REG - musicMagpie plc - FULL YEAR RESULTS FOR THE YEAR ENDED 30 NOV 2023
13/03/2024 07:00
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RNS Number : 6000G musicMagpie plc 13 March 2024
13 March 2024
musicMagpie plc
("musicMagpie", or "the Group")
FULL YEAR RESULTS FOR THE YEAR ENDED 30 NOVEMBER 2023
Margin improvement and overhead reduction delivers 15.4% increase in EBITDA
musicMagpie, a circular economy pioneer specialising in refurbished consumer
technology, disc media and books in both the UK and US, announces its audited
full year results for the year ended 30 November 2023 ("FY23").
Financial and Operational highlights
· Adjusted EBITDA up 15.4% to £7.5m (2022: £6.5m) driven by tight
control of margins and costs
· Consumer Technology revenue of £95.4m (2022: £96.6m),
representing 70% of Group revenue
· Increase in gross margin to 27.7% (2022: 26.3%) with continued
focus on margin expansion
· Consumer Technology gross profit increased 15.8% from £20.2m to
£23.4m
· Cash generative before investing and financing activities with
net cash from operations of £8.1m (2022: £6.2m)
· £30m revolving credit facility with HSBC UK and NatWest
committed until July 2026
· Year-end net debt of £13.1m (2022: £7.9m) following investment
in rental assets
· Rental book provides recurring revenues, with year-end active
renters contributing approximately £3.6m of committed revenue into 2024 and
assets with a FY23 year end balance sheet value of £7.2m (2022: £6.6m)
· Active subscribers to device rental service increased to 37,100
(2022: 30,500)
· Overheads reduced year on year with additional cost and headcount
savings implemented post-year end
FY23 FY22
£m £m
Revenue 136.6 145.3
- Consumer Technology 95.4 96.6
- Disc Media and Books 41.2 48.7
Gross profit 37.9 38.1
Adjusted EBITDA(1) 7.5 6.5
Depreciation, amortisation and impairments (10.0) (4.9)
Shared based payments 0.1 (0.2)
Non-underlying items (2.5) (0.2)
Financial expense (1.9) (0.9)
Loss before taxation (6.8) (1.5)
Net Debt (13.1) (7.9)
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.
Q1 trading and outlook:
The Group finished the 2023 financial year with a record Black Friday period
which contributed to a 15.4% increase in EBITDA for FY23. Q1 FY24 has
recently closed and trading was in line with management's expectations. This
positive start to the new financial year, combined with the recent changes
made in the US to the Group's Consumer Technology buying strategy and
operations, cost reduction exercises in the UK and lower investment levels
into our Rental offering, give the Board confidence in the Group's FY24 and
medium-term prospects.
Commenting on the results, Steve Oliver, Chief Executive Officer &
Co-Founder of musicMagpie, said:
"Following a successful end to FY23 we are pleased with FY24's Q1
performance. Having recently made changes to our US Consumer Technology
buying strategy and operations, and implemented further cost savings in the
UK, we believe that musicMagpie is well positioned for the remainder of the
year. We expect second-use markets to continue to grow which will complement
our strategy of unlocking a 'world of inventory' from consumers homes and
providing them with a solution that is 'smart for you, smart for the planet'
across of our existing product categories and potential new product
categories. As such we remain confident in musicMagpie's future prospects."
- 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
Powerscourt (Financial Public Relations) Tel: +44 (0) 20 7250 1446
Rob Greening
Sam Austrums
Oliver Banks
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 FY23. In addition, the Group
re-sells approximately 8.4m books and disc media each year that could have
ended up as waste. 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 has 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 payment. 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 almost 285,000 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/___.YXAxZTpzaG9yZWNhcDphOm86ZTJjMDAwODJiY2RiNjcwZjkwYTlkZDNjZGIwZGVjYzY6Njo1NWQzOmVhZjM0MGU4YzM0YjExMDIyZDk0OThjNDg1N2VlZDE2NTk4YjY0YmYwYWYzYWQ3MjUyZWZkNzQyODAyZjc2Mzc6cDpG)
Chief Executive Officer's review
Our ambition is to continue to be a leader in the circular economy and drive
profitable growth through second-life products. We will achieve this by
executing our fast, trusted and convenient business model across our
technology and media products, as well as expanding into other product areas
that present opportunities.
'Buy'
Buying is the cornerstone of our model, it's the 'fuel for our fire' and
allows us to sell and rent profitably. Innovation in this area allows us to be
competitive on price and market-leading on trust, convenience and customer
service. FY23 was the first year in which our innovative SMARTDrop kiosks were
fully installed across a network of 290 Asda stores. These kiosks, which
provide a fast and effective way for people to sell their devices for an
immediate cash payment, have grown in popularity to the point where at peak
approximately 43% of all of our smart phones are being sourced via this route.
As well as allowing us to buy devices through a differentiated route, the
kiosks also bring significant marketing and brand awareness benefits to our
business. During the year we rolled out several pricing initiatives for the
kiosks that see differentiated fee structures for purchases made using this
channel. This allows us to buy for slightly lower prices, while still
delivering a fantastic service to those customers who want immediate payment
and/or who value a secure and instantaneous drop off option.
The non-kiosk buying route, which still accounts for the majority of our
buying activities, involves the consumer posting their product(s) to our
warehouse using the provided choice of free logistics services, and upon
arrival, detailed quality checks are undertaken before payment to the customer
is made. During the year we have installed and trained Artificial Intelligence
(AI) models to understand our phone grading systems. Over time, we expect AI
to perform most of our cosmetic grading and thereby enhancing consistency of
grading and also providing a productivity cost saving to the business.
Towards the end of the financial year, in line with our renewed focus on gross
profit, we took steps in the US to increase our gross margins by reducing
buying prices, which naturally reduces volumes but improves the unit
economics, selling less product but for greater margin. As volume reduced
through the operation, we reduced the headcount accordingly. Our unit
economics going into the next financial year are expected to improve which
will boost the profitability of the division. While executing this strategy
we have seen interesting opportunities emerge where we are able to source
product in the US and sell that product more profitably in the UK rather than
in its home location. If these opportunities continue, we envisage there may
become a point where the US Technology business acts purely as a sourcing
avenue for the UK rather than a standalone trading business that sells in its
own territory.
'Sell'
Against a tough consumer macro environment, Group revenues were down on prior
year, but overall gross margin was 27.7%, up from 26.3% in the prior year.
This was achieved not only from buying product for less, but from selling
product with a clear target margin so that all our sales channels, (ebay,
Amazon, Walmart and Backmarket) delivered similar returns.
Our routes to market are either direct via the musicMagpie store, or indirect
via third-party platforms. The musicMagpie store continues to provide a
slightly higher gross margin and a deeper level of customer ownership than
selling through platforms; however, we recognise the need to service customers
through all channels and tactically distribute product on whatever channel
they may wish to purchase as long as that sale delivers sufficient gross
margin. So the key is to understand the specific margins of each channel and
actively manage sales to acceptable minimums so that while we are channel
agnostic we are not gross margin agnostic.
Looking forward into 2024 we expect our enhanced Buy Now Pay Later ('BNPL')
offering to have a positive impact on revenues. As we refine our product
offering we see the combination of outright sale, BNPL and renting as the full
suite of options that refurbished tech buyers require, and which will support
our future sales growth. There is a place for instalment purchase plans (BNPL)
for cash conscious consumers as well as renting for upgrade and sustainability
conscious consumers. As BNPL provides immediate revenue and cash to the
business it will complement the longer payback rentals that will continue into
2024. Looking further ahead than 2024, we aspire to grow our product base
and hope to grow new product category lines to meaningful levels.
'Rent'
Our monthly rental subscription model is a disruptive and differentiated
offering that provides an attractive and flexible usage offer for refurbished
smart phones and other consumer technology products. The model provides a
variety of advantages to consumers including a lower cost outlay, a defined
renewal pathway and a sustainable approach to consumer technology usage.
Having launched in October 2020, we have now grown the Rental book to 37,100
renters and expanded the offering to include rentals to businesses under the
Magpie Circular offering. The advantages to musicMagpie are the quality
recurring revenues that rentals provide and the certainty of ownership
of devices that we can build into our demand planning models.
To build the rental book requires a carefully balanced approach to opportunity
cost, because each phone rented has the lost opportunity of an outright sale,
and while the rental over the long term provides more profits, an outright
sale in the short term provides immediate cash. During the second half of the
year we began to refine the rental product to a more segmented basis and one
that is aimed at a narrow customer subset - this refined product is aimed at
customers with higher credit ratings and a greater propensity to renew. In the
short term, we see our Rental product as a profitable and complementary line
of business, but not one that we intend to grow to a mass market.
Total Rental revenues for 2023 were £8.3m (2022: £5.3m), and gross profit
was £7.4m (2022: £4.2m). With the current refined product, we expect to
see similar levels of revenues in 2024, but without the requirement for
significant capital investment. We do not expect our rental book to grow and
indeed it is possible that it will modestly decline over time as we continue
to refine our rental strategy and balance it with outright sales and our BNPL
offering.
Sustainability
At musicMagpie, we strive to promote circularity by extending the life of
products and preventing devices and physical media from ending up in
landfills. We believe that as the market shifts towards subscription and
rental models, this trend presents significant opportunities for us.
To support this mission, 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 circularity 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.
Looking after our people
I would like to take this opportunity to thank all our amazing colleagues
across the Group. This business had humble beginnings, starting as it did in
my garage in 2007 but has always placed colleagues at the heart of everything
it does. I can say with absolute conviction that, without all of the amazing
Magpies with whom I work, this business would not be the innovative circular
economy champion that it is today, and I am blessed to work with such
talented, ambitious and passionate people who care so deeply.
Cost base
As both a buyer and seller of products we can avoid the main impacts of
inflation by managing our buy-sell prices. However, inflation across the
remainder of our cost base is still an issue. For the second year in a row,
we increased rates of pay for our lower-paid colleagues ahead of any statutory
deadlines.
We believe we can mitigate the impact of this increase by continuing with our
regular cost control reviews. For our UK energy consumption, we took steps in
2022 to hedge against price rises and secure fixed future costs. While the
current impact of these contracts is a modest £0.1m loss against current
market rates, we are pleased to have certainty of pricing and to remain
insulated from future price volatility for at least another 22 months.
We have a strong commitment to leaving no stone unturned in our efforts to
control costs, and overheads in 2023 were £30.4m (2022: £31.7m). This is
an ongoing exercise to reduce costs and increase our profits and post-year end
we took the difficult decision to implement further cost and headcount
reductions in both the UK and US to right size the business and support our
future profits.
Outlook
I have no doubt that second-use markets will continue to grow as consumer
adoption increases in all manner of areas. musicMagpie must maintain its
position in its established markets and be agile and purposeful in exploiting
new and expanding markets as they emerge. Our mantra of being 'here to help'
will continue to apply to consumers, corporates and the environment, and will
become ever more relevant in the years to come. We will seek to unlock a
'world of inventory' from consumers homes and provide them with a solution
that is 'smart for you, smart for the planet' across both of our existing
product categories and potential new product categories going forward. I
remain hugely proud of this business, its people, and the positive impact that
we are making on our community, wider society and the environment whilst
acknowledging that we need to continue to focus on the future financial
performance to maximise the potential success, long term security and welfare
of the business.
Steve Oliver
Chief Executive Officer
12 March 2024
Financial review
The Group has been intensely focused on cash and profits in the year and as a
result gross margin increased year over year which led to a static gross
profit despite the decline in revenue. Revenue for the year ended 30 November
2023 was £136.6m (2022: £145.3m). Gross profit was £37.9m (2022: £38.1m)
with gross margin of 27.7%, up from 26.3% in the prior year.
Consumer Technology
Consumer Technology revenue was £95.4m (2022: £96.6m) and now represents the
dominant category in the Group with 70% of total revenues. Within this
segment, the Rental business grew from £5.3m to £8.25m as active renters
increased from 30,500 to 37,100. Owing to a shift in the rental model, the
level of active renters is expected to remain broadly static over the
forthcoming year and the Group does not have plans to increase the rental base
significantly as this would require further cash investment. The second
component of Consumer Technology, outright sales, saw revenue decline by
£4.0m to £87.2m (2022: £91.2m), but gross profit was static at £16.0m. The
Group has focused on expanding its margin on outright sales via a number of
initiatives as well as managing the sale of stock across the various sales
platforms in a more sophisticated manner in order to achieve minimum expected
gross margin targets. Maintaining gross profit on a lower turnover has helped
reduce overhead costs from £31.6m to £30.4m, with lower activity and lower
marketing spend, and this supported the increase in EBITDA year over year.
Disc Media and Books
Revenue for the year was £41.2m (2022: £48.7m). This category is declining
as expected, mainly owing to the continued reduction in the sale of both new
and second-hand physical media as consumers increasingly consume content in
different ways, for example online streaming. We are starting to see a
deceleration in this sales decline as the more rapidly declining DVD and
gaming segments become much less significant and books, which are more
resilient therefore generate an increasing share of overall sales. Gross
margin slipped back a little from 36.9% to 35.2% with the small decline owing
to slightly higher direct costs despite the higher trading margin on purchased
product.
Earnings
The following table analyses the results for the year from EBITDA to loss
after tax.
2023 2022 Movement
EBITDA 7.5 6.5 1.0
Depreciation, amortisation and impairments (10.0) (6.6) (3.4)
Equity-settled share-based payments 0.1 (0.2) 0.3
Other non-underlying items (2.5) (0.2) (2.3)
Operating loss (4.9) (0.5) (4.4)
Net interest cost (1.9) (0.9) (1.0)
Loss before tax (6.8) (1.4) (5.4)
Tax (0.1) (3.3) 3.2
Loss after tax (6.9) (4.7) (2.1)
Adjusted EBITDA is a non-GAAP alternative performance measure. See Note 30 to
the financial statements for further definition and reconciliation.
Overheads reduced £1.3m from the prior year following tight cost control and
include fee and salary reductions taken by the CEO, the COO and the
Non-Executive Directors. The overhead reduction contributed to the EBITDA
improvement from £6.5m to £7.5m.
Depreciation, amortisation and impairments increased to £10.0m from £6.6m in
the prior year. All components were up, depreciation was £5.9m (2022:
£3.9m), amortisation was £2.5m (2022: £1.9m) and impairments were £1.5m
up from £0.8m.
The increase in depreciation resulted from an increase in the average value of
devices out on rent during the year and the depreciation policy which is 33%
reducing balance. Impairments were up slightly and relate to losses on the
assets out on rent.
Amortisation increased to £2.5m and follows the increased development spend
over recent years. Actual development spend is on a downwards trajectory after
investment over recent years; however, owing to the lag on the amortisation
policy, the non-cash income statement charge is expected to peak during 2024.
There was a £2.5m charge (2022: £0.2m charge) for other non-underlying
items. When reviewing the gross margin improvement likely to be achieved in
our forecast models, it was identified that the recoverable amount of the
discounted cashflows was less than the carrying value of the assets and this
resulted in a £1.1m (2022: £nil) write-down in the value of goodwill. In
addition there was a non-underlying expense related to a mark to market on a
fixed price electricity supply contract plus some costs consistently treated
as non-underlying in 2022. The Group has in place various contracts to
purchase electricity at fixed prices for periods up to autumn 2026. These
prices provide certainty over planning and forecasting and set rates as close
to the levels paid by the Group during 2022. Under IFRS accounting the value
of these contracts has been marked to the external market price of electricity
at reporting dates. Owing to a reduction in the market price of electricity to
below the fixed price in the contracts, the Group has booked a non-cash
liability of £0.1m at November 2023. At 30 November 2022 the Group had an
asset of £1.1m and so a charge of £1.2m has been processed through the
accounts to reverse this previous asset and book the current year liability.
As there is less than two years left on the contracts, the volatility on the
mark-to-market accounting will reduce over time.
The interest charge for the year was £1.9m (2022: £0.9m) with the increase
owing both to the increase in average debt and the increase in interest rates
in the market. With the adjusted strategy for rental, the expectation is that
gross debt and thus interest charges will fall over time.
The loss before tax for the period was £6.8m. The taxation charge was £0.1m
(2022: £3.2m charge), with the prior year charge related to movements in
deferred taxation on historical share-based payments. The Group has
historically benefitted from the UK's R&D tax regime with above the line
tax credits of around £0.2m per year related to its development spend on its
recent large infrastructure projects. It is becoming increasingly difficult to
qualify for the credits and the tax authority appears more willing to
challenge and reject claims. The Group is unlikely to submit further claims
now that the major project spend has completed and the tax authority landscape
has changed.
After taxation the total loss for the period was £6.9m (2022: £4.7m).
Net assets
The balance sheet is summarised as follows:
2023 2022
£m £m
Fixed assets 13.1 14.0
Capitalised development 8.4 6.6
Inventory 7.4 8.8
Debtors 2.0 2.6
Creditors (8.2) (9.3)
Operating net assets 22.7 22.7
Goodwill and other intangibles 4.4 5.8
Deferred tax 1.8 1.9
Net debt (13.1) (7.9)
Lease liabilities (3.4) (4.1)
Derivative (0.1) 1.1
Net assets 12.3 19.5
Operating net assets stayed level at £22.7m despite an increase in rental
assets of £0.6m and increase in capitalised development spend of £1.8m. As
noted above, tight working capital management saw inventory reduce from £8.8m
to £7.4m, and together with the reduction in fixed asset spend, this offset
the increase in rental assets and the capitalised development spend. Net debt
increased £5.2m as described in the cash flow section below. With the
retained loss for the period of £6.9m (2022: £4.7m), net assets reduced from
£19.5m to £12.3m.
Cash flow
The cash flow in the year is summarised in the table below:
2023 2022
£m £m
Net cash from operations 8.1 6.2
Acquisition of PPE
- Rental assets (6.2) (6.6)
- Other (0.2) (3.0)
Development costs (4.1) (4.6)
Cash outflow from investing (10.5) (14.2)
New loan drawings 5.9 13.5
Interest and lease (2.5) (1.6)
Other - 0.1
Cash flow from financing 3.4 11.9
Cash increase 1.0 3.9
FX (0.2) 0.1
Cash carried forward 7.6 6.8
Gross debt (20.7) (14.7)
Net debt (13.1) (7.9)
Future value of contract rental revenues 3.6 n/a
Current value of assets out on rent 7.2 n/a
Notional net debt after rental cash (2.3) n/a
Net cash generated from operating activities was £8.1m up 30.6% from the
prior year £6.2m, and this was driven by both an improved adjusted EBITDA in
the period but also continued control of working capital that saw £0.9m cash
inflow (2022: £1.0m inflow) over the year. Inventory reductions made a
significant contribution to the working capital inflows with closing stock of
£7.4m being £1.4m lower than 2022.
The £8.1m of cash from operations was consumed by £10.5m of spend on capital
expenditure and development spend. Capital expenditure was £6.4m in total and
was almost entirely allocated to rental assets of £6.2m (2022: £6.6m),
driven by the additional value of assets out on rent. When rental devices are
returned at the end of a rental period, they are transferred back into stock
and sold as normal. The value of assets out on rent therefore represents
future potential cash. The fact that the devices will depreciate over time is
offset by the expected gross margin at sale. Development expenditure was down
from £4.6m in the prior year to £4.1m and as noted above we expect this
spend to continue to decline following the completion of a number of major
upgrades over recent years.
After £5.9m of net drawings from the loan facility, the net increase in cash
was £1.0m (2022: £3.9m) and net debt closed at £13.1m (2022: £7.9m).
Stated after future rental cash flows, notional net debt is £2.3m, albeit the
rental cash flows will only be crystallised over time as the contracts
progress to expiry.
The Group relies on a £30m committed revolving credit facility with HSBC UK
and NatWest which expires in July 2026. There are two financial covenants on
the lending: that leverage (the size of net debt to EBITDA) shall be less than
2.5 times and that interest cover (EBITDA divided by interest) shall be
greater than four times. The Group continues to operate with net debt.
Leverage following Black Friday in November 2023 was 1.7 times but during
other months of the year increases above this position, but still within the
covenant limits. There are several levers available to manage debt,
including reducing the number of assets that go out on rent each week.
Matthew Fowler
Chief Financial Officer
12 March 2024
Consolidated Statement of Comprehensive Income
Year ended Year ended
30 November 2023 30 November 2022
Note £000 £000
Turnover 4 , 5 136,601 145,279
Cost of sales (98,737) (107,138)
Gross profit 37,864 38,141
Operating expenses (40,224) (38,478)
Operating expenses - non-underlying items 6 (2,527) (174)
Total operating expenses (42,751) (38,652)
Adjusted EBITDA* 329 7,452 6,471
Depreciation of property, plant and equipment 14 (5,943) (3,877)
Impairment of property, plant and equipment 14 (1,463) (835)
Loss on disposal of property, plant and equipment 14 - (19)
Amortisation of intangible assets 15 (2,538) (1,910)
Equity - settled share-based payments 25 132 (167)
Other non - underlying items 6 (2,527) (174)
Operating loss (4,887) (511)
7
Financial expense 10 (1,877) (946)
Loss before taxation (6,764) (1,457)
Taxation 11 (89) (3,278)
Loss for the period attributable to the equity holders of the parent
(6,853) (4,735)
Other comprehensive income
Items that may be reclassified to profit and loss
Foreign exchange differences on translation of foreign operations (282) 145
Total comprehensive loss for the year attributable to the
equity holders of the parent (7,135) (4,590)
Pence Pence
- basic loss per share 13 (6.8)p (4.8)p
- diluted loss per share 13 (6.8)p (4.8)p
*Adjusted EBITDA is a non-GAAP measure. See note 30 for definition and
reconciliation.
Consolidated Statement of Financial Position
As at As at
30 November 2023 30 November 2022
Note £000 £000
Assets
Property, plant and equipment 14 13,068 13,995
Intangible assets 15 12,827 12,379
Deferred tax asset 12 1,847 1,909
Derivative financial asset 19 - 578
Total non-current assets 27,742 28,861
Inventories 17 7,387 8,824
Trade and other receivables 18 1,996 2,602
Derivative financial asset 19 - 555
Cash and cash equivalents 20 7,600 6,806
Total current assets 16,983 18,787
Total assets 44,725 47,648
Liabilities
Trade and other payables 21 8,241 9,340
Lease liabilities 23 831 687
Derivative financial liability 22 96 -
Other interest-bearing loans and borrowings 23 203 -
Total current liabilities 9,371 10,027
Net current assets 7,612 8,760
Other interest-bearing loans and borrowings 23 20,496 14,675
Lease liabilities 23 2,582 3,403
Total non-current liabilities 23,078 18,078
Total liabilities 32,449 28,105
Net assets 12,276 19,543
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 (257) 25
Retained earnings (3,111) 3,874
Equity attributable to the equity holders of the parent 12,276 19,543
Consolidated Statement of Changes in Equity
Share Share Capital redemption 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
Loss for the year - - - - - (6,853) (6,853)
Foreign currency translation - - - (282) (282)
Total comprehensive income/ (loss) for the year - - - - (282) (6,853) (7,135)
Share-based payments 25 - - - (132) (132)
Balance as at 30 November 2023 1,078 14,449 1,108 (991) (257) (3,111) 12,276
Consolidated Cash Flow Statement
Year ended Year ended
30 November 2023 30 November 2022
£000 £000
Net cash flows from operating activities
Loss for the year (6,853) (4,735)
Adjustments for:
Financial expense 1,877 946
Taxation expense 89 3,278
Depreciation of property, plant and equipment 5,943 3,877
Impairment of property, plant and equipment 1,463 835
Loss on disposal of property, plant and equipment - 19
Amortisation of intangible assets 2,538 1,910
Goodwill impairment 1,100 -
Fair value loss/(gain) on derivative instruments 1,229 (1,133)
Share-based payments (credit)/ expense (132) 167
Working capital adjustments
Decrease in inventories
1,437 (805)
Decrease in trade and other receivables 579 1,122
(Decrease)/increase in trade and other payables (1,143) 712
Net cash from operations 8,127 6,193
Cash flows used in investing activities
Acquisition of property, plant and equipment (6,429) (9,661)
Capitalised development expenditure (4,086) (4,555)
Net cash used in investing activities (10,515) (14,216)
Cash flows from financing activities
Net proceeds from loans 5,954 21,026
Financial expenses paid (1,668) (577)
Lease liabilities paid (730) (868)
Interest paid on lease liabilities (138) (169)
Repayment of other loans - (7,500)
Net cash from financing activities 3,418 11,912
Net increase in cash and cash equivalents 1,030 3,889
Cash and cash equivalents brought forward 6,806 2,849
Effect of exchange rate fluctuations on cash (236) 68
Cash and cash equivalents carried forward 7,600 6,806
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 2023.
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 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.
Whilst the financial information included in this announcement has been
prepared on the basis of UK-adopted International Accounting Standards
("Adopted IFRSs"), this announcement does not itself contain sufficient
information to comply with Adopted IFRSs. The Group financial statements have
been prepared and approved by the directors in accordance with UK-adopted
International Accounting Standards.
The Group expects to publish full Consolidated Financial Statements in April
2024. The financial information set out in this announcement does not
constitute the Group's Consolidated Financial Statements for the years ended
30 November 2023 or 2022 but is derived from those Financial Statements which
were approved by the Board of Directors on 12 March 2024. The auditor, RSM UK
Audit LLP, has reported on the Group's Consolidated Financial Statements and
the report was unqualified and did not contain a statement under section 498
(2) or 498 (3) of the Companies Act 2006.
The statutory financial statements for the year ended 30 November 2023 have
not yet been delivered to the Registrar of Companies and will be delivered
following the Company's Annual General Meeting.
The Group financial statements consolidate those of the Company and its
subsidiaries (together referred to as the "Group"). The Group financial
statements are prepared on the historical cost basis except where UK-adopted
International Accounting Standards require an alternative treatment.
The Group's accounting policies are set out in the 2022 Annual Report and
Accounts and have been applied consistently in 2023
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 2023 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 £6,764,000 during the year ended 30 November 2023
(year ended 30 November 2022: loss of £1,457,000). At the year-end date it
had net current assets of £7,612,000 (year ended 30 November 2022:
£8,760,000). The Group has access to a £30m committed credit facility.
The drawings on the facility are controlled by two financial covenants:
leverage, being adjusted EBITDA to net debt, and interest cover, being
adjusted EBITDA divided by interest. The Group currently meets its day to day
working capital requirements through cash reserves and from its' credit
facility.
In reviewing its forecasts for going concern, the key consideration of the
Group is whether it can demonstrate ongoing compliance with the financial
covenants on the facility. In completing their going concern assessment, the
directors have reviewed the trading and cash flow forecasts for the period to
the end of March 2025 and have incorporated reasonable downside
sensitivities. The downside sensitivities were based on reductions in
adjusted EBITDA, the key covenant metric. In the worse case scenarios
mitigating actions available to the business were included in the
assessments. In these forecasts the directors 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.
Based on the forecasts and the downside scenarios modelled, the Directors
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. 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 non-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. Equipment rented out to consumers are impaired to a
residual value when the device is deemed to be unrecoverable, the residual
value being the amount expected to be received when the debt is sold on to a
3(rd) party.
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 realisable 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 earns rental income on devices rented to customers over fixed terms.
The ownership of the devices 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 Group recognises revenue for these
rental items on a straight-line basis over the period of the rent. Revenue
for terminations is recognised at the point termination is agreed.
2.14 Financial expense
Financial expense includes interest payable on borrowings and other finance
charges incurred.
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.
2.17 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.
2.18 Derivative financial instruments
The Group accounts for derivative instruments under IFRS 9 Financial
Instruments. The Group does not hedge account. 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 not be achieved in
line with the Board's plans then it is possible that investments and other
assets included in the statement of financial position could be impaired
further. 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 £7,387,000 (Year ended 30
November 2022: £8,824,000) which included a provision for slow moving lines
of £696,000 (Year ended 30 November 2022: £729,000). If the estimate of
future demand for product were under or overstated by 25% the provision would
be impacted by £174,000 (£182,000).
• 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 a liability of £100k (2022: asset of £1,133k). 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 liability
would not be material.
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
£1,847,000 (2022: £1,909,000). 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 effective at the balance sheet date
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 January 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 and
Media and books.
An analysis of the results for the period by reportable segment is as follows:
Year ended 30 November 2023 Technology Media and books Total
Outright sales Rental income Total
£000 £000 £000 £000 £000
Revenue 87,184 8,250 95,434 41,167 136,601
Gross profit 15,964 7,406 23,370 14,494 37,864
Processing wages (4,088) - (4,088) (7,609) (11,697)
Contribution after direct labour 11,876 7,406 19,282 6,885 26,167
Trading margin (%) 29.6 100.0 35.7 82.6 49.2
Gross margin (%) 18.3 89.8 24.5 35.2 27.7
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 2023
amounted to approximately £3,600k (year ended 30 November 2022: £3,000k)
which is due predominantly in the next 12 months.
Year ended 30 November 2022 Consumer 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
The CODM does not review asset and liability information in segmental formats
and as such no presentation of assets and liabilities is presented for the
segments.
5. Revenue
Disaggregation of revenue
An analysis of revenue by geographical market is given below:
Year ended Year ended
30 November 2022
30 November 2023
£000
£000
United Kingdom 99,883 102,727
Within the European Community 2,353 4,086
United States of America 29,585 34,362
Outside the European Community (excluding the USA) 4,780 4,104
Total 136,601 145,279
An analysis of revenue by country of origination is given below:
Year ended Year ended
30 November 2022
30 November 2023
£000
£000
United Kingdom 108,210 110,233
United States of America 28,391 35,046
Total 136,601 145,279
6. Other non-underlying items
Year ended Year ended
30 November 2022
30 November 2023
£000
£000
Non-underlying (loss)/ gain (1,229) 1,133
Impairment of Goodwill (1,100) -
Other non-underlying costs (198) (1,307)
Total (2,527) (174)
Underlying performance excludes the above (losses)/gains and expenses which
consist of the following in line with historic treatments, or because they are
large or one-off in nature. For 2023 these consisted of:
- Mark to market loss 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 above the market price of electricity at the
reporting date and a resulting liability of £0.1m has been booked at the
balance sheet date. In the prior year the contract was an asset of £1.1m
and so a £1.2m loss has been booked in the period (2022: £1.1m gain)
- Impairment of Goodwill held on consolidation £1.1m (2022: £nil)
booked following sensitivity analysis on the Group forecasts, see note 15
- Dual running IT costs £0.1m (2022: £0.9m)
- Non-recurring redundancy and re-organisational costs £0.1m
(2022: £nil)
- Covid-19-related expenditure £nil (2022: £0.2m); and
- VAT provision relating to a pre-Brexit tax structure £nil
(2022: £0.2m).
7. Operating loss
Year ended Year ended
included in the operating loss are the following: 30 November 2023 30 November 2022
£000 £000
Amortisation of intangible assets 2,538 1,910
Depreciation of property, plant & equipment:
Owned assets 5,147 3,152
Right-of-use assets 796 725
Impairment of property, plant and equipment 1,463 835
Loss on disposal of property, plant and equipment - 19
Auditor's remuneration:
Audit of these financial statements* 184 177
Net forex losses/ (gains) in the period 282 (145)
* £15,000 (year ended 30 November 2022: £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 2022: £nil).
8. Remuneration of directors
Year ended Year ended
30 November 2022
30 November 2023
Short term benefits
£000
£000
Directors' emoluments 691 664
Employers pension contributions 11 9
Total 702 673
Included in the above are amounts paid to non-executive directors of £207,000
(year ended 30 November 2022: £230,000).
The aggregate of emoluments of the highest paid director were £290,000 (year
ended 30 November 2022: £318,000). Pension contributions included in these
amounts and paid on his behalf were £7,000 (period ended 30 November 2022:
£7,000).
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
2023 2022
Office and administration 178 202
Warehouse 412 481
Total 590 683
The aggregate payroll costs of these persons were as follows:
Group Group
2023 2022
£000
£000
Wages and salaries 16,756 17,790
Social security costs 1,462 1,317
Other pension costs 271 271
Equity-settled share-based payments (see note 25) (132) 167
Total 18,357 19,545
In addition to the above payroll costs, a further £2,440,000 (year ended 30
November 2022: £2,661,000) 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 £2,142,000 during the year (Year ended 30 November 2022: £3,010,000).
10. Financial expense
Year ended Year ended
30 November 2023 30 November 2022
£000 £000
Interest on bank and other loans 1,371 323
Interest expense on lease liabilities 138 169
Other non-underlying financial expense 149 152
Bank interest and similar charges 219 302
1,877 946
11. Taxation
Year ended 30 November 2023 Year ended 30 November 2022
£000 £000
Current tax expense
UK corporation tax on profits for the period 32 40
Adjustments in respect of previous periods (5) 132
Total current tax expense 27 172
Deferred tax credit 53 3,014
Origination and reversal of timing differences
Adjustment in respect of previous periods 9 92
Total deferred tax charge 62 3,106
Total tax charge in the income statement 89 3,278
Equity items
Deferred tax current year charge - 318
Total - 318
Reconciliation of effective tax rate
Year ended 30 November 2023 Year ended 30 November 2022
£000 £000
Loss before taxation (6,764) (1,457)
Tax using the UK corporation tax rate of 23% (2022: 19%) (1,556) (277)
Other tax adjustments, reliefs and transfers 300 20
Adjustments in respect of prior periods - current tax (5) 132
Adjustments in respect of prior periods - deferred tax 9 92
Tax rate changes (67) -
Research and Development Expenditure Credit 26 40
Share options 78 3,000
Deferred tax not recognised 1,304 271
Total tax charge in the income statement 89 3,278
12. Deferred tax
Tax losses £000
Capital allowances Share options* £000 Others Total
£000 £000 £000
At 1 December 2022 1,893 (610) 417 209 1,909
Credited/(debited) to profit or loss 77 (5) (78) (56) (62)
Debited to equity
At 30 November 2023 1,970 (615) 339 153 1,847
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 23% (2022 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 2022 to November 2023 the value of
the share based payments deferred taxation asset has fallen
In addition to the above, the group has unrecognised deferred tax assets in
respect of carried forward losses amounting to £3,253,000 (year ended 30
November 2022: £1,676,000).
13. Loss per share
Year ended Year ended
note 30 November 2023 30 November 2022
£000 £000
Loss for the period (6,853) (4,735)
Number Number
Weighted average number of shares 1 , 2 98,612,385 98,588,041
Diluted number of shares 101,070,385 101,153,813
Pence Pence
Basic loss per share (pence) (6.8) (4.7)
Diluted loss per share (pence) (same as basic) (6.8) (4.7)
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.
Computer and office equipment
14. Property, plant and equipment, Right-of-use lease assets Plant and machinery Fixtures and fittings Rental assets
Total
£000 £000 £000 £000 £000 £000
Cost
Balance at 1 December 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
Additions 53 56 97 8,505 99 8,810
Effect of movements in foreign currency (109) (11) (14) - (6) (140)
Impairment - - - (3,156) - (3,156)
Disposals - - (2,818) - (2,818)
Balance at 30 November 2023 7,263 2,801 1,983 11,292 1,722 25,061
Depreciation
Balance at 1 December 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
Charge for the year 796 446 270 4,194 237 5,943
Effect of movements in foreign currency (75) (8) (11) - (5) (99)
Impairment - - - (1,308) - (1,308)
Disposals - - - (913) - (913)
Balance at 30 November 2023 4,353 802 1,330 4,094 1,414 11,993
Net book value
At 30 November 2023 2,910 1,999 653 7,198 308 13,068
At 30 November 2022 3,687 2,392 829 6,640 447 13,995
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. The profit impact of the impairment in the year was £1,463,000
(2022: £). The cash impact of the impairment was £2,610,000 (2022:
£1,120,000).
15. Intangible assets
Website and IT development Proprietary software
Goodwill Domains Total
£000 £000 £000 £000 £000
Cost
Balance at 1 December 2021 4,848 10,257 3,000 53 18,158
Additions - 4,555 - - 4,555
Disposals - (4,841) - - (4,841)
Balance at 30 November 2022 4,848 9,971 3,000 53 17,872
Additions - 4,086 - - 4,086
4,848 14,057 3,000 53 21,958
Balance at 30 November 2023
Amortisation and impairment
Balance at 1 December 2021 - 6,667 1,782 29 8,478
Charge for the year - 1,605 300 5 1,910
Disposals - (4,895) - - (4,895)
Balance at 30 November 2022 - 3,377 2,082 34 5,493
Charge for the year - 2,233 300 5 2,538
Impairment 1,100 - - - 1,100
Balance at 30 November 2023 1,100 5,610 2,382 39 9,131
Net book value
At 30 November 2023 3,748 8,447 618 14 12,827
At 30 November 2022 4,848 6,594 918 19 12,379
All amortisation of intangible assets is charged to the consolidated statement
of comprehensive income and is included within operating expenses (see note
7).
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 2023 30 November 2022
Period on which management approved forecasts are based 5 years 5 years
Growth rate applied beyond approved forecast period (10%) (10%)
Discount rate Pre-tax 8% 11%
The method used to calculate the discounted cashflows for each CGU uses the
same forecast model, but with specific assumptions for each that reflect the
differing nature of each CGU. 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. The 5-year forecasts for the non-rental CGU included contributions of
new product categories as the business intends to expand its recommerce
business into new areas, and annual improvements in gross margin as a result
of strategic decision making by management. For years 6 to 10 there is an
assumption of negative sales growth. This negative growth assumption allows
for the declining business of Disc Media and Books, offset by the increasing
sales from Consumer Technology. The net overall sales decline assumption
allows for the unpredictability of these out years across both segments. Year
ten uses a terminal value on the cashflow from that year for the non-rental
CGU; no terminal values are used in the rental CGU as it is still a relatively
new business and it is not clear if the business model will sustain after year
10. Inflation in the cost base is captured in the board approved plans.
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, which has reduced in the year owing to the fall in the
expected rate of return on equity, (the cost of debt element in the WACC has
remained virtually unchanged).
· The contribution of new product categories, which are a key facet
to future revenue and profit growth
· The plans around gross margin improvements in the Consumer
Technology segment, which follow on from recent gross profit improvements in
the year and expect ongoing improvements year over year
Sensitivities
The following sensitivities were run on the valuation approaches:
1. Increasing the WACC to 15%: in isolation this would not change the
outcome of the review.
2. Reducing the rate of growth of gross margin improvements in the
future years
When reviewing the gross margin improvements likely to be achieved in the
forecast models, it was identified that the recoverable amount of the
discounted cashflows was less than the carrying value of the assets.
Accordingly an impairment to goodwill of £1.1m was included in these
financial statements.
16. 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 2023.
Name of subsidiary Company number Principle place of business Class of shares held Proportion of ownership Principle activity
Entertainment Magpie Group Limited ^ 09775280 United Kingdom Ordinary 100% Intermediate holding company
Entertainment Magpie Holdings Limited*^ 07578858 United Kingdom Ordinary 100% Intermediate holding company
Entertainment Magpie Limited* 06277562 United Kingdom Ordinary 100% Purchase & resale of electronic items and replay media products
MM Guernsey Limited*^ (X) 52777 Guernsey Ordinary 100% Refurbishment & dispatch of replay media products
Mozo Media Limited *^ 06759026 United Kingdom Ordinary 100% Refurbishment & dispatch of replay media products
Entertainment Magpie, Inc* 33-1225350 United States of America Ordinary 100% Purchase & resale of electronic items and 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
(X) Entity under formal wind up processes at the balance sheet date
17. Inventories
Year ended Year ended
30 November 2022
30 November 2023
£000
£000
Goods for resale 7,387 8,824
Total 7,387 8,824
Goods for resale recognised as cost of sales in the year ended 30 November
2023 amounted to £68,550,000 (year ended 30 November 2022: £75,336,000). The
write-down of inventories to net realisable value and reversals are included
in cost of sales.
The Company's closing inventory value is £nil (2022 - £nil)
18. Trade and other receivables
Group Group
Current assets
2023 2022
£000 £000
Trade receivables 631 701
Amounts due from Group companies - -
Other receivables 260 216
Prepayments and accrued income 1,105 1,685
Total 1,996 2,602
Non-current assets Group Group
2023 2022
£000 £000
Amounts due from Group companies - -
Total - -
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.
19. Derivative financial asset
2023 2022
£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. The derivative financial asset as at 30 November 2022
is now a derivative financial liability as at 30 November 2023 (see note 22
for details).
20. Cash and cash equivalents
2023 2022
£000 £000
Cash and cash equivalents 7,600 6,806
Total 7,600 6,806
21. Trade and other payables
Group Group
2023 2022
£000 £000
Trade payables 6,360 6,166
Other taxation and social security 463 542
Other payables and accruals 1,418 2,632
Total 8,241 9,340
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.
22. Derivative financial liability
2023 2022
£000 £000
Derivative financial liability
Derivatives not designated as hedging instruments 96 -
Total 96 -
Current and non-current:
Current 96 -
Non-current - -
Total 96 -
The derivative financial liabilities are all net settled; therefore, the
maximum exposure to credit risk at the reporting date is the fair value of the
derivative liabilities which are included in the consolidated financial
statement of financial position.
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.
2023 2022
£000 £000
Current liabilities
Bank loan interest 203 -
Lease liabilities 831 687
Total 1,034 687
Non-current liabilities
Bank loans 20,496 14,675
Lease liabilities 2,582 3,403
Total 23,078 18,078
Falling due within one year 1,034 687
Falling due after more than one year 23,078 18,376
Total 24,112 19,063
Unamortised debt issue costs (254) (298)
Total interest-bearing loans and borrowings 23,858 18,765
The Group has a £30m committed Revolving Credit Facility ("RCF") arrangement
with HSBC UK and Natwest banks. This agreement expires in July 2026. 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 greater than 4 times.
The banks have security over Group assets in the form of debentures and cross
guarantees from all material entities in the Group.
The Company has no borrowings.
Terms and debt repayment schedule
30 November 2023
Currency Interest rate Year of maturity Debt value Carrying value
£000 £000
Bank loans GBP SONIA + 1.95 -2.5% 2026 20,953 20,699
Lease liabilities GBP 5% 2023 - 2027 2,791 2,791
Lease liabilities USD 5% 2027 622 622
Total 24,366 24,112
Interest on the Revolving Credit Facility is dependent on the average base
rate in the market and adjusted for the Groups leverage.
30 November 2022 Currency Interest rate Year of maturity Debt value Carrying value
£000 £000
Bank loans GBP SONIA + 1.95 -2.5% 2026 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
Changes in liabilities from financing activities
30 November 2023 Bank loan Lease liabilities Total
£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
Other movements 146 - 146
Total 469 169 638
Balance at 30 November 2022 14,675 4,090 18,765
Changes from financing cash flows
Lease additions - 53 53
Proceeds from new loan 8,204 - 8,204
Repayment of existing loans (2,250) - (2,250)
Interest paid (1,450) (138) (1,588)
Payment of lease liabilities - (730) (730)
Total 19,179 3,275 22,454
Other changes
Interest expense 1,371 138 1,509
Other movements 149 - 149
Total 1,520 138 1,658
Balance at 30 November 2023 20,699 3,413 24,112
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 2021 1,709
Additions to right of use 2,620
asset
Effect of movements in foreign currency 83
Depreciation (725)
Balance at 30 November 2022 3,687
Additions to right of use asset 53
Effect of movements in foreign currency (34)
Depreciation (796)
Balance at 30 November 2023 2,910
Leases Land and buildings
£000
Balance at 1 December 2021 1,923
Additions to lease 3,035
liabilities
Interest expense 169
Depreciation (1,037)
Balance at 30 November 2022 4,090
Additions to lease 53
liabilities
Interest expense 138
Depreciation (868)
Balance at 30 November 2023 3,413
Amounts recognised in the consolidated income statement
Land and buildings Year ended Year ended
30 November 2023 30 November 2022
£000 £000
Depreciation charge on right of use assets 796 725
Interest on lease liabilities 138 169
Total 934 894
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 2023 3,413 3,677 937 953 1,304 483
30 November 2022 4,090 4,916 867 969 2,357 723
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 £265,000 (year ended 30 November 2022: £271,000).
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. 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 year are as follows:
Number Weighted exercise price Weighted average remaining contracted life
Sharesave 2023 2022 2023 2022 2023 2022
Outstanding at 1 December 554,192 48,672
Granted during the year - 508,720
Forfeited (217,112) (3,200)
Outstanding at 30 November 337,080 554,192 £0.57 £0.56 8.3 yrs 9.75 yrs
Number Weighted exercise price Weighted average remaining contracted life
EBT 2023 2022 2023 2022 2023 2022
Outstanding at 1 December 9,195,902 9,195,902
Outstanding at 30 November 9,195,902 9,195,902 £0.00 £0.00 4.4yrs 5.4yrs
Number Weighted exercise price Weighted average remaining contracted life
LTIP 2023 2022 2023 2022 2022 2022
Outstanding at 1 December 2,565,772 -
Granted during the year - 2,565,772
Lapsed 107,772 -
Outstanding at 30 November 2,458,000 2,565,772 nil p nil p 8.25 9.25
No options were exercised or granted in the EBT, the sharesave scheme or LTIP
during the year
Fair value of share options and assumptions
As at 30 November 2023
LTIP EBT Sharesave 2022 Sharesave 2021
Fair value at measurement date £0.45 £1.88 £nil £0.35
Share price at grant £0.45 £1.88 £0.31 £1.82
Exercise price £0.00 nil £0.45 £1.82
Expected volatility 25.0% 45.0% 25.0% 25.0%
Expected dividends 0.0% 0.0% 0.0% 0.0%
Risk free interest rate 2.0% 0.6% 2.0% 1.25%
Option life 3.25 years 0.2 years 3.25 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 2023 Year ended 30 November 2022
£000 £000
Sharesave 8 27
LTIP (140) 140
(132) 167
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% of the voting shares of the Group.
Group
The compensation of the Directors, including amounts paid for services
provided to the directors totalled £702,000 (Year ended 30 November 2022:
£673,000). See note 8 for further details.
Compensation for other members of the Senior Leadership Team not included in
the above totalled £1,004,000. (Year ended 30 November 2022: £1,095,000)
In addition, Equity-settled share-based payment charges and Employers NI with
key management personnel totalled £67,000 (Year ended 30 November 2022:
£371,000).
Transactions with the Employee Benefit Trust
There were no movements in EBT during the year (2022: no movements) 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.
27. Capital and reserves
The authorised, issued and fully paid number of shares are set out below:
# £0.01 each £'000
30 November 2021 - Ordinary shares 107,772,050 1,078
Shares issued in the year 36,237 -
30 November 2022 - Ordinary shares 107,808,287 1,078
30 November 2023 - Ordinary shares 107,808,287 1078
The ordinary shares have full voting, dividend and capital distribution
rights, including on winding up. They are non-redeemable. 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 Group applies the IFRS 9 when measuring expected credit losses for trade
receivables. Given the very low trade receivables balances, the low expected
loss rates and the known credit status of the customers, the loss allowance is
less than £1,000. Group balances are also assessed under IFRS9 and impairment
provisions for receivables from related parties and loans to related parties
are recognised based on a forward looking expected credit loss model. The
methodology used to determine the amount of the provision is based on whether
there has been a significant increase in credit risk since initial recognition
of the financial asset. Where appropriate the Group balances are impaired.
Exposure to credit risk
30 November 30 November 2022
2023 £000
£000
Trade and other receivables 891 917
Cash and cash equivalents 7,600 6,806
Total 8,491 7,723
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 2023 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 7,778 7,778 7,778 - - -
Bank loans 20,699 20,953 203 - 20,750 -
Derivative financial liability 96 96 96 - - -
Lease liabilities 3,413 3,677 937 953 1,304 483
Total 31,890 32,408 8,918 953 22,054 483
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
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 27,659 28,783 9,938 969 17,153 723
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
2023 2022
£000 £000
Fixed rate instruments
Lease liabilities 3,413 4,090
Total 3,413 4,090
Variable rate instruments
Bank loans 20,953 14,973
Total 20,953 14,973
Sensitivity analysis
A change of 150 basis points in interest rates at the reporting date would
have decreased equity and profit or loss by £270,000 (2022: 100 basis points
£106,000). 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 2023 30 November 2022
GBP Sterling US Dollars Total GBP Sterling US Dollars Total
£000 £000 £000 £000 £000 £000
Cash and cash equivalents 6,594 1,006 7,600 5,834 972 6,806
Trade and other receivables 787 104 891 836 81 917
Trade and other payables (7,147) (631) (7,778) (7,915) (883) (8,798)
Borrowings (20,699) - (20,699) (14,675) - (14,675)
Lease liabilities (2,791) (622) (3,413) (3,194) (896) (4,090)
Total (23,256) (143) (23,399) (19,114) (726) (19,840)
The following significant exchange rates were applied:
30 November 30 November
2023 2022
Average rate for the financial period
US Dollars 1.24 1.26
Balance sheet rate
US Dollars 1.27 1.21
Sensitivity analysis
A 10 percent weakening of the US Dollar against the pound sterling at 30
November 2023 would have decreased equity and profit or loss by £20,000
(2022: £20,000). 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).
2023 2022
Carrying Carrying
amount Fair value amount Fair value
£000 £000 £000 £000
Borrowings (Level 3) 20,699 20,953 14,675 14,973
Derivative financial liability (Level 2) 96 96 - -
Total 20,795 21,049 14,675 14,973
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 (loss)/ 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 2023 30 November 2022
£000 £000
Loss before tax (6,764) (1,457)
Equity-settled share-based payments (132) 167
Other non-underlying items 2,527 174
Adjusted loss profit before tax (1,116)
(4,369)
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 2023 30 November 2022
£000 £000
Adjusted loss before tax (4,369) (1,116)
Depreciation of property, plant and equipment 5,943 3,877
Impairment of property, plant and equipment 1,463 835
Loss on disposal of property, plant and equipment - 19
Amortisation of intangible assets 2,538 1,910
Financial expense 1,877 946
Adjusted EBITDA 7,452 6,471
Adjusted operating cash flow
Adjusted operating cash flow is calculated as Adjusted EBITDA adjusted for
movements in working capital.
Year ended 30 November 2023 Year ended
£000 30 November 2022
£000
Adjusted EBITDA 7,452 6,471
Movements in working capital 1,029
2,102
Adjusted operating cash flow 9,554 7,500
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 2023 Year ended
£000 30 November 2022
£000
Net cash generated from operations (from Consolidated Cash Flow
Statement) 8,123 6,193
Other non-underlying cash items 198 174
Cash generated from operations before non-underlying items paid 8,321 6,367
Adjusted EBITDA 7,452 6,471
Cash conversion % 111.7% 98.4%
Net 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.
Year ended Year ended
30 November 2023 30 November 2022
£000 £000
Cash and cash equivalents 6,806 6,806
Loans and accrued loan interest (20,699) (14,675)
Unamortised loan arrangement fees (254) (298)
External loans (20,953) (14,973)
Net debt (14,147) (8,167)
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