INTERIM RESULTS FOR THE 6 MONTHS ENDED 31 MAY 2024
28/06/2024 07:00
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RNS Number : 2383U musicMagpie plc 28 June 2024
28 June 2024
musicMagpie plc
("musicMagpie", or "the Group")
INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 MAY 2024
musicMagpie, a circular economy pioneer specialising in refurbished consumer
technology, disc media and books, announces its unaudited interim results for
the six months ended 31 May 2024.
Financial and operational highlights
· Group revenue of £53.8m (H1 2023: £61.9m), with the reduction
owing to the planned conversion of the Group's US business into a
sourcing-only operation
· UK Consumer Technology outright sales marginally up at £28.7m (H1
2023: £28.6m)
· US Consumer Technology outright sales reduced to £1.6m (H1 2023:
£8.5m), with the effect of the change to a sourcing-only operation
· Rental revenue was £3.8m (H1 2023: £4.0m), with active
subscribers of 32,700 at 31 May 2024 (30 Nov 2023: 37,100), as the business
manages the cash investment required for rented devices
· Disc Media and Books sales of £19.7m (H1 2023: £20.9m), down 5.7%
on the prior year, but representing a significant reduction on the declines
seen in previous years
· Successful delivery of cost reduction measures reduced overheads by
£2.4m in H1 2024 versus H1 2023 mitigating much of the reduced gross profit
from lower revenues
· Adjusted EBITDA(1) of £2.4m (H1 2023: £2.8m), with the prior
period benefiting from a one-off £0.3m from the sale of delinquents from the
rental book
· Small improvement in loss before taxation of £3.0m (H1 2023:
£3.2m loss) on lower revenues and with significantly less cash investment;
£0.5m improvement against H1 2023 when excluding the benefit of a sale of
delinquent rental assets in the prior period
· Net debt for bank reporting of £13.8m (31 May 2023: £13.7m),
consistent with Board expectations and prior year
· Post period end: launched the buying of branded fashion on the
musicMagpie platform as the next step in unlocking a 'world of inventory' from
people's homes
OUTLOOK
Due to the prevailing macroeconomic headwinds in the market, current trading
conditions remain challenging. However, the second half of the Group's
financial year includes the Black Friday period and this is historically when
the majority of full year profits are earned. While current wider market
conditions lead the Board to be cautious on the medium-term outlook, by
focusing on improving profitability, combined with the cost savings
introduced, the Board remains confident in the strategy of unlocking inventory
in people's homes to further capitalise on the growth in second-use markets.
1 Adjusted EBITDA, means adjusted (loss)/ profit before tax before
depreciation, impairment of property, plant and equipment and amortisation of
intangible assets and financial expense.
Commenting on the results, Steve Oliver, Chief Executive Officer of
musicMagpie, said:
"Amidst an increasingly competitive environment for second-use technology, and
with consumers continuing to feel the squeeze on their wallets, the market has
undoubtedly been challenging. However, our turnover remained robust in the UK,
where Consumer Technology sales held firm, and Disc Media and Books showed
welcome signs of stabilisation.
"We have been proactive in delivering savings to our cost base and right
sizing our business. Combined with our efforts to refine and improve the way
in which we buy, sell, and rent, our business is now in a stronger position
and better able to capitalise on the continued growth of second-use markets.
We have recently launched the buying of branded fashion items on the
musicMagpie platform and intend to continue broadening our offering and
further unlock the 'world of inventory' that sits in consumers' households."
- 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
Rachel Goldstein
Powerscourt (Financial Public Relations) Tel: +44 (0) 20 7250 1446
Rob Greening
Sam Austrums
Oliver Banks
Offer period
musicMagpie plc has been in an offer period since 27 November 2023 during
which time various conversations have taken place with interested parties.
Several discussions remain ongoing and as such the Company remains in an
offer period. There can be no certainty that any offer for the Company will
be made, nor as to the terms of any such offer. The Panel Executive has
granted a dispensation from the requirements of Rule 2.4(a) and Rule 2.4(b) of
the Takeover Code such that the Company is not required to identify any
potential offeror with which the Company is in talks, or from which an
approach has been received.
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, physical media products and clothing items 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 over 293,000 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)
OPERATING REVIEW
Consumer Technology
We took the decision during the early part of the period to convert the US
Consumer Technology business into a sourcing-only operation, buying devices in
the US and selling them in the UK for a higher gross margin than could be
achieved in the US. This decision has had an inevitable impact on overall
revenues, with the US business reporting revenues that were £7.7m lower than
the prior year. This reduction accounts for the majority of the £6.8m
reduction in Group Consumer Technology revenues, which fell to £30.3m. In the
UK, Consumer Technology had marginally increased revenues of £28.7m versus
£28.6m in H1 2023 owing to the impacts of the increasingly competitive market
for second-use technology. Buying cheaper in the US and selling in the UK did
positively contribute to the Group's margins, with overall gross margins being
19.7%, up by 1.4% on the 18.3% achieved in the 12 months to November 2023.
During H1 2024 we also progressed our Buy Now Pay Later ("BNPL") offering with
the introduction of both design and technical improvements at checkout and on
our product detail pages. As a result, we are seeing improved sales conversion
rates. Enhancing cost spreading options to the consumer, with BNPL sitting
alongside and complementing our Rental subscription model, is expected to
improve overall outright sales, the full effects of which will be clearer at
the FY24 results, given the recent timings of these changes.
Finally, our SMARTDrop kiosks remain a unique differentiator and enabler in
sourcing good product. Our kiosks are installed across approximately 290 Asda
stores in the UK as well as a small number of large shopping centres. This
innovative buying tool allows us to promote our brand, buy additional handsets
and give consumers the unique opportunity to get paid within seconds for their
smartphones. During the period we have refined our kiosk offering away from
a mass-market solution towards upper end devices.
Rental
To optimise the Group's return on capital, we chose to segment the rental
model midway through 2023, limiting it to a smaller subset of customers with
higher credit ratings, better renewal rates and more interest in the upgrade
journey. The impact of this strategy is visible in the H1 2024 performance;
the cash investment into rental assets was just £0.2m (H1 2023: £4.6m),
gross margin was up at 90.7% (H1 2023: 84.5%) and, allowing for depreciation
and loss provisions of £1.9m (H1 2023: £2.8m), rental has made a
significantly improved bottom line contribution despite the reduced number of
contracted renters of 32,700 (November 2023: 37,100). We will continue to
manage the offering during the second half of the financial year and expect a
lower level of Rental revenue than reported in 2023. The lower revenue will
be somewhat offset at a profit before taxation level by reduced depreciation
and lower impairment losses.
Disc Media and Books
Disc Media and Books is our legacy category and is being managed for cash.
Over recent years, this category's sales have been affected by the move to
online streaming. Pleasingly, however, the revenue decline appears to be
decelerating, with revenue to May 2024 being down just 5.7% compared to the
17.4% reduction seen in the same six-month period in 2023. The Disc Media and
Books segment only requires modest investment to sustain its performance and
during the period we implemented a new pricing software to automate and
improve pricing.
Resilience Strategies
In response to the challenging market conditions, the Group has implemented a
number of strategies that focus on profitability and cash. Our "no stone
unturned" approach in both the UK and US has resulted in a significant
reduction in overheads, and we continue to review the Group's cost base and
cost drivers to achieve best value. We have reduced the number of staff in the
US because of the move to become a sourcing-only business for Consumer
Technology. We also took similar steps in the UK to better match the cost base
of the business to the size of its activity. With our external marketing
spend, we have been even more judicious with our outlay, but without damaging
overall brand awareness. In total, overheads were down £2.4m (or around 15%)
and we expect further progress in H2 2024 as the full run-rate benefit of the
changes made takes effect.
Operational Improvements
The most significant operational change in the period has been the decision to
convert the Group's US business into a sourcing-only operation. The US market
for second-use phones is not as developed as in the UK. We are therefore able
to source product in the US and sell into the UK to exploit greater margin
opportunities than selling in-country. This step has also allowed us to reduce
costs in the US to fit a sourcing-only model and, in total, is accretive to
the Group.
As well as the strategic decision to reduce activity in the US, we have made
tactical technological investments into AI to further reduce our reliance on
manual processes. AI brings the advantages of scalability, consistency and a
reduction in costs, and we have started by making significant changes in our
back-office customer service functions. The Consumer Technology business
employs a skilled workforce for the repairing of devices, and we have put more
rigorous models around when to undertake value-add activities, helping us to
improve more devices for higher margin where the economics permit.
Both activities have helped to deliver sustained gross margins, which were
38.3% in Consumer Technology (H1 2023: 38.1%) and 29.1% at a Group-level (H1
2023: 29.7%).
Other second-use markets
Growing environmental awareness is seeing the recommerce sector flourish and
become mainstream. We expect this trend will continue across an
ever-broadening spectrum of products and categories, and we have a strategy to
unlock a 'world of inventory' from consumers' homes by providing them with
solutions across new product categories.
We entered our first new category in June 2024 with the launch of a branded
fashion buying service on the musicMagpie store. The items purchased using
this new service will then be sold onto expert third-party trade partners. The
Group has a scalable model for buying and selling new product categories and,
where the economics are attractive, we expect to add further new product
categories to our offering.
FINANCIAL REVIEW
Revenue and EBITDA
Group revenue for the six months ended 31 May 2024 was £53.8m (H1 2023:
£61.9m). Changes to the US Consumer Technology business, which was converted
to a sourcing-only operation, were responsible for £6.9m (or 85%) of the
period's revenue decline. Outright Consumer Technology sales in the UK were
£28.7m (H1 2023: £28.6m).
Rental revenues were £3.8m (H1 2023: £4.0m) with 32,700 active renters at 31
May 2024 (H1 2023: 39,000). Overall rental profitability has increased, helped
by higher margins and lower delinquency costs. Given the current strategy of
limiting our Rental offering to a subset of higher-quality customers, and the
opening position of 32,700 contracts at 1 June 2024, revenues will continue to
reduce during the second half of the financial year.
Revenues in Disc Media and Books, our legacy category, declined less than in
recent years. Segment revenue was £19.7m, which represents a fall of 5.7%
from £20.9m in 2023. Within this category, UK revenues fell by just 2.7%, or
£0.4m, which again suggests a deceleration in category decline.
Despite lower volumes, gross margin for Consumer Technology increased to 27.6%
(H1 2023: 26.6%),and was positively impacted by the richer mix of higher
margin rental sales. H1 2024 Consumer Technology margins also compare
favourably to the 12-month period to November 2023, where gross margin was
24.5%. Gross margin from the Disc Media and Books segment was 31.6% (H1 2023:
35.9%) having been impacted by some moderate cost increases, mainly in
postage. Pleasingly, Group expectations for the category in the second half of
the financial year are more positive.
Total gross profit for the Group was £15.6m (H1 2023: £18.4m), resulting in
a gross margin of 29.1% (H1 2023: 29.7%). Below gross profit and as part of a
strategy to control costs and increase profitability, overheads were £13.3m,
significantly down on the £15.6m from 2023, as a result of savings both in
terms of marketing spend and the operational costs base.
Adjusted EBITDA for the period was £2.4m (H1 2023: £2.8m) reflecting in part
the retraction of US sales, and the prior period benefitting from one-off
disposal proceeds from delinquent accounts.
Reported and adjusted PBT
Below EBITDA, the reduction in the value of assets out on rent has driven a
large portion of the reduction in depreciation from £2.7m in 2023 to £2.4m
in the current year. In addition, the focus of renting to higher credit rated
customers has helped reduce the losses on rentals from £0.9m for the six
months to May 2023 to just £0.3m for the same period in 2024. Combining
Rental contribution, deprecation and losses has created a £1.0m improvement
to PBT year over year. Amortisation increased to £1.4m (H1 2023: £1.2m) and
reflects the profile of spend in previous periods. The £0.2m of exceptionals
in the period (H1 2023: £0.5m) related to the severance cost of leavers
following cost reduction exercises, and in the prior year were associated with
the energy contract mark-to-market that has a negligible impact in 2024.
Finance costs were £1.0m (H1 2023: £0.8m), with the small increase being
driven by an increase in the average drawings over the period. Interest
costs are a focus for the Group with efforts being made to keep the drawing
down and minimise interest payments.
The Group's loss before tax was £3.0m (H1 2022: £3.2m). After estimating the
full year tax rate and adjusting for deferred tax, the tax credit for the
period is £0.1m (H1 2023: £0.3m) and the loss after tax is £2.9m (H1 2023:
£2.9m). The basic and diluted loss per share was 2.9p (H1 2023: 2.9p).
Balance sheet
Non-current assets reduced from £31.3m to £25.9m, with £2.9m of this
reduction within the Rental assets with a lower number of contracts in May
2024. The remaining reduction was owing to deprecation of £0.8m (H1 2023:
£0.8m) being much greater than the level of new capex £0.1m (H1 2023:
£0.2m).
A focus on stock management, and changes made in the US operation, have
benefitted inventory, which reduced to £5.0m (H1 2023: £7.5m) and made a
significant contribution to cash inflows during the period. Other working
capital levels have remained fairy static, contributing to net current assets
of £4.0m (H1 2023: £6.5m).
Borrowings remained virtually unchanged at £18.4m (H1 2023: £18.4m), as did
cash and cash equivalents, which were £4.6m (H1 2023: £4.8m), leaving a very
similar level of net debt.
Net assets at the end of the period were £9.4m (31 May 2023: £16.5m).
Cashflow
Operating cashflows were up £0.4m on the prior year at £2.8m (H1 2023:
£2.4m) driven by a reduction in working capital related to lower activity in
the US Consumer Technology business supporting an inventory number
significantly lower than November 2023.
Below operating cashflow, capex spend was down significantly to £0.3m versus
£4.8m in the prior year, almost entirely owing to the reduction in the rental
book. Development spend of £1.8m (H1 2023 £2.2m) was also down following the
completion of a number of major IT projects. In total, cash consumed on
investing activities was down £4.8m on the same period to May 2023. Below
investing activities, £0.5m was incurred on property leases, consistent with
the prior period. Interest paid on the Group's borrowings was £1.0m, up from
£0.7m owing to the larger average debt during the period.
Net debt for bank reporting on 31 May was £13.8m (H1 2023: £13.7m, and at
November 2023 £13.1m). The rental contracts for the 32,700 renters represent
committed future cashflows of £3.3m as well as £5.1m of assets that will
return to the business for resale once contracts are complete. Stating net
debt after both these future cashflows reduces the net debt to a notional
figure of £5.4m (H1 2023: £3.6m).
Both leverage (being net debt to rolling EBITDA) and interest cover (being
rolling EBITDA divided by net interest costs) are comfortably under the
previously stated covenant limits of 2.5 times leverage and 4.0 times interest
cover.
Martin Hellawell Steve
Oliver
Chair Chief
Executive Officer
Consolidated Condensed Statement of Comprehensive Income
Unaudited Unaudited Audited
6 months ended 6 months ended Year
31 May 2024
31 May 2023
ended
£'000 £'000
Note 30 Nov
2023
£'000
Revenue 4,5 53,817 61,929 136,601
Cost of sales (38,172) (43,533) (98,737)
Gross profit 15,645 18,396 37,864
Operating expenses (17,405) (20,424) (40,224)
Operating expenses - exceptional (229) (372) (2,527)
Total operating expenses (17,634) (20,796) (42,751)
Adjusted EBITDA* 11 2,359 2,759 7,452
Depreciation of property, plant and equipment (2,362) (2,697) (5,943)
Impairment of property, plant and equipment (323) (897) (1,463)
Amortisation of intangible assets (1,434) (1,193) (2,538)
Equity - settled share-based payments - 137 132
Other non - underlying items (229) (509) (2,527)
Operating loss (1,989) (2,400) (4,887)
Financial expense
(1,010) (776) (1,877)
Loss before taxation (2,999) (3,176) (6,764)
Taxation 6 107 325 (89)
Loss for the period (2,892) (2,851) (6,853)
Other comprehensive expense
Items that may be reclassified to profit and loss
Foreign exchange differences on translation of foreign operations (6) (100) (282)
Total comprehensive loss for the period (2,898) (2,951) (7,135)
Pence Pence Pence
Basic and diluted loss per share for the period 7 (2.9) (2.9) (6.8)
* Adjusted EBITDA, means adjusted (loss)/ profit before tax before
depreciation, impairment of property, plant and equipment and amortisation of
intangible assets and financial expense.
Consolidated Condensed Statement of Financial Position
Unaudited Unaudited Audited
As at As at As at
31 May 2024
31 May 2023
Note
30 Nov
£'000 £'000
2023
£'000
Assets 8
Property, plant and equipment 9 10,740 15,165 13,068
Intangible assets and goodwill 13,216 13,339 12,827
Deferred tax 1,954 2,234 1,847
Derivative financial asset - 578 -
Total non-current assets 25,910 31,316 27,742
Inventories 4,958 7,522 7,387
Trade and other receivables 2,233 2,476 1,996
Derivative financial asset - 240 -
Cash and cash equivalents 4,574 4,755 7,600
Total current assets 11,765 14,993 16,983
Total assets 37,675 46,309 44,725
Liabilities
Trade and other payables (6,754) (7,775) (8,241)
Other interest-bearing loans and borrowings - - (203)
Lease liabilities (896) (746) (831)
Derivative financial liability (96) - (96)
Total current liabilities (7,746) (8,521) (9,371)
Net current assets 4,019 6,472 7,612
Borrowings (18,422) (18,408) (20,496)
Lease liabilities (2,129) (2,925) (2,582)
Total non-current liabilities (20,551) (21,333) (23,078)
Total liabilities (28,297) (29,854) (32,449)
Net assets 9,378 16,455 12,276
Equity
Share capital 1,078 1,078 1,078
Other reserves 14,303 14,491 14,309
Retained earnings 10 (6,003) 886 (3,111)
Equity attributable to owners of the company 9,378 16,455 12,276
Consolidated Condensed Statement of Changes in Equity
Share capital Other reserves Retained earnings Total
£'000 £'000 £'000 equity
£'000
As at 30 November 2022 1,078 14,591 3,874 19,543
Loss for the period - (2,851) (2,851)
Foreign currency translation - (100) - (100)
Total comprehensive loss for the period - (100) (2,851) (2,951)
Transactions with shareholders:
Share-based payments - - (137) (137)
As at 31 May 2023 1,078 14,491 886 16,455
Loss for the period - (2,230) (2,230)
Foreign currency translation (182) (182)
Total comprehensive profit for the period - (182) (2,230) (2,048)
Transactions with shareholders:
Share-based payments - - 5 5
As at 30 November 2023 1,078 14,309 (3,111) 12,276
Loss for the period - (2,892) (2,892)
Foreign currency translation - (6) - (6)
Total comprehensive loss for the period - (6) (2,892) (2,898)
As at 31 May 2024 1,078 14,303 (6,003) 9,378
Consolidated Condensed Cash Flow Statement
Unaudited Unaudited Audited
6 months 6 months Year
ended ended ended
31 May 2024
31 May 2023
30 Nov 2023
£'000 £'000
£'000
Net cash flow from operating activities
Loss for the period (2,892) (2,851) (6,853)
Adjustments for:
Finance costs 1,010 776 1,877
Income tax expense (107) (325) 89
Depreciation of property, plant and equipment 2,362 2,697 5,943
Impairment of property, plant and equipment 323 897 1,463
Amortisation 1,434 1,193 2,538
Fair value gain on derivative instruments - 315 1,229
Share-based payments expense - (137) (132)
Working capital adjustments
Decrease in inventories
2,429 1,302 1,427
(Increase)/ decrease in trade and other receivables
(237) 126 579
Decrease in trade and other payables
(1,487) (1,565) (1,143)
Net cash from operations 2,835 2,428 8,127
Cash flows used in investing activities
Acquisition of property, plant and equipment Capitalised development (314) (4,765) (6,429)
expenditure
(1,823) (2,153) (4,086)
Net cash used in investing activities (2,137) (6,918) (10,515)
Cash flows used in financing activities
Proceeds from new loan - 3,704 5,954
Interest paid (974) (656) (1,668)
Repayment of lease liabilities (433) (419) (730)
Interest paid on lease liabilities (61) (91) (138)
Repayment of borrowings (2,250) - -
Net cash used in finance activities (3,718) 2,538 3,418
Net (decrease)/increase in cash and cash equivalents (3,020) (1,952) 1,030
Cash and cash equivalents brought forward
Exchange losses on cash and cash equivalents 7,600 6,806 6,806
(6) (99) (236)
Cash and cash equivalents carried forward 4,574 4,755 7,600
Notes to the Interim Results
1. General Information
The Directors of musicMagpie plc (the "Company") present their Interim Report
and the unaudited Condensed Consolidated Interim Financial Statements for the
six months ended 31 May 2024 ("Condensed Consolidated Interim Financial
Statements").
musicMagpie plc is a public limited company incorporated in the United Kingdom
whose shares are publicly traded on the AIM market of the London Stock
Exchange and is incorporated and domiciled in the UK. Its registered address
is One Stockport Exchange, Railway Road, Stockport, Cheshire, SK1 3SW.
2. Basis of Preparation
The Group's half-yearly financial information, which is unaudited,
consolidates the results of musicMagpie plc and its subsidiary undertakings up
to 31 May 2024. The Group's accounting reference date is 30 November. The
presentational and functional currency of the Group is Sterling. Results in
this consolidated financial information have been prepared to the nearest
£1,000.
musicMagpie plc and its subsidiary undertakings have not applied IAS 34,
Interim Financial Reporting, which is not mandatory for UK AIM listed groups,
in the preparation of this half-yearly financial report.
The accounting policies used in the preparation of the financial information
for the six months ended 31 May 2024 are in accordance with the recognition
and measurement criteria of UK adopted International Financial Reporting
Standards ('IFRS') and are consistent with those which will be adopted in the
annual financial statements for the year ending 30 November 2024. The profit
before interest, tax, depreciation, amortisation and share-based payment
charge is presented in the statement of total comprehensive income as the
Directors consider this performance measure provides a more accurate
indication of the underlying performance of the Group and is commonly used by
City analysts and investors.
While the financial information included has been prepared in accordance with
the recognition and measurement criteria of UK adopted IFRS, these interim
financial statements do not contain sufficient information to comply with
IFRS. The comparative financial information for the year ended 30 November
2023 has been extracted from the annual financial statements of musicMagpie
plc. These interim results for the period ended 31 May 2024, which are not
audited, do not comprise statutory accounts within the meaning of section 434
of the Companies Act 2006. The financial information does not therefore
include all of the information and disclosures required in the annual
financial statements. Full audited accounts of the Group in respect of the
year ended 30 November 2023, which received an unqualified audit opinion and
did not contain a statement under section 498(2) or (3) of the Companies Act
2006, have been delivered to the Registrar of Companies.
Accounting Policies
The accounting policies adopted in the preparation of the Condensed
Consolidated Interim Financial Statements are consistent with those followed
in the preparation of the Historical Financial Information. The Group has not
early adopted any standard, interpretation or amendment that has been issued
but is not yet effective. Their adoption is not expected to have a material
effect on the Condensed Consolidated Interim Financial Statements.
Critical accounting judgements and key sources of estimation and uncertainty
The preparation of the Condensed Consolidated Interim Financial
Statements requires management to make judgements, estimates and assumptions
that affect the application of policies and reported amounts of assets and
liabilities, income and expenses. The estimates and associated assumptions are
based on historical experience and various other factors that are believed to
be reasonable under the circumstances, the results of which form the basis of
making judgements about carrying values of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from these
estimates. In preparing these Condensed Consolidated Interim Financial
Statements, the key sources of estimation uncertainty and the critical
accounting judgements made by management are as follows:
Key sources of estimation uncertainty
The Group makes an estimate of the useful economic life of acquired intangible
assets being the proprietary software acquired. When assessing the useful
economic life, management considers expected usage of the assets; technical,
technological, commercial and other types of obsolescence; changes in the
market demand for the products related to the assets; the level of maintenance
expenditure required to maintain the assets' operating capability and whether
the assets' useful life is dependent on the useful life of other assets of the
entity.
Stock provisioning - the Group carries significant amounts of stock against
which there are provisions for slow moving lines. The provisioning policies
require a degree of judgement and the use of estimates around future sales
based on the historical demand for product lines. In addition, management
make use of this historical sales data regarding selling price of items in
order to ensure that inventories are valued at the lower of cost and net
realisable value.
Impairment of assets - in testing for impairment of goodwill and other assets,
management have made certain assumptions concerning the future development of
the business that are consistent with its forecasts into perpetuity. Should
these assumptions regarding the discount rate or growth in the profitability
be unfounded then it is possible that investments and other assets included in
the balance sheet could be impaired.
Critical accounting judgements
Capitalisation of website and IT development costs - judgement is applied to
assess whether the criteria for capitalisation of costs is met.
Going Concern
The Directors have reviewed the Group's forecast and projections,
including assumptions concerning capital expenditure and expenditure
commitments and their impact on cash flows, and have a reasonable expectation
that the group has adequate financial resources to continue in operational
existence for at least 12 months from the date of approval of the interim
statements. For this reason, they have continued to adopt the going concern
basis in preparing the financial statements.
3. Principal Risks and Uncertainties
The Directors consider that the principal risks and uncertainties, which could
have a material impact on the Group's performance in the remaining six months
of the financial year, remain substantially the same as those stated on pages
33-34 of the Group's Annual Report and Accounts to 30 November 2023, which is
available on the Group's website, www.musicmagpieplc.com
(https://url.avanan.click/v2/___http:/www.musicmagpieplc.com___.YXAxZTpzaG9yZWNhcDphOm86MjM0MmM2NGQzOTI4ZDE3NDk5YzQxMWE5NzczNDIyYjg6NjpmNTg4OjA0ZWY2NjY2YThmNzBiNzI1ZTE1MTQwMGRhNzg2MTQ2YzdmZmFjNGZjNzNiMzM4MmNmNTI0M2ViNDIyYmIxOTI6cDpG)
.
4. Segmental reporting
Information reported to the Group's Chief Executive Officer for the purposes
of resource allocation and assessment of segment performance is focused on
product categories. The principal product categories and the Group's
reportable segments under IFRS 8 are Consumer Technology, Media and Books.
An analysis of the results for the period by reportable segment is as follows:
6 months ended 31 May 2024
Outright sales Rental Consumer Technology Media and Books Total
£'000 £'000 £'000 £'000 £'000
Revenue 30,301 3,789 34,089 19,727 53,817
Gross profit 5,965 3,437 9,402 6.243 15,645
Processing wages (1,695) (72) (1,767) (3,033) (4,800)
Contribution after direct labour 4,270 3,365 7,635 3,210 10,845
Trading margin (%) 30.6 100.0 38.3 80.1 53.6
Gross profit (%) 19.7 90.7 27.6 31.6 29.1
6 months ended 31 May 2023
Outright sales Rental Consumer Technology Media and Books Total
£'000 £'000 £'000 £'000 £'000
Revenue 37,061 3,993 41,054 20,875 61,929
Gross profit 7,536 3,373 10,909 7,487 18,396
Processing wages (2,264) (75) (2,339) (3,352) (5,691)
Contribution after direct labour 5,272 3,298 8,570 4,135 12,705
Trading margin (%) 31.4 100 38.1 82.8 53.2
Gross profit (%) 20.3 84.5 26.6 35.9 29.7
12 months ended 30 November 2023
Consumer Media and Books Total
Technology
Outright sales Rental 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 profit (%) 18.3 89.8 24.5 35.2 27.7
5. Revenue
Disaggregation of revenue
An analysis of revenue by geographical location of customer is given below:
Unaudited Unaudited Audited
6 months ended 6 months ended Year
31 May 2024
31 May 2023
ended
£'000 £'000
30 Nov 2023
£'000
United Kingdom 44,097 44,259 99,883
Within the European Community other than United Kingdom 1,670 1,181 2,353
United States of America
Outside the European Community 6,700 14,746 29,585
1,350 1,743 4,780
Total 53,818 61,929 136,601
6. Taxation
Unaudited Unaudited Audited
6 months ended 6 months ended Year
31 May 2024
31 May 2023
ended
£'000 £'000
30 Nov 2023
£'000
Current tax expense
Charge for the year - - 32
Adjustments in respect of previous periods - - (5)
Total Current tax expense - - 27
Deferred tax credit
Origination and reversal of temporary differences (107) (325) 53
Adjustment in respect of previous periods - - 9
Total deferred tax (credit)/ charge (107) (325) 62
Total tax (credit)/ charge in the income statement (107) (325) 89
UK Corporation tax rate used to calculate the estimated tax due and deferred 25% 25% 25%
tax timing differences:
7. Earnings per share
Unaudited Unaudited Audited
6 months ended 6 months ended Year
31 May 2024
31 May 2023
ended
£'000 £'000
note 30 Nov 2023
£'000
Loss for the period (2,892) (2,851) (6,853)
Number Number Number
Weighted average number of shares in issue 1 98,612,385 98,612,385 98,612,385
Diluted number of shares
101,070,385 101,070,385 101,070,385
2
Pence Pence Pence
Basic loss per share (2.9) (2.9) (6.8)
Diluted loss per share (2.9) (2.9) (6.8)
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.
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.
8. Property, plant and equipment
Right of use lease asset Fixtures and fittings Computer and office equipment
£'000 Plant and machinery £'000 Rental assets £'000
£'000 £'000 Total
£'000
Cost
Balance at 30 November 2022 7,319 2,756 1,900 8,761 1,629 22,365
Additions - 56 79 5,535 55 5,725
Foreign currency adjustment (49) (7) (7) - (3) (66)
Impairment and returns - - - (2,304) - (2,304)
Balance at 31 May 2023 7,270 2,805 1,972 11,992 1,681 25,720
Additions 53 - 18 2,970 44 3,085
Foreign currency adjustment (60) (4) (7) - (3) (74)
Impairment and returns - - - (852) (852)
Disposals - - - (2,818) (2,818)
Balance at 30 November 2023 7,263 2,801 1,983 11,292 1,722 25,061
Additions 44 17 45 1,335 12 1,453
Foreign currency adjustment (2) - - - - (2)
Impairment and returns - - - (2,554) - (2,554)
Balance at 31 May 2024 7,305 2,818 2,028 10,073 1,734 23,958
Depreciation
Balance at 30 November 2022 3,632 364 1,071 2,121 1,182 8,370
Charge for the period 357 219 146 1,853 122 2,697
Foreign currency adjustment (28) (4) (6) (2) (40)
Impairment and returns (472) (472)
Balance at 31 May 2023 3,961 579 1,211 3,502 1,302 10,555
Charge for the period 439 227 124 2,341 115 3,246
Foreign currency adjustment (47) (4) (5) (3) (49)
Impairment and returns - - - (836) - (836)
Disposals - - - (913) - (913)
Balance at 30 November 2023 4,353 802 1,330 4,094 1,414 11,993
Charge for the period 424 208 112 1,522 96 2,362
Foreign currency adjustment (3) - - - (3)
Impairment and returns (1,134) (1,134)
Balance at 31 May 2024 4,774 1,010 1,442 4,482 1,510 13,218
Net book value
At 31 May 2024 2,531 1,808 586 5,591 224 10,740
At 30 November 2023 2,910 1,999 653 7,198 308 13,068
At 31 May 2023 3,309 2,226 761 8,490 379 15,165
9. Intangible assets and goodwill
Website Proprietary software
Good development Domains Total
will £'000 £'000
£'000 £'000 £'000
Cost
Balance at 1 December 2022 4,848 9,971 3,000 53 17,872
Additions - 2,153 - - 2,153
Balance at 31 May 2023 4,848 12,124 3,000 53 20,025
Additions - 1,933 - - 1,933
Balance at 30 November 2023 4,848 14,057 3,000 53 21,958
Additions - 1,823 - - 1,823
Balance at 31 May 2024 4,848 15,880 3,000 53 23,781
Amortisation and impairment
Balance at 1 December 2022 - 3,377 2,082 34 5,493
Charge for the period - 1,040 150 3 1,193
Balance at 31 May 2023 - 4,417 2,232 37 6,686
Charge for the period - 1,193 150 2 1,345
Impairment 1,100 - - - 1,100
Balance at 30 November 2023 1,100 5,610 2,382 39 9,131
Charge for the period - 1,281 150 3 1,434
Balance at 31 May 2024 1,100 6,891 2,532 42 10,565
Net book value
At 31 May 2024 3,748 8,989 468 11 13,216
At 30 November 2023 3,748 8,447 618 14 12,827
At 31 May 2023 4,848 320 768 16 13,339
10. Other Reserves
Share Premium Capital Merger Reserve Translation reserve
£'000 Redemption £'000 £'000 Total
£'000 £'000
As at 30 November 2021 14,449 1,108 (991) (120) 14,446
Foreign currency translation - - - 68 68
As at 31 May 2022 14,449 1,108 (991) (52) 14,514
Foreign currency translation - - - 77 201
As at 30 November 2022 14,449 1,108 (991) 25 14,591
Foreign currency translation - - - (100) (100)
As at 31 May 2023 14,449 1,108 (991) (75) 14,491
Foreign currency translation - - - (182) (182)
As at 30 November 2023 14,449 1,108 (991) (257) 14,309
Foreign currency translation - - - (6) (6)
As at 31 May 2024 14,449 1,108 (991) (263) 14,303
11. Alternative Performance Measures
Management assesses the performance of the Group using a variety of
alternative performance measures. In the discussion of the Group's reported
operating results, alternative performance measures are presented to provide
readers with additional financial information that is regularly reviewed by
management. However, this additional information presented is not uniformly
defined by all companies including those in the Group's industry. Accordingly,
it may not be comparable with similarly titled measures and disclosures by
other companies. Additionally, certain information presented is derived from
amounts calculated in accordance with IFRS but is not itself an expressly
permitted GAAP measure. Such measures are not defined under IFRS and are
therefore termed 'non-GAAP' measures and should not be viewed in isolation or
as an alternative to the equivalent GAAP measure.
The following are the key non-GAAP measures used by the Group:
Adjusted Profit before tax
Adjusted profit before tax means (loss)/profit before tax before
equity-settled share-based payments and other non- underlying items including
non-underlying financial expense relating to deal and early termination fees
from previous financing.
Unaudited Unaudited Audited
6 months ended 6 months ended Year
31 May 2024
31 May 2023
ended
£'000 £'000
30 Nov 2023
£'000
Loss before tax (2,999) (3,176) (6,764)
Equity settled share-based payments - (137) (132)
Other non-underlying items 229 509 2,527
Adjusted Loss before tax (2,770) (2,804) (4,369)
Adjusted EBITDA
Adjusted EBITDA means adjusted profit before tax before depreciation and
amortisation of intangible assets and financial expense.
Unaudited Unaudited Audited
6 months ended 6 months ended Year
31 May 2024
31 May 2023
ended
£'000 £'000
30 Nov 2023
£'000
Adjusted loss before tax (2,770) (2,804) (4,369)
Depreciation of property, plant and equipment 2,362 2,697 5,943
Impairment of property, plant and equipment 323 897 1,463
Amortisation of intangible assets 1,434 1,193 2,538
Financial expense 1,010 776 946
Adjusted EBITDA 2,359 2,759 7,452
Adjusted Operating Cash flow
Adjusted operating cash flow is calculated as Adjusted EBITDA less movements
in working capital.
Unaudited Unaudited Audited
6 months ended 6 months ended Year
31 May 2024
31 May 2023
ended
£'000 £'000
30 Nov 2023
£'000
Adjusted EBITDA 2,359 2,759 7,452
Movements in working capital 705 (137) 2,103
Adjusted Operating Cash flow 3,064 2,622 9,554
Cash conversion %
This is calculated as cash generated from operating activities in the
Consolidated Cash Flow Statement, adjusted to exclude cash payments for
exceptional items, as a percentage of Adjusted EBITDA.
Unaudited Unaudited Audited
6 months ended 6 months ended Year
31 May 2024
31 May 2023
ended
£'000 £'000
30 Nov 2023
£'000
Cash generated from operations before tax payments (from Consolidated Cash 2,835 2,428 8,127
Flow Statement)
Other non-underlying items 229 509 198
Cash generated from operations before tax payments and exceptional items paid 3,064 2,937 8,325
Adjusted EBITDA 2,359 2,759 7,452
Cash conversion % 129.9% 106.5% 111.7%
Net Cash / (debt)
This is calculated as cash and cash equivalent balances less outstanding
external loans. Unamortised loan arrangement fees are netted against the loan
balance in the financial statements but are excluded from the calculation of
net cash/(debt). Lease liabilities and hire purchase are not included in the
calculation of net debt.
Unaudited Unaudited Audited
6 months ended 6 months ended Year
31 May 2024
31 May 2023
ended
£'000 £'000
30 Nov 2023
£'000
Cash and cash equivalents 4,574 4,755 7,600
Loans and accrued loan interest (18,422) (18,408) (20,699)
Unamortised loan arrangement fees (165) (247) (254)
External loans (18,587) (18,655) (20,953)
Net debt (14,013) (13,900) (13,353)
Bank reported Net Debt (exc arrangement fees) (13,848) (13,653) (£13,099)
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