10.9m (H1 2022: £9.6m). Despite lower volumes,
margin was positively impacted by the richer mix of higher margin rental sales
and improvements in margin percentages driven from strategic steps taken to
buy for less and sell for more.
Sales of Disc Media and Books fell, with revenue of £20.9m (H1 2022:
£25.3m), with the impact of streaming accelerating the decline in DVD and
gaming sales despite the relative resilience of the largest segment, CDs.
Gross margin from this segment was 35.9% (H1 2022: 37.0%), giving gross
profit of £7.5m (H1 2022: £9.4m). As the Disc Media and Books segment
continues its anticipated decline, it is gratifying to see the increased gross
profit from Consumer Technology that sees it now contribute 59% of the Group's
total gross profit.
Total gross profit for the Group was £18.4m (H1 2022: £19.0m) giving a gross
margin of 29.7% (H1 2022: 26.6%). As documented above, the margin
improvements came from concerted efforts on buy side activities and a
strategic move to channel revenues to the musicMagpie store.
Operating expenses, excluding depreciation and amortisation, were lower at
£15.6m (H1 2022: £16.4). Half of the reduction was due to lower marketing
spend, and half was from lower overhead as a result of an ongoing review of
costs and spend activity. Typically, the momentum of the market around Black
Friday means that Q4 of the Group's financial year requires less overall
marketing spend than other times of the year. However, spend will continue
to be incurred into H2 at H1 rates if this drives profitable revenue into the
musicMagpie store.
Exceptional costs in the period were £0.5m (H1 2022: £0.3m), with the
majority related to the long-term energy contract that was entered into in
2022. An exceptional gain of £1.1m was recognised at 30 November 2022
because the energy contract secured pricing well below market price. The
cost reported in the period represents an unwind of that gain based both on
usage and subsequent changes in market rates for electricity prices. The
remaining £0.8m derivative financial asset will be amortised into the Income
Statement over future reporting periods to the contracts end date in September
2025.
Finance costs were £0.8m (H1 2022: £0.3m), with the increase coming from
both the rise in interest rates over the period and the increased drawings on
the facility being used to fund the rental assets.
The Group's loss before tax was £3.2m (H1 2022: loss before tax £1.0m).
After estimating the full year tax rate and adjusting for deferred tax, the
tax credit for the period is £0.3m (H1 2022: £2.2m charge) and the loss
after tax is £2.9m (H1 2022: loss after tax £3.2m). The diluted loss per
share was 2.8p (H1 2022: loss per share 3.2p).
Net cash from operating activities was £2.4m (H2 2022: £2.3m) with working
capital movements consuming a small £0.1m of cash (H1 2022: £0.1m
increase). The cash conversion rate, net cash from operations divided by
adjusted EBITDA less movements in working capital, was 106.5% (H1 2022:
103.1%).
Below operating activities, cash used in investing activities was £6.9m (H1
2022: £6.7m), with acquisition of property plant and equipment increasing to
£4.7m (H1 2022: £4.5m), and the majority of this spend was investment in
rental assets of £4.5m (H1 2022: £3.6m). Capex spend on non-rental assets
declined to £0.2m (H1: 2022: £0.9m) following the completion of the ASDA
kiosk roll-out programme. We continue to invest in the underlying IT
platforms of the business, which drive and enable our competitive market
position, and that investment in the period was £2.2m (H1 2022: £2.2m).
Interest payments were £0.7m (H1 2022: £0.3m). Loan drawing increased by
£3.7m, giving gross debt of £18.4m. With closing cash of £4.8m (H1 2022:
£4.2m) net debt was £13.6m, or £13.7m for bank reporting (H1 2022: £3.3m).
The balance sheet has remained strong and overall movements between May 2023
and May 2022 were relatively small. Working capital levels have remained
fairy static, contributing to net current assets of £6.5m (H1 2022:
£7.2m). Non-current assets and liabilities saw the biggest changes with
assets increasing to £31.3m (H1 2022: £25.0m) and liabilities to £21.3m (H1
2022: £11.3m). Non-current assets grew owing to the continued investment in
rental assets of £5.5m (H1 2022: £3.8m) and IT development spend of £2.2m
(H1 2022: £2.2m), with these investments being funded by an increase in
borrowings from £7.4m to £18.4m. Net assets at the end of the period were
£16.5m (31 May 2022: £20.9m).
Post period end, the Group extended its £30m committed Revolving Credit
Facility with HSBC UK and NatWest out to July 2026 to provide greater
certainty of funding.
Martin
Hellawell
Steve Oliver
Chairman
Chief Executive Officer
Consolidated Condensed Statement of Comprehensive Income
Unaudited Unaudited Audited
6 months ended 6 months ended Year
31 May 2023
31 May 2022
ended
£'000 £'000
Note 30 Nov
2022
£'000
Revenue 4,5 61,929 71,288 145,279
Cost of sales (43,533) (52,298) (107,138)
Gross profit 18,396 18,990 38,141
Operating expenses (20,424) (19,318) (38,478)
Operating expenses - exceptional (372) (328) (174)
Total operating expenses (20,796) (19,646) (38,652)
Adjusted EBITDA* 10 2,759 2,561 6,471
Depreciation of property, plant and equipment (2,697) (1,740) (3,877)
Impairment of property, plant and equipment (897) (240) (835)
Loss on disposal of property, plant and equipment
- - (19)
Amortisation of intangible assets (1,193) (909) (1,910)
Equity - settled share-based payments 137 - (167)
Other non - underlying items (509) (328) (174)
Operating loss (2,400) (656) (511)
Financial expense
(776) (346) (946)
Loss before taxation (3,176) (1,002) (1,457)
Taxation 6 325 (2,157) (3,278)
Loss for the period (2,851) (3,159) (4,735)
Other comprehensive expense
Items that may be reclassified to profit and loss
Foreign exchange differences on translation of foreign operations (100) 68 145
Total comprehensive loss for the period (2,951) (3,091) (4,590)
Pence Pence Pence
Basic loss per share for the period (2.9) (3.2) (4.8)
Diluted loss per share for the period (2.8) (3.2) (4.7)
Consolidated Condensed Statement of Financial Position
Unaudited Unaudited Audited
As at As at As at
31 May 2023
31 May 2022
Note
30 Nov
£'000 £'000
2022
£'000
Assets 8
Property, plant and equipment 9 15,165 11,316 13,995
Intangible assets and goodwill 13,339 10,967 12,379
Deferred tax 2,234 2,708 1,909
Derivative financial asset 578 - 578
Total non-current assets 31,316 24,991 28,861
Inventories 7,522 8,658 8,824
Trade and other receivables 2,476 3,172 2,602
Derivative financial asset 240 555
Cash and cash equivalents 4,755 4,179 6,806
Total current assets 14,993 16,009 18,787
Total assets 46,309 41,000 47,648
Liabilities
Trade and other payables (7,775) (8,038) (9,340)
Other interest-bearing loans and borrowings - - -
Lease liabilities (746) (621) (687)
Corporation tax payable - (120) -
Total current liabilities (8,521) (8,779) (10,027)
Net current assets 6,472 7,230 8,760
Borrowings (18,408) (7,413) (14,675)
Lease liabilities (2,925) (3,933) (3,403)
Shares classified as debt - - -
Total non-current liabilities (21,333) (11,346) (18,078)
Total liabilities (29,854) (20,125) (28,105)
Net assets 16,455 20,875 19,543
Equity
Share capital 1,078 1,078 1,078
Other reserves 14,491 14,514 14,591
Retained earnings 10 886 5,283 3,874
Equity attributable to owners of the company 16,455 20,875 19,543
Consolidated Condensed Statement of Changes in Equity
Share capital Other reserves Retained earnings Total
£'000 £'000 £'000 equity
£'000
As at 30 November 2021 1,078 14,446 8,760 24,284
Loss for the period - - (3,159) (3,159)
Foreign currency translation - 68 - 68
Total comprehensive loss for the period 68 (3,159) (3,091)
Transactions with shareholders:
Tax effects of share-based payment charge - - (318) (318
As at 31 May 2022 1,078 14,514 5,283 20,875
Loss for the period - - (1,576) (1,576)
Foreign currency translation 77 - 77
Total comprehensive profit for the period - 77 (1,576) (1,499)
Transactions with shareholders:
Share-based payments - - 167 167
As at 30 November 2022 1,078 14,591 3,874 19,543
Loss for the period - (2,851) (2,851)
Foreign currency translation - (100) - (100)
Total comprehensive loss for the period - (100) (2,851) (2,951)
Transactions with shareholders:
Share-based payments - - (137) (137)
As at 31 May 2023 1,078 14,491 886 16,455
Consolidated Condensed Cash Flow Statement
Unaudited Unaudited Audited
6 months 6 months Year
ended ended ended
31 May 2023
31 May 2022
30 Nov 2022
£'000 £'000
£'000
Net cash flow from operating activities
Loss for the period (2,851) (3,159) (4,735)
Adjustments for:
Finance costs 776 346 946
Income tax expense (325) 2,157 3,278
Depreciation of property, plant and equipment 2,697 1,740 3,877
Impairment of property, plant and equipment 897 240 835
Loss on property, plant and equipment - - 19
Amortisation 1,193 909 1,910
Fair value gain on derivative instruments 315 - (1,133)
Share-based payments expense (137) 167
Working capital adjustments
(Increase)/decrease in inventories
1,302 (637) (805)
Decrease/ (increase) in trade and other receivables
126 984 1,122
(Decrease)/increase in trade and other payables
(1,565) (268) 712
Net cash from operations 2,428 2,312 6,193
Cash flows used in investing activities
Acquisition of property, plant and equipment Capitalised development (4,765) (4,524) (9,661)
expenditure
(2,153) (2,196) (4,555)
Net cash used in investing activities (6,918) (6,720) (14,216)
Cash flows used in financing activities
Proceeds from new loan 3,704 6,500 21,026
Interest paid (656) (305) (577)
Repayment of lease liabilities (419) (404) (868)
Interest paid on lease liabilities (91) (68) (169)
Repayment of borrowings - - (7,500)
Net cash used in finance activities 2,538 5,723 11,912
Net increase in cash and cash equivalents (1,952) 1,315 3,889
Cash and cash equivalents brought forward 6,806 2,849 2,849
Exchange losses on cash and cash equivalents (99) 15 68
Cash and cash equivalents carried forward 4,755 4,179 6,806
Notes to the Interim Results
1. General Information
The Directors of musicMagpie plc (the "Company") present their Interim Report
and the unaudited Condensed Consolidated Interim Financial Statements for the
six months ended 31 May 2023 ("Condensed Consolidated Interim Financial
Statements").
musicMagpie plc is a public limited company incorporated in the United Kingdom
whose shares are publicly traded on the AIM market of the London Stock
Exchange and is incorporated and domiciled in the UK. Its registered address
is One Stockport Exchange, Railway Road, Stockport, Cheshire, SK1 3SW.
2. Basis of Preparation
The Group's half-yearly financial information, which is unaudited,
consolidates the results of musicMagpie plc and its subsidiary undertakings up
to 31 May 2023. The Group's accounting reference date is 30 November. The
presentational and functional currency of the Group is Sterling. Results in
this consolidated financial information have been prepared to the nearest
£1,000.
musicMagpie plc and its subsidiary undertakings have not applied IAS 34,
Interim Financial Reporting, which is not mandatory for UK AIM listed groups,
in the preparation of this half-yearly financial report.
The accounting policies used in the preparation of the financial information
for the six months ended 31 May 2023 are in accordance with the recognition
and measurement criteria of UK adopted International Financial Reporting
Standards ('IFRS') and are consistent with those which will be adopted in the
annual financial statements for the year ending 30 November 2023. The profit
before interest, tax, depreciation, amortisation and share-based payment
charge is presented in the statement of total comprehensive income as the
Directors consider this performance measure provides a more accurate
indication of the underlying performance of the Group and is commonly used by
City analysts and investors.
While the financial information included has been prepared in accordance with
the recognition and measurement criteria of UK adopted IFRS, these interim
financial statements do not contain sufficient information to comply with
IFRS. The comparative financial information for the year ended 30 November
2022 has been extracted from the annual financial statements of musicMagpie
plc. These interim results for the period ended 31 May 2023, which are not
audited, do not comprise statutory accounts within the meaning of section 434
of the Companies Act 2006. The financial information does not therefore
include all of the information and disclosures required in the annual
financial statements. Full audited accounts of the Group in respect of the
year ended 30 November 2022, which received an unqualified audit opinion and
did not contain a statement under section 498(2) or (3) of the Companies Act
2006, have been delivered to the Registrar of Companies.
Accounting Policies
The accounting policies adopted in the preparation of the Condensed
Consolidated Interim Financial Statements are consistent with those followed
in the preparation of the Historical Financial Information. The Group has not
early adopted any standard, interpretation or amendment that has been issued
but is not yet effective. Their adoption is not expected to have a material
effect on the Condensed Consolidated Interim Financial Statements.
Critical accounting judgements and key sources of estimation and uncertainty
The preparation of the Condensed Consolidated Interim Financial
Statements requires management to make judgements, estimates and assumptions
that affect the application of policies and reported amounts of assets and
liabilities, income and expenses. The estimates and associated assumptions are
based on historical experience and various other factors that are believed to
be reasonable under the circumstances, the results of which form the basis of
making judgements about carrying values of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from these
estimates. In preparing these Condensed Consolidated Interim Financial
Statements, the key sources of estimation uncertainty and the critical
accounting judgements made by management are as follows:
Key sources of estimation uncertainty
The Group makes an estimate of the useful economic life of acquired intangible
assets being the proprietary software acquired. When assessing the useful
economic life, management considers expected usage of the assets; technical,
technological, commercial and other types of obsolescence; changes in the
market demand for the products related to the assets; the level of maintenance
expenditure required to maintain the assets' operating capability and whether
the assets' useful life is dependent on the useful life of other assets of the
entity.
Stock provisioning - the Group carries significant amounts of stock against
which there are provisions for slow moving lines. The provisioning policies
require a degree of judgement and the use of estimates around future sales
based on the historical demand for product lines. In addition, management
make use of this historical sales data regarding selling price of items in
order to ensure that inventories are valued at the lower of cost and net
realisable value.
Impairment of assets - in testing for impairment of goodwill and other assets,
management have made certain assumptions concerning the future development of
the business that are consistent with its forecasts into perpetuity. Should
these assumptions regarding the discount rate or growth in the profitability
be unfounded then it is possible that investments and other assets included in
the balance sheet could be impaired.
Critical accounting judgements
Capitalisation of website and IT development costs - judgement is applied to
assess whether the criteria for capitalisation of costs is met.
Going Concern
The Directors have reviewed the Group's forecast and projections,
including assumptions concerning capital expenditure and expenditure
commitments and their impact on cash flows, and have a reasonable expectation
that the group has adequate financial resources to continue in operational
existence for at least 12 months from the date of approval of the interim
statements. For this reason, they have continued to adopt the going concern
basis in preparing the financial statements.
3. Principal Risks and Uncertainties
The Directors consider that the principal risks and uncertainties, which could
have a material impact on the Group's performance in the remaining six months
of the financial year, remain substantially the same as those stated on pages
27-28 of the Group's Annual Report and Accounts to 30 November 2022, which is
available on the Group's website, www.musicmagpieplc.com
(https://url.avanan.click/v2/___http:/www.musicmagpieplc.com___.YXAxZTpzaG9yZWNhcDphOm86MjM0MmM2NGQzOTI4ZDE3NDk5YzQxMWE5NzczNDIyYjg6NjpmNTg4OjA0ZWY2NjY2YThmNzBiNzI1ZTE1MTQwMGRhNzg2MTQ2YzdmZmFjNGZjNzNiMzM4MmNmNTI0M2ViNDIyYmIxOTI6cDpG)
.
4. Segmental reporting
Information reported to the Group's Chief Executive Officer for the purposes
of resource allocation and assessment of segment performance is focused on
product categories. The principal product categories and the Group's
reportable segments under IFRS 8 are Technology, Media and Books.
An analysis of the results for the period by reportable segment is as follows:
6 months ended 31 May 2023
Media and Books
Outright sales
Consumer Technology
Rental Total
£'000 £'000 £'000 £'000 £'000
Revenue 37,061 3,993 41,054 20,875 61,929
Gross profit 7,536 3,373 10,909 7,487 18,396
Processing wages (2,264) (75) (2,339) (3,352) (5,691)
Contribution after direct labour 5,272 3,298 8,570 4,135 12,705
Trading margin (%) 31.4 100.0 38.1 82.8 53.2
Gross profit (%) 20.3 84.5 26.6 35.9 29.7
6 months ended 31 May 2022
Media and Books
Consumer
Technology Total
Outright sales Rental Total
£'000 £'000 £'000 £'000 £'000
Revenue 43,694 2,257 45,951 25,337 71,288
Gross profit 7,857 1,761 9,618 9,372 18,990
Processing wages (2,121) - (2,121) (3,614) (5,735)
Contribution after direct labour 5,736 1,761 7,497 5,758 13,255
Trading margin (%) 27.0 100.0 30.5 90.4 48.5
Gross profit (%) 18.0 78.0 20.9 37.0 26.6
Year ended 30 November 2022
Technology Media and Books Total
Outright sales Rental Total
£'000 £'000 £'000 £'000 £'000
Revenue 91,213 5,345 96,558 48,781 145,279
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 profit (%) 17.5 78.7 20.9 36.9 26.3
5. Revenue
Disaggregation of revenue
An analysis of revenue by geographical location of customer is given below:
Unaudited Unaudited Audited
6 months ended 6 months ended Year
31 May 2023
31 May 2022
ended
£'000 £'000
30 Nov 2022
£'000
United Kingdom 44,259 49,302 102,727
Within the European Community other than United Kingdom 1,181 2,162 4,086
United States of America
Outside the European Community 14,746 18,441 34,362
1,743 1,383 4,104
Total 61,929 71,288 145,279
6. Taxation
Unaudited Unaudited Audited
6 months ended 6 months ended Year
31 May 2023
31 May 2022
ended
£'000 £'000
30 Nov 2022
£'000
Current tax expense
Charge for the year - 149 40
Adjustments in respect of previous periods - - 132
Total Current tax expense - 149 172
Deferred tax credit
Origination and reversal of temporary differences (325) 2,008 3,014
Adjustment in respect of previous periods - - 92
Total deferred tax (credit)/ charge (325) 2,008 3,106
Total tax (credit)/ charge in the income statement (325) 2,157 3,278
UK Corporation tax rate used to calculate the estimated tax due and deferred 25% 25% 25%
tax timing differences:
7. Earnings per share
Unaudited Unaudited Audited
6 months ended 6 months ended Year
31 May 2023
31 May 2022
ended
£'000 £'000
note 30 Nov 2022
£'000
Loss for the period (2,851) (3,159) (4,735)
Number Number Number
Weighted average number of shares in issue 1 98,612,385 98,576,118 98,588,041
Diluted number of shares
101,070,385 98,576,118 101,153,813
Pence Pence Pence
Basic loss per share (2.9) (3.2) (4.8)
Diluted loss per share (2.8) (3.2) (4.7)
Notes:
1 There were no dilutive or potentially dilutive shares in issue at 31 May 2023
8. Property, plant and equipment
Right of use lease asset Fixtures and fittings Computer and office equipment
£'000 Plant and machinery £'000 Rental assets £'000
£'000 £'000 Total
£'000
Cost
Balance at 1 December 2021 4,538 3,457 2,668 3,258 4,297 18,218
Additions 2,585 680 109 3,586 149 7,109
Foreign currency adjustment 56 6 5 - 1 68
Disposals - - - (283) - (283)
Balance at 31 May 2022 7,179 4,143 2,782 6,561 4,447 25,112
Additions 35 1,523 338 4,432 112 6,440
Foreign currency adjustment 105 18 25 - 7 155
Impairment and returns - - - (837) - (837)
Disposals - (2,928) (1,245) (1,395) (2,937) (8,505)
Balance at 30 November 2022 7,319 2,756 1,900 8,761 1,629 22,365
Additions - 56 79 5,535 50 5,725
Foreign currency adjustment (49) (7) (7) - (3) (66)
Impairment and returns - - - (2,304) - (2,304)
Balance at 31 May 2023 7,270 2,805 1,972 11,992 1,681 25,720
Depreciation
Balance at 1 December 2021 2,829 2,875 2,078 420 3,897 12,099
Charge for the period 355 132 108 1,045 100 1,740
Impairment and returns - - (43) - (43)
Balance at 31 May 2022 3,184 3,007 2,186 1,422 3,997 13,796
Charge for the period 370 184 127 1,340 116 2,137
Foreign currency adjustment 78 12 20 5 115
Impairment and returns (240) (240)
Disposals (2,839) (1,262) (401) (2,936) (7,438)
Balance at 30 November 2022 3,632 364 1,071 2,121 1,182 8,370
Charge for the period 357 219 146 1,853 122 2,697
Foreign currency adjustment (28) (4) (6) (2) (40)
Impairment and returns (472) (472)
Balance at 31 May 2023 3,961 579 1,211 3,502 1,302 10,555
Net book value
At 31 May 2023 3,309 2,226 761 8,490 379 15,165
At 30 November 2022 3,687 2,392 829 6,640 447 13,995
At 31 May 2022 3,995 1,136 596 5,139 450 11,316
9. Intangible assets and goodwill
Good Website IT development Proprietary software
will development £'000 £'000 Domains Total
£'000 £'000 £'000 £'000
Cost
Balance at 1 December 2021 4,848 1,459 8,798 3,000 53 18,158
Additions - 153 2,043 - - 2,196
Disposals - - - - - -
Balance at 31 May 2022 4,848 1,612 10,841 3,000 53 20,354
Additions - 15 2,344 - - 2,359
Disposals - (1,081) (3,760) - - (4,841)
Balance at 30 November 2022 4,848 546 9,425 3,000 53 17,872
Additions - 45 2,108 - - 2,153
Disposals - - - - - -
Balance at 31 May 2023 4,848 591 11,533 3,000 53 20,025
Amortisation
Balance at 1 December 2021 - 1,133 5,534 1,782 29 8,478
Charge for the period - 52 704 150 3 909
On disposals - - - - - -
Balance at 31 May 2022 - 1,185 6,238 1,932 32 9,387
Charge for the period - 68 781 150 2 1,001
On disposals - (1,047) (3,848) - - (4,895)
Balance at 30 November 2022 - 206 3,171 2,082 34 5,493
Charge for the period - 65 975 150 3 1,193
On disposals - - - - - -
Balance at 31 May 2023 - 271 4,146 2,232 37 6,686
Net book value
At 31 May 2023 4,848 320 7,387 768 16 13,339
At 30 November 2022 4,848 340 6,254 918 19 12,379
At 31 May 2022 4,848 427 4,603 1,068 21 10,967
10. Other Reserves
Share Premium Capital Merger Reserve Translation reserve
£'000 Redemption £'000 £'000 Total
£'000 £'000
As at 30 November 2021 14,449 1,108 (991) (120) 14,446
Foreign currency translation - - - 68 68
As at 31 May 2022 14,449 1,108 (991) (52) 14,514
Foreign currency translation - - - 77 201
As at 30 November 2022 14,449 1,108 (991) 25 14,591
Foreign currency translation - - - (100) (100)
As at 31 May 2023 14,449 1,108 (991) (75) 14,491
11. Alternative Performance Measures
Management assess the performance of the Group using a variety of alternative
performance measures. In the discussion of the Group's reported operating
results, alternative performance measures are presented to provide readers
with additional financial information that is regularly reviewed by
management. However, this additional information presented is not uniformly
defined by all companies including those in the Group's industry. Accordingly,
it may not be comparable with similarly titled measures and disclosures by
other companies. Additionally, certain information presented is derived from
amounts calculated in accordance with IFRS but is not itself an expressly
permitted GAAP measure. Such measures are not defined under IFRS and are
therefore termed 'non-GAAP' measures and should not be viewed in isolation or
as an alternative to the equivalent GAAP measure.
The following are the key non-GAAP measures used by the Group:
Adjusted Profit before tax
Adjusted profit before tax means (loss)/profit before tax before
equity-settled share-based payments and other non- underlying items including
non-underlying financial expense relating to deal and early termination fees
from previous financing.
Unaudited Unaudited Audited
6 months ended 6 months ended Year
31 May 2023
31 May 2022
ended
£'000 £'000
30 Nov 2022
£'000
Loss before tax (3,176) (1,002) (1,457)
Equity settled share-based payments (137) - 167
Other non-underlying items 509 328 174
Adjusted Loss before tax (2,804) (674) (1,116)
Adjusted EBITDA
Adjusted EBITDA means adjusted profit before tax before depreciation and
amortisation of intangible assets and financial expense.
Unaudited Unaudited Audited
6 months ended 6 months ended Year
31 May 2023
31 May 2022
ended
£'000 £'000
30 Nov 2022
£'000
Adjusted loss before tax (2,804) (674) (1,116)
Depreciation of property, plant and equipment 2,697 1,740 3,877
Impairment of property, plant and equipment 897 240 835
Loss on disposal of property, plant and equipment - - 19
Amortisation of intangible assets 1,193 909 1,910
Financial expense 776 346 946
Adjusted EBITDA 2,759 2,561 6,471
Adjusted Operating Cash flow
Adjusted operating cash flow is calculated as Adjusted EBITDA less movements
in working capital.
Unaudited Unaudited Audited
6 months ended 6 months ended Year
31 May 2023
31 May 2022
ended
£'000 £'000
30 Nov 2022
£'000
Adjusted EBITDA 2,759 2,561 6,471
Movements in working capital (137) 79 (104)
Adjusted Operating Cash flow 2,622 2,640 6,367
Cash conversion %
This is calculated as cash generated from operating activities in the
Consolidated Cash Flow Statement, adjusted to exclude cash payments for
exceptional items, as a percentage of Adjusted EBITDA.
Unaudited Unaudited Audited
6 months ended 6 months ended Year
31 May 2023
31 May 2022
ended
£'000 £'000
30 Nov 2022
£'000
Cash generated from operations before tax payments (from Consolidated Cash 2,428 2,312 6,193
Flow Statement)
Other non-underlying items 509 328 174
Cash generated from operations before tax payments and exceptional items paid 2,937 2,640 6,367
Adjusted EBITDA 2,759 2,561 6,471
Cash conversion % 106.5% 103.1% 98.4%
Net Cash / (debt)
This is calculated as cash and cash equivalent balances less outstanding
external loans. Unamortised loan arrangement fees are netted against the loan
balance in the financial statements but are excluded from the calculation of
net cash/(debt). Lease liabilities and hire purchase are not included in the
calculation of net debt.
Unaudited Unaudited Audited
6 months ended 6 months ended Year
31 May 2023
31 May 2022
ended
£'000 £'000
30 Nov 2022
£'000
Cash and cash equivalents 4,755 4,179 6,806
Loans and accrued loan interest (18,408) (7,413) (14,675)
Unamortised loan arrangement fees (247) (87) (298)
External loans (18,655) (7,500) (14,973)
Net debt (13,900) (3,321) (8,167)
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