FY21 Results Statement

2 March 2022

musicMagpie plc

("musicMagpie", or “the Group”)

FULL YEAR RESULTS FOR THE YEAR ENDED 30 NOVEMBER 2021

EBITDA performance for the year in line with market expectations

Delivered strong progress in the Group’s rental subscription service – a key strategic priority

musicMagpie, a leading re-commerce business in the UK and US specialising in refurbished consumer technology, announces its audited full year results for the year ended 30 November 2021.

	FY 21 £m	FY 20 £m	FY21 vs. FY20 Change	FY 19 £m	FY21 vs. FY19 Change
Revenue	145.5	153.3	-5.1%	131.5	+10.7%
Gross Profit	44.3	44.8	-1.1%	30.4	+45.7%
Gross Margin	30.4%	29.2%	+4.1%	23.1%	+31.7%
Adjusted EBITDA ¹	12.2	13.9	-12.2%	4.6	+167.1%
Adjusted Profit Before Tax ²	7.9	9.2	-14.4%	(0.2)
Adjusted Earnings per Share ³	7.33p	8.56p	-14.4%	n/a
Net Cash/(Debt) at period end	1.8	(6.3)		(12.6)

Notes

1 Adjusted EBITDA is a non-GAAP measure and has been calculated as earnings before interest, taxation, depreciation, amortisation, equity-settled share-based payments and other non-underlying items.

2 Adjusted Profit Before Tax means profit before tax before equity-settled share-based payments and other non-underlying items, including non-underlying financial expenses.

3 Adjusted Earnings per Share is calculated on Adjusted Profit Before Tax and is given to exclude the effects of equity-settled share-based payments and other non-underlying items and is therefore considered to show the underlying performance of the Group

Financial highlights

· Revenue for the Group of £145.5m (FY20: £153.3m, FY19: £131.5m) down 5.1% in line with management expectations as a result of business normalisation in FY21 following the first year of the pandemic in FY20 but up 10.7% on an FY19 comparative, a CAGR of 5.2%

o Consumer Technology revenue increased by 3.1% to £86.1m (FY20: £83.5m: FY19: £70.4m), representing 59% of Group revenue

o UK Consumer Technology revenue grew by 6.1% to £71.2m, a 16.2% CAGR on FY19 performance

· Gross margin increased to 30.4% (FY20: 29.2%: FY19: 23.1%) due to buy and sell price focus combined with the increased contribution from rental contracts

o Gross profit in Consumer Technology across the Group increased by 9.9% to £21.3m (FY20: £19.4m; FY19 £12.6m) with gross margin increasing from 23.2% to 24.4%

· Adjusted EBITDA of £12.2m (FY20: £13.9m: FY19: £4.6m), in line with management expectations

· Net cash of £1.8m at period end (FY20: net debt (£6.3m)) with continued investment in strategic initiatives underpinned by profitable growth and £15m primary raise at IPO with significant headroom on committed facility

Operational highlights

· Strong progress from the Group’s innovative new device rental subscription service, launched in October 2020, with c.19,000 active paying subscribers as at 28 February 2022. Success of our Rental proposition has led us to expand in to new product categories such as tablets, games consoles, MacBooks and wearables

· Launched a sustainability partnership with Asda, including a projected roll-out expansion of musicMagpie’s innovative SMARTDrop kiosks to nearly 300 Asda stores commencing March 2022: over 8,000 devices traded by 28 February 2022, paying out over £2.3m to consumers increasing inbound items

· The musicMagpie corporate recycling programme fully launched in February 2021, aimed at businesses looking to increase their sustainability efforts: contracts signed with Deloitte and Zurich

· New Apple products now available for sale and rent on musicMagpie Store

· Matthew Fowler joining from genedrive plc as CFO on 20 April 2022

· Successful IPO in April 2021 on the AIM market of the London Stock Exchange raising primary proceeds of £15m to repay existing debt and for investment in Rental and SMARTDrop Kiosks

Successful continuation of environmental initiatives

· Received London Stock Exchange’s Green Economy Mark, which recognises companies that derive 50% or more of total annual revenue from products/services that contribute to the ‘Green Economy'

· Created the ‘Mount Recyclemore’ sculpture at the G7 summit to highlight the growing global problem of e-waste

· During the year, musicMagpie gave a ‘second-life’ to over 400,000 technology products, as well as 2,500 tonnes of legacy categories of disc media and books. musicMagpie’s consumer tech and disc media customers, along with its trade partners, helped to save over 50,000 tonnes of CO2 during the year by buying, selling and renting with the Group – an amount equivalent to providing heating for over 18,000 homes

Current trading and outlook

· FY21 ended strongly with record sales in the UK and US during the Black Friday period across the business. This sales momentum continued as we entered the current year, however, as the first quarter of FY22 has progressed, volumes and trade-in activity levels have moderated in line with consumer trends

· Consumer Tech revenues for the first quarter of the year have been in line with management expectations, but a trend towards lower sales volume at a higher average selling price and an increase in the proportion of products sourced from intermediary wholesale partners, is currently expected to compress the gross margin on outright sales in the category in the current year by c.4.0 percentage points compared to FY21

· The rental subscription service is continuing to grow, with c.19,000 active subscribers at the end of Q1, with a forward contracted order book of £2.2m (2021: £0.4m). 15 per cent. of outbound Consumer Tech volumes on musicMagpie store are now rental sales versus 4 per cent. in 2021. The introduction and success of rentals to our business model is expected to have a short-term compression on the Group’s headline revenue growth as we move from upfront to monthly revenue recognition. This area of the business is expected to earn higher revenue and EBITDA over the life of a device, as opposed to a one-off sale, underpinned by a contracted recurring income and cash flow stream and will become more visible in the Group’s performance in the medium-term

· Books and Disc Media continue to perform in line with management expectations

· The strength of our circular economy model and Rental offering, as well as the increasing awareness of the rising problem of e-waste, means that the Board remains highly confident in its growth strategies and in the prospects of musicMagpie

Commenting on the results, Steve Oliver, Chief Executive Officer & Co-Founder of musicMagpie, said:

“This has been a landmark year in the history of musicMagpie, and I am hugely proud of everything that the business has achieved. We have delivered strong operational and strategic progress in our first year as a listed company, and have done so while staying true to our clear environmental and social focus and our long-standing ‘smart for you, smart for the planet’ ethos. During the year, we gave a ‘second-life’ to over 400,000 technology products, as well as 2,500 tonnes of disc media and books. This helped to save over 50,000 tonnes of CO2, which is the equivalent to providing heating for over 18,000 homes.

In the current uncertain climate for consumers, the benefits of buying and renting refurbished consumer technology products, whilst helping the environment, has never been more compelling. We are particularly pleased with the progress being made by our rental subscription service, which provides customers with a more affordable and flexible option than an outright purchase or a pay-monthly contract. We are extremely excited about its future growth prospects, and scaling this area of the business further will be a major point of focus for us in the coming year.

I would like to thank each and every one of our colleagues for their unswerving loyalty, dedication and professionalism. It is their hard work, creativity and innovation that drives our business, and it has been humbling to witness their resilience and adaptability in changing their ways of working during the pandemic.”

Analyst Conference Call

Steve Oliver (CEO) and Ian Storey (COO) will host an analyst presentation at 9:00am GMT today, Wednesday 2 March 2022, to talk through the Group’s operational and financial performance.

Please advise whether you and / or a colleague would like to attend to Powerscourt, either by phone on +44 (0) 20 7250 1446 or by email to [email protected].

Enquiries

musicMagpie plc Steve Oliver, CEO Ian Storey, COO	Tel: +44 (0) 870 479 2705

Peel Hunt (Nominated Adviser and Joint Broker) Edward Knight Paul Gillam Tom Ballard	Tel: +44 (0) 20 7418 8900

Shore Capital (Joint Broker) Malachy McEntyre Mark Percy Daniel Bush John More	Tel: +44 (0) 20 7408 4090

Powerscourt (Financial Public Relations) Rob Greening Genevieve Ryan Sam Austrums	Tel: +44 (0) 20 7250 1446

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF THE MARKET ABUSE REGULATION (EU) 596/2014 WHICH IS PART OF UK LAW BY VIRTUE OF THE EUROPEAN UNION (WITHDRAWAL) ACT 2018.

THE PERSON RESPONSIBLE FOR ARRANGING FOR THE RELEASE OF THIS ANNOUCEMENT ON BEHALF OF THE COMPANY IS STEVE OLIVER, CEO.

Notes to Editors

musicMagpie is a leader in the re-commerce of consumer technology (including smartphones, tablets, consoles and wearables), disc media (including CDs, DVDs and games) and books, with sustainability running to the very heart of its operations. The business has a clear strategic growth plan to buy more, sell more and rent more.

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. Operating through its two trusted brands - musicMagpie in the UK and decluttr in the US - the Group's core business model is simple: to provide consumers with a smart, sustainable and trusted way to buy, rent and sell refurbished consumer technology and physical media products.

musicMagpie has a strong environmental and social focus, as demonstrated by its trademarked 'smart for you, smart for the planet' ethos. Over 400,000 consumer technology products were resold to consumers in FY21. In addition, the Group re-sells approximately 2,500 tonnes of books and disc media each year that could have ended up as waste. During 2021, musicMagpie’s UK consumer tech and disc media customers, along with its trade partners, helped to save over 50,000 tonnes of CO₂ by buying, selling and renting with the Group – an amount equivalent to providing heating for over 18,000 homes. 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. 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 4.6* rating on UK Trustpilot with over 215,000 reviews.

For further information please visit: www.musicmagpieplc.com/

A CLEAR STRATEGIC GROWTH PLAN: "BUY MORE, SELL MORE, RENT MORE"

Operating through our two trusted brands - musicMagpie in the UK and decluttr in the US - our core strategy is simple: to provide consumers with a smart, trusted and sustainable way to buy, rent and sell refurbished consumer technology and physical media products. The market for pre-owned consumer technology and physical media is worth approximately £9 billion in the UK and US and is supported by a number of positive tailwinds.

We see a significant opportunity for musicMagpie to accelerate its growth by adopting a simple three-pillared strategic approach to “buy more, sell more, rent more”:

1. “Buy more”

In order to be in a position to rent and sell products to our customers, we need to have a continual stream of high-quality products coming into our ecosystem; increasing the number of entry points for products into the musicMagpie circle is therefore a key priority. In addition to making it as easy as possible for consumers to sell their unwanted products directly to us, we also have a number of strategic initiatives underway for which we see significant potential:

Our SMARTDrop kiosk offering, which launched in November 2020, is being successfully rolled out across the Asda network and will be in nearly 300 stores in 2022. At year end, approximately 5,300 smartphones had been traded in through the kiosks, paying out over £1.5m to customers, rising to 8,000 units and £2.3m at the end of the first quarter of FY22. The kiosks also form a key component of the wider sustainability partnership that the Group has recently launched with Asda, as announced in September 2021.
In February 2021, we launched a corporate technology recycling service for businesses looking to increase their sustainability efforts. The service allows businesses to recycle their unwanted company smartphones and tablets to musicMagpie for cash, which can then either go back into their business, fund upgrades, be used to reward colleagues, or even be donated to a charity of the company's choosing. The service also has the benefit of ensuring that all data is erased safely and securely. It has already been used by a number of high-profile global businesses, and contracts have recently been signed with both Deloitte and Zurich.

2. “Sell more”

The above initiatives are enabling us to sell more – and higher quality – products through musicMagpie in the UK and decluttr in the US. In addition, we have a number of projects underway to make the customer experience even better when it comes to their buying journey with us:

· Expanding our sales channels and ensuring that maximum distribution of product is achieved

· Personalising the consumer experience by using our customer data more effectively and powerfully

· Making our musicMagpie and decluttr online stores ‘best in class’, using customer research and insight to enhance our product development in areas such as check-out, basket, search, merchandising, and ‘my account’

· Bringing accessories and other high margin ‘peripheral’ products to the fore of our offer

· Launched new Apple products for sale on the musicMagpie Store in the UK in July 2021, with a rental offering following in November 2021

3. “Rent more”

In October 2020 we launched an innovative device rental subscription service in the UK. It provides customers with a more affordable and flexible option than an outright purchase or a pay-monthly contract with a mobile network, and we are hugely excited about its future growth prospects.

It has made strong progress since its launch, and its growing popularity with consumers means that, as at 28 February 2022, the service now has c.19,000 active paying subscribers, including our first cohort of subscription renewals. This has already made a positive contribution to Group margins in FY21, and creates the potential to earn higher recurring revenues and EBITDA over the life of a device as opposed to a one-off sale.

Given its attractive financial profile and the strong momentum that we are already seeing in this area, maximising and scaling our rental business is a major point of focus for us in the coming year. Initiatives that are underway include:

· Expanding into other product categories, such as tablets, games consoles, MacBooks and wearables

· Marketing / PR campaigns to drive consumer awareness of the uniqueness of the rental offer

· Making new Apple products available to rent, and raising their visibility both through their positioning on the site and via external communications

· Extending the service to corporate customers

SUSTAINABILITY AT OUR HEART

Since the inception of musicMagpie in 2007, the Group has had circularity at its heart. musicMagpie is absolutely committed to the protection of the environment; the prevention of pollution; continual environmental improvement throughout the life cycle of our products, services and business operations; and compliance with all legal and other environmental policy requirements.

In particular, given its relevance to our business model, musicMagpie is committed to raising awareness of the growing problem of e-waste. For example, in June the Group created the 'Mount Recyclemore' sculpture in partnership with the artist Joe Rush. The giant Mount Rushmore-style sculpture of the G7 leaders' heads, made entirely of discarded electronics, appeared on a beach near Carbis Bay during the G7 summit to coincide with discussions around how to tackle climate change and build a greener future. It was devised following musicMagpie-commissioned research showing that the G7 nations alone produce almost 15.9m tonnes of e-waste a year, with the US (6.9m), Japan (2.6m), Germany (1.6m) and UK (1.6m) being the worst offenders.

The Mount Recyclemore activity was exceptionally well received, and as part of the campaign the Group partnered with global waste management charity WasteAid. Throughout June, sellers had the option to donate the value offered by the Group to the charity whilst musicMagpie gave the charity £1 for each piece of consumer tech customers traded in with the Group.

More broadly, musicMagpie has a range of sustainability measures in place to improve our own efforts even further. These include mitigating our carbon footprint, limiting our waste, and engaging with colleagues, customers, suppliers and local communities to educate and work in close collaboration with them.

FINANCIAL PERFORMANCE REVIEW

Group revenue for the year ended 30 November 2021 was £145.5m, down 5.1% on the previous year (£153.4m), but up 10.7% compared to pre-pandemic levels (2019: £131.5m), a CAGR of 5.2%. This was in line with market expectations after a Covid-19 enhanced prior year. Gross profit was £44.3m, a reduction of 1.1% on FY20 (£44.8m), but gross margin increased from 29.2% to 30.4%, with buy and sell price focus combined with the increased contribution from rental contracts driving the margin improvement.

On a geographical basis, in the UK, where the Group trades under the musicMagpie brand, revenue was down 3.1% to £115.4m (FY20: £119.1m). In the US, where the Group trades under the decluttr brand, revenue was down 6.0% to $41.5m (FY20: $44.1m) as the business continued with its strategy of focusing on profitable trading, protecting margin at the short-term expense of additional revenue.

To fully understand revenue and margin movements, it is necessary to consider the performance of each of the three main product areas: the Group saw continued progression in its Consumer Technology category whilst Disc Media and Books both moved back towards pre-pandemic levels of activity in the second half of the year as expected.

Consumer Technology (59% of Group revenue)

Consumer Technology revenue increased by 3.1% to £86.1m (FY20: £83.5m), now represents 59% of Group revenue cementing its place as the dominant product category. Whilst the Group is pleased to see top line growth, this was muted by two key factors; the introduction of the rental service, which was a deliberate long term strategic move that is expected to bear fruit as the rental portfolio matures; and the focus on profitability over revenue growth in the US business.

Firstly, the UK business saw consumer technology revenue grow by 6.1% to £71.2m (FY20: £67.1m), a 16.2% CAGR on FY19 performance. October 2020 saw the strategic launch of musicMagpie’s innovative device rental service, the introduction of which provides the potential to earn higher recurring revenues over the life of the device but reduces revenue performance at the outset. Subscription revenue is recognised monthly on a straight line basis over the duration of the rental contract, presently a 12-month period. As at 30 November 2021, devices purchased by the Group for over £3.6m had been rented to subscribers with £1.8m (FY20: £5,000) of rental revenue recognised in the year with contracted future revenue of £1.9m.

Secondly, the US business saw consumer technology revenues fall 3.0% to $20.5m (FY20: $21.1m). Within this, sales from product purchased direct from consumers accounted for $17.5m growing by 30.8% year on year (FY20: $13.4m). Sales from product purchased from intermediary wholesale partners (‘B2B’) fell from $7.7m to $3.0m, a 61.6% drop as both stock availability and acceptable margin opportunities through those channels tightened for large parts of the year.

Gross profit in Consumer Technology across the Group increased by 9.9% to £21.3m (FY20: £19.4m) with gross margin increasing from 23.2% to 24.4%.

Disc Media (35% of Group revenue)

The Group’s legacy category of Disc Media was an undoubted beneficiary from the various periods of Covid-19 lockdowns and the related restrictions for a sizable part of FY20 and the early part of FY21.

The Group has typically seen year on year reductions in Disc Media sales in the region of between 5% and 10%, reflecting a decline in the purchase of both new and second-hand physical media as consumers have increasingly consumed content in different ways such as streaming or video on demand. FY20 however saw Disc Media sales increase to £58.8m, up 7.5% on the 12-month period ending 30 November 2019 (£54.8m), as consumers sought increased breadth of ‘stay at home’ entertainment. FY21 therefore saw the category come up against tough, and trend bucking, comparatives. The second half of FY21 saw sales fall back, as expected, closer to pre-pandemic levels of activity. Overall revenue for the category was down 13.8% to £50.7m for FY21.

With a £7.1m sales drop, gross profit from Disc Media declined 6.2% to £19.7m (FY20: £21.0m), the revenue reduction partially mitigated by a 3.1% improvement in gross margin to 38.8% from 35.7%. This was attributable to the continued focus on margin maximisation and accordingly product selection, as well as a reduction in lower percentage margin new media sales.

Books (6% of Group revenue)

The prior year saw the Books category follow a similar pandemic trend to Disc Media with sales up 73.7% from £6.3m in the 12-month period ending 30 November 2019 to £11.0m in FY20.

FY21 sales fell back to £8.7m (down 20.6%), but still up x% on pre-pandemic levels. The second half saw average monthly sales of £0.6m, again a return to the average levels seen pre-pandemic.

Gross profit in the category was £3.3m (FY20: £4.4m) with gross margins reducing from 40.0% to 38.2%.

Operating expenses

Operating expenses, excluding equity-settled share-based payments and other non-underlying items, depreciation and impairment of fixed assets, and amortisation of intangible assets, increased 2.8% to £31.8m (FY20: £31.0m). This was largely driven by increased investment in headcount (£1.8m year on year payroll cost increase) to ensure the Group has appropriate resources to execute its growth strategy, as well as the introduction of plc related costs. This was offset by a reduction in marketing spend (£1.1m reduction) as activity such as TV spend was normalised in the second half of the year in comparison to the one-off brand build TV activity undertaken during the pandemic in FY20.

Adjusted EBITDA

The Group delivered an Adjusted EBITDA of £12.2m, a 12.3% reduction on the pandemic-enhanced FY20 out-turn (FY20: £13.9m; FY19: £4.6m). Adjusted EBITDA is considered to be the key financial performance indicator for the Group, albeit is a non-GAAP alternative performance measure, further explanation for which is given in Note 27 to the financial statements.

Loss before tax

The Group’s statutory loss before tax of £14.8m (FY20: £7.0m profit) was after taking account of £25.7m of costs (FY20: £4.2m) associated with: equity-settled share-based payments of £17.4m (FY20: £0.4m); depreciation on disposal of property, plant and equipment of £1.8m (FY20: £1.3m); provision for impairment of rental assets of £0.4m (FY20: nil); amortisation of intangible assets of £1.5m (FY20: £1.3m); and £4.6m (FY20: £1.3m) of IPO and other non-underlying items.

Of these costs, £21.1m (FY20: £2.9m) were non-cash items and £22.0m (FY20: £1.3m) were non-recurring items.

Cash flow and balance sheet

The Group generated net cash from operating activities of £2.7m (FY20: £12.0m).

Adjusted operating cash flow[1] calculated as Adjusted EBITDA1 less movements in working capital, was £7.3m (FY20: £13.2m) giving a cash conversion ratio of 60.0%. This was down on the 95.6% recorded in FY20 due to a £4.9m working capital movement with stock and receivables each increasing by £1.2m and trade and other payables decreasing by £2.5m.

Total cash used in investing activities was £7.2m (FY20: £1.9m) with acquisition of rental assets of £3.7m (FY20: £0.1m) and capitalised development expenditure of £2.8m (FY20: £1.5m) forming the majority of the year-on-year movement. The increase in capitalised development expenditure reflects the scaling up of our IT development teams over the last 18 months to both retain our technological advantage and accelerate our strategic initiatives.

On 5 February 2021, the Group refinanced with the introduction of a £10m three year committed revolving credit facility with Silicon Valley Bank (‘SVB’), repaying existing bank debt from Aurelius Finance Company Limited. We would like to thank both institutions for their unwavering support of our business and the management team.

On IPO, the Group completed a primary fund raise of £15.0m, providing further funds for future investment activities in strategic growth intiatives such as rental and SMARTDrop kiosks, whilst also strengthening our balance sheet in the process. £5.4m of this was used to repay investor loan notes and interest on completion in addition to reducing the drawn SVB facility to nil at that time. The combination of these saw financial expenses reduce by £1.4m to £1.3m year on year.

Taking into account all of the above, the Group finished with net cash (calculated as cash at bank less amounts drawn against committed facilities) of £1.8m at 30 November 2021 (FY20: net debt of £6.3m), and retained headroom of £11.8m in the SVB revolving credit facility.

CHARITY AND COMMUNITY

We care about each other, our customers, our communities and the environment. During the pandemic, musicMagpie actively sought ways to help, donating books to children’s charities, iPads and phones to Covid patients in hospitals, and £200,000 to the NHS Charities Together charity.

This year, the Group has continued its partnership with City in the Community to support their programmes focusing on improved mental wellbeing in young people and sporting activities with disadvantaged people in Greater Manchester. The Group has also once again given over an area of its warehouse to Cash for Kids to use as their HQ for their Mission Christmas campaign, which saw the charity collecting, processing and delivering gifts to over 35,000 disadvantaged children this Christmas.

Our colleagues have been involved in a number of charity events; a team of fifteen colleagues – the ‘Wheelie Magpies’ - collectively cycled over 2,000 miles in eight days raising over £10,000 for Smart Works. This is a charity which provides practical and emotional support to unemployed women to help them back into the workplace. In the summer, 10 teams of six Magpies walked 10,000 steps each day for six days to raise over £5,000 for the British Heart Foundation as part of their 60th birthday ‘Team 60’ challenge, clocking up a huge 4.5m steps over the six days.

FY2021 also saw musicMagpie launch payroll giving with the Charities Trust, enabling all colleagues to donate to charity through their pay. The Group also introduced a volunteering programme allowing colleagues two paid days a year to volunteer for a charity or take part in a charitable event. The Group has facilitated two events through its partnership with Walking With the Wounded, a charity which supports disadvantaged veterans to re-integrate back into society and sustain their independence, with a number of colleagues joining veterans and colleagues from other local businesses to plant trees in the local area as part of their ‘Op-Regen Mission Green’ programme.

As part of this year’s colleague Objectives and Key Results reviews, we have asked them to include an individual or team sustainability commitment, progress against which will be reviewed throughout the year and celebrated across the Group.

INITIAL PUBLIC OFFERING

In April, the Group successfully completed an IPO on the AIM market of London Stock Exchange (“LSE”). The IPO attracted strong support from high quality institutional investors, with the net proceeds being used to repay existing debt facilities and fund the Group's growth strategy and working capital requirements, in particular the expansion of its device rental proposition. As part of the process, the Group was delighted to receive the LSE's Green Economy Mark, which recognises companies that derive 50% or more of their total annual revenue from products and services that contribute to the global 'Green Economy'.

BOARD

In tandem with the IPO, musicMagpie appointed Martin Hellawell as Non-Executive Chair, Dave Wilson as a Non-Executive Director and Chair of the Audit Committee, and Alison Littley as a Non-Executive Director, Senior Independent Director and Chair of the Remuneration Committee.

Martin is Chair of FTSE 250 listed Softcat plc, a leading UK provider of IT infrastructure technology and services. He previously spent 12 years as Chief Executive and Managing Director during which he led the company through a highly successful IPO and its first two years as a PLC. Martin is also Chair of Raspberry Pi Trading Limited, a subsidiary of the Raspberry Pi Foundation, a UK-based charity that works to put the power of computing and digital making into the hands of people all over the world. He is also Senior Independent Director at Team17 PLC.

Dave was, until June 2021, the Chief Finance Officer and Chief Operating Officer at GB Group PLC (“GBG”), the global identity data intelligence specialist. Over the 12 years he served as CFO, GBG increased its market capitalisation from c.£14.2m to c.£1.7bn. Dave has a strong background in managing business growth, and previously held international and operational board level positions with companies including Envirofone.com, Codemasters, Fujitsu and Technology plc. Dave became Chair of LBG Media in December 2021.

Alison is a Non-Executive Director at Xaar plc, Norcros Plc and Osborne Group Ltd and Chair of the Remuneration Committees at all three. In her executive career, Alison held a variety of senior management positions in Diageo plc and Mars Inc, and was Chief Executive Officer at Buying Solutions, an agency to HM Treasury.

In November 2021, musicMagpie appointed Matthew Fowler as Executive Director and Chief Financial Officer. Matthew's start date at musicMagpie will be 20 April 2022 and he shall join the Board upon appointmement. This appointment follows Ian Storey's promotion to Group Chief Operating Officer at the time of the IPO. Matthew joins musicMagpie from genedrive plc, an AIM-quoted molecular diagnostics company, where he has been CFO since 2016. Prior to joining genedrive, Matthew spent eight years as Group Financial Controller of Scapa Group plc, an AIM-quoted multinational manufacturing business. He previously spent three years at British Nuclear Group as Finance Manager, having trained and qualified in the audit department of Deloitte & Touche.

CURRENT TRADING AND OUTLOOK

We entered the new financial year with confidence following a record Black Friday sales period in both the UK and US. Our rental subscription service has continued to grow through Q1, however in line with current consumer trends, we have seen a moderation of outright sales and trade-in volumes in Consumer Tech.

In this environment, our rental offering is proving to be particularly attractive for consumers, with active paying subscribers increasing to c.19,000 at the end of Q1, increasing the forward contracted order book to £2.1m (30 November 2021: £1.9m). Rentals accounted for c.15% of musicMagpie store Tech volume shipped to consumers in January 2022, up from 4% in January 2021. The introduction and success of rentals to our business model is expected to have a short-term compression on the Group’s headline revenue growth as we move from upfront to monthly revenue recognition. This area of the business is expected to earn higher revenue and EBITDA over the life of a device, as opposed to a one-off sale, underpinned by a contracted recurring income and cash flow stream and will become more visible in the Group’s performance in the medium-term.

The success of rentals to date has led us to expand the subscription offer to tablets, games consoles, MacBooks and wearables. In addition, March 2022 will see us launch our rental solution to Corporate customers under the Magpie Circular banner, and we expect this to resonate well with businesses looking for a greener and more economical model for their Techology needs. The continued expansion of the musicMagpie eco-system, and the material medium term profitability step-change this can bring, will see the Group continue to focus its resources on promoting and further scaling this offering, including increased platform development investment throughout 2022.

Outright Consumer Tech sales have seen a trend of lower sales volume, but at a higher average sell price. A similar trend has been evident in the US, with Q1 Consumer Tech revenue up 46% against Q1 2021, driven by sales of higher value iPhones underpinned by the reintroduction of bulk purchasing activity from intermediary wholesale partners. Overall, whilst we currently anticipate full year Consumer Tech revenues across both markets to be in line with current management expectations, the trend towards higher value, lower volume products sourced from intermediary wholesale partners is expected to reduce the Group’s gross margin headline percentage on outright sales in the category by some c.4.0 percentage points for the current year compared to the year to 30 November 2021.

We have continued to make excellent progress with our disruptive SMARTDrop kiosk proposition with devices traded to date increasing to over 8,000 units, paying out over £2.3m to consumers by the end of Q1. Our increased roll out across the Asda Stores estate commences in March and runs through to September 2022.

Since the start of the year, Disk Media has performed in line with management expectations. Books has maintained the sales performance level seen in the second half of FY21 and is anticipated to remain at this level. These sunset categories continue to provide a good level of profitability and cash generation to underpin our continued investment in our Consumer Tech subscription model.

Whilst well-documented headwinds prevail for consumers, we believe the positioning of our circular economy model in the value-led sector leaves us well placed in the event of economic uncertainty as consumers seek ways both to save money and generate income. This, combined with our attractive rental offering and increasing awareness of the rising problem of e-waste, means that we continue to be confident in the medium term growth and prospects of musicMagpie.

DIVIDEND

In line with guidance given at the IPO, the Directors have decided to re-invest earnings of the Group to finance the development and expansion of the business in the short term. Accordingly, the directors do not propose to declare a full year dividend for the period.

Martin Hellawell	Steve Oliver
Chairman	Chief Executive Officer

Consolidated Statement of Comprehensive income

	Note	Year ended 30 November 2021 £000	Year ended 30 November 2020 £000
Turnover	4 , 5	145,506	153,350
Cost of sales		(101,211)	(108,566)
Gross profit		44,295	44,784
Operating expenses		(35,875)	(33,521)
Operating expenses - exceptional	6 , 24	(22,000)	(1,663)
Total operating expenses		(57,875)	(35,184)
Other operating income		60	49
Adjusted EBITDA*	28	12,174	13,873
Depreciation of property, plant and equipment	14	(1,755)	(1,300)
Impairment of property, plant and equipment	14	(410)	-
Loss on disposal of property, plant and equipment	14	(12)	-
Amortisation of intangible assets	15	(1,517)	(1,261)
Equity - settled share-based payments	24	(17,379)	(381)
Other non - underlying items	6	(4,621)	(1,282)
Operating (loss)/profit		(13,520)	9,649
Financial expense	10	(1,299)	(2,691)
(Loss)/profit before tax		(14,819)	6,958
Taxation	11	2,694	1,612
(Loss)/profit for the period attributable to the equity holders of the parent		(12,125)	8,570
Other comprehensive income/(expense)
Items that may be reclassified to profit and loss Foreign exchange differences on translation of foreign operations		38	(86)
Total comprehensive (loss)/income for the period attributable to the equity holders of the parent		(12,087)	8,484
		Pence	Pence
- basic (loss)/earnings per share	13	(12.67)p	9.44p
- diluted (loss)/earnings per share	13	(12.67)p	9.42p

*Adjusted EBITDA is a non-GAAP measure. See note 28 for definition and reconciliation.

Consolidated Statement of Financial Position

	Note	As at 30 November 2021 £000	As at 30 November 2020 £000
Assets Property, plant and equipment	14	6,118	3,888
Intangible assets	15	9,679	8,358
Deferred tax asset	12	5,333	1,666
Total non-current assets		21,130	13,912
Inventories	18	8,019	6,835
Trade and other receivables	19	3,724	2,508
Cash and cash equivalents	20	2,849	5,140
Total current assets		14,592	14,483
Total assets		35,722	28,395
Liabilities Trade and other payables	21	8,359	10,881
Other interest-bearing loans and borrowings	22	-	7,035
Lease liabilities	22	366	745
Corporation tax payable		269	54
Total current liabilities		8,994	18,715
Net current assets/(liabilities)		5,598	(4,232)
Other interest-bearing loans and borrowings	22	887	4,200
Lease liabilities	22	1,557	1,820
Shares classified as debt	22	-	1,240
Total non-current liabilities		2,444	7,260
Total liabilities		11,438	25,975
Net assets		24,284	2,420
Equity Share capital	26	1,078	14
Share premium	26	14,449	1,690
Capital redemption reserve	26	1,108	-
Merger reserve	26	(991)	-
Translation reserve	26	(120)	(158)
Retained earnings		8,760	874
Equity attributable to the equity holders of the parent		24,284	2,420

These financial statements were approved by the board of directors on 1 March 2022 and were signed on behalf by:

S Oliver

CEO

Company Statement of Financial Position

Registered number 12977343

	Note	As at 30 November 2021 £000
Assets Investments	16	14,285
Total non-current assets		14,285
Trade and other receivables	19	11,476
Total current assets		11,476
Net assets		25,761
Equity Share capital	26	1,078
Share premium	26	14,449
Capital redemption reserve	26	1,108
Merger reserve	26	801
Retained earnings		8,325
Equity attributable to the equity holders of the parent		25,761

The Company has taken advantage of the exemption permitted by Section 408 of the Companies Act 2006 not to present its own profit and loss account. The Company made a loss of £8,959,000 for the period.

These financial statements were approved by the board of directors on 1 March 2022 and were signed on behalf by:

S Oliver

CEO

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 2019		14	1,690	-	-	(72)	(8,077)	(6,445)
Profit for the year		-	-	-	-	-	8,570	8,570
Foreign currency translation		-	-	-	-	(86)	-	(86)
Total comprehensive income for the year		-	-	-	-	(86)	8,570	8,484
Share-based payments	24	-	-	-	-	-	381	381
Balance as at 30 November 2020		14	1,690	-	-	(158)	874	2,420
				Capital
		Share	Share	Redemption	Merger	Translation	Retained	Total
		capital	premium	reserve	reserve	reserve	earnings	Equity
	note	£000	£000	£000	£000	£000	£000	£000
As at 1 December 2020		14	1,690	-	-	(158)	874	2,420
Loss for the year		-	-	-	-	-	(12,125)	(12,125)
Foreign currency translation		-	-		-	38		38
Total comprehensive (loss)/income for the year		-	-	-	-	38	(12,125)	(12,087)
Cancellation of share premium	26	-	(1,690)	-	-	-	1,690	-
Reclassification of shares	26	1,100	-	-	-	-	-	1,100
Repurchase of deferred shares	26	(1,108)	-	1,108	-	-	-	-
Bonus issue of shares		991	-	-	(991)	-	-	-
Shares issued	26	81	14,922			-	-	15,003
Issue costs of shares Interest on preference shares waived by the	26	-	(473)			-	-	(473)
owners	25	-	-			-	185	185
Share-based payments	24	-	-			-	17,379	17,379
Tax effects of share-based payment charge							757	757
Balance as at 30 November 2021		1,078	14,449	1,108	(991)	(120)	8,760	24,285

Company Statement of Changes in Equity

				Capital
		Share	Share	Redemption	Merger	Retainer	Total
		capital	Premium	Reserve	Reserve	Earnings	Equity
	note	£000	£000	£000	£000	£000	£000
As at 27 October 2020		-	-	-	-	-	-
Loss for the period		-	-	-	-	(8,959)	(8,959)
Total comprehensive loss for the period		-	-	-	-	(8,959)	(8,959)
Share based payments	24				-	17,284	17,284
Share for share exchange	26	14	-		1,792	-	1,806
Reclassification of shares	26	1,100	-		-	-	1,100
Repurchase of deferred shares	26	(1,108)		1,108			-
Bonus issue of shares	26	991	-		(991)	-	-
Shares issued	26	81	14,922		-	-	15,003
Issue costs of shares	26	-	(473)		-	-	(473)
Balance as at 30 November 2021		1,078	14,449	1,108	801	8,325	25,761

Consolidated Cash Flow Statement

	Year ended 30 November 2021 £000	Year ended 30 November 2020 £000
Net cash flows from operating activities (Loss)/profit for the period	(12,125)	8,570
Adjustments for: Financial expense	1,299	2,691
Taxation expense	(2,694)	(1,612)
Depreciation of property, plant and equipment	1,755	1,300
Impairment of property, plant and equipment	410	-
Loss on property, plant and equipment	12	-
Amortisation of intangible assets	1,517	1,261
Share-based payments expense	17,379	381
Taxation paid	-	-
Working capital adjustments Increase in inventories	(1,184)	(642)
Increase in trade and other receivables	(1,216)	(367)
(Decrease)/Increase in trade and other payables	(2,522)	397
Net cash from operations	2,631	11,979
Cash flows used in investing activities Acquisition of property, plant and equipment	(4,404)	(442)
Capitalised development expenditure	(2,837)	(1,472)
Net cash used in investing activities	(7,241)	(1,914)
Cash flows from financing activities Proceeds from new loan	1,000	310
Proceeds from shares issued	15,002	-
Costs incurred on IPO charged to Share Premium	(473)	-
Financial expenses paid	(2,275)	(2,682)
Lease liabilities paid	(618)	(846)
Interest paid on lease liabilities	(131)	(243)
Repayment of other loans	(6,000)	(3,500)
Repayment of shareholder loan notes	(4,200)	-
Net cash from/(used in) financing activities	2,305	(6,961)
Net (decrease)/increase in cash and cash equivalents	(2,305)	3,104
Cash and cash equivalents brought forward	5,140	2,036
Effect of exchange rate fluctuations on cash	14	-
Cash and cash equivalents carried forward	2,849	5,140

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 2021.

musicMagpie plc is a public limited company incorporated in the United Kingdom whose shares are publicly traded on the Alternative Investment Market (AIM) of the London Stock Exchange and is incorporated and domiciled in the UK. Its registered 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. The Company has taken advantage of the exemption permitted by Section 408 of the Companies Act 2006 not to present its own profit and loss account.

The Company, musicMagpie plc is the ultimate group company of the consolidated group.

2. ACCOUNTING POLICIES

2.1 Basis of Preparation

The consolidated financial statements have been prepared in accordance with International Accounting Standards in conformity with the requirements of the Companies Act 2006 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.

The accounting policies that follow set out those policies that apply in preparing the financial statements for the year ended 30 November 2021 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 with the parent or wholly owned members of the group;

Disclosure of the objectives, policies and processes for managing capital.

Initial public offering ("IPO")

On 22 April 2021, the Company was admitted to the Alternative Investment Market (AIM) of the London Stock Exchange. These Consolidated Financial Statements are the Company’s first subsequent to its admission.

The Admission Document for the IPO contains the audited Historical Financial Information of the Company on pages 66 to 106 (the "Historical Financial Information") presented under International Financial Reporting Standards ("IFRS"). The comparative figures for the financial year ended 30 November 2020 are an extract of the Company's historical financial information for that year. Prior to the restructuring the Group was not in existence in its current form, as described in this note. A statutory audit performed in accordance with the Companies Act 2006 was not performed and hence no audit opinion was issued in respect of the historical comparatives presented in these consolidated financial statements. However, as part of the process of Admission to listing on AIM and to trading on the London Stock Exchange, an accountant’s report, undertaken by RSM UK Audit LLP, in accordance with the Standards for Investment Reporting 2000 (“SIR 2000”) issued by the Auditing Practices Board in the United Kingdom, was issued on the Historical Financial Information included in the Admission Document. The accountant’s report, dated 16 April 2021, included an unqualified opinion on the historical information presented. Statutory accounts for the year ended 30 November 2020, prepared under Financial Reporting Standard 102, were approved by the Board of Directors on 16 April 2021 and delivered to the Registrar of Companies. The report of the auditor on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 498 (2) or (3) of the Companies Act 2006. Note 25 of the Historical Financial Information refers to the transition to IFRS and sets out the main items contributing to the change in financial information compared with that reported under UK GAAP as at the transition date.

Group Reorganisation

In connection with the admission to AIM, the Group undertook a group reorganisation of its corporate structure which resulted in the Company, musicMagpie plc becoming the ultimate holding company of the Group. The creation of the Company was not conditional upon the IPO. The Company acquired 100% of the share capital of Entertainment Magpie Group Limited (“EMGL”) on 31 March 2021 through a share for share exchange.

The insertion of the Company as a new holding company was such that the group reorganisation has been accounted for as a continuation of the existing group rather than an acquisition in accordance with the IFRS 3 guidance in respect of reverse acquisition accounting. Management determined that the Company was formed only to issue equity interests to affect a business combination and does not appear to meet the characteristics of an acquirer following the guidance given in paras. B15 to B18 of IFRS3. In applying the guidance it was determined that:

• EMGL was significantly greater in size than the Company;

• the shareholders and the Board of EMGL initiated the restructure of the Group to achieve an IPO;

• the owners of EMGL still retained majority voting rights after the combination; and

• no premium was paid as part of the share for share exchange.

Management also determined that the Company did not meet the definition of a business. Accordingly, the insertion of the Company on top of the existing group does not constitute a business combination under IFRS 3 ‘Business Combinations’ and instead has been accounted for as a common control transaction. Merger accounting has been used to account for this transaction.

Under merger accounting principles, the assets and liabilities of the subsidiaries are consolidated at book value in the Group financial statements.

These consolidated financial statements of the Group are the first set of financial statements for the newly formed Group and the prior period has been presented as a continuation of the former EMGL Group on a consistent basis as if the Group reorganisation had taken place at the start of the earliest period presented. The prior period comparatives are those of the EMGL Group since no substantive economic changes have occurred.

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 generated a loss of £12,125,000 during the year ended 30 November 2021 (year ended 30 November 2020: profit of £8,570,000) but this was largely driven by non-cash items including a share- based payments expense totaling £17,379,000. At the year-end date it had net current assets of £5,598,000 (year ended 30 November 2020: liabilities of £4,232,000).

The group presently meets its day to day working capital requirements through cash reserves and its bank facilities which are subject to various facility limits and covenants. The directors have reviewed the trading and cash flow forecasts for the 12 month period from the date of approval of the financial statements as part of their going concern assessment and having incorporated reasonable downside sensitivities have confirmed that the group will be able to continue to meet quarterly covenant tests and remain within the borrowing limits set out within its bank facility agreement.

The Directors therefore believe there is a reasonable expectation that the Group can continue as a going concern for at least the next 12 months from the date of approval of the financial statements. Accordingly, they continue to adopt the going concern basis in preparing the financial statements.

2.3 Foreign currency

Transactions in foreign currencies are translated to the functional currency at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the foreign exchange rate ruling at that date and the foreign exchange differences arising on translation are recognised in profit or loss.

The 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 the 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 and intercompany balances, lifetime ECL 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 (including intercompany balances), and interest bearing loans. These are measured at initial recognition at fair value and subsequently at amortised cost using the effective interest rate method. Interest expense and foreign exchange gains and losses are recognised in profit or loss. Any gain or loss on derecognition is also recognised in profit or loss.

Classification of financial instruments issued by the Group

Financial instruments issued by the Group are treated as equity only to the extent that they meet the following two conditions:

a) they include no contractual obligations upon the Group to deliver cash or other financial assets or to exchange financial assets or financial liabilities with another party under conditions that are potentially unfavourable to the musicMagpie Group; and

b) where the instrument will or may be settled in the Group’s own equity instruments, it is either a non- derivative that includes no obligation to deliver a variable number of the musicMagpie Group’s own equity instruments or is a derivative that will be settled by the musicMagpie Group’s exchanging a fixed amount of cash or other financial assets for a fixed number of its own equity instruments.

To the extent that this definition is not met, the proceeds of issue are classified as a financial liability. Where the instrument so classified takes the legal form of the musicMagpie Group’s own shares, the amounts presented in these financial statements for called up share capital and share premium account exclude amounts in relation to those shares.

Inter-company balances are classified as current in the financial statements due to the low credit risk of the issuer given its profitability in the short term.

2.5 Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses. Property, plant and equipment includes assets rented to customers (Rental Assets) which, as we retain ownership of the device throughout the contractual term, the cost of the asset is capitalised and depreciated over its expected remaining useful economic life.

Where parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment.

The Company assesses at each reporting date whether property, plant and equipment are impaired.

Depreciation is charged to profit and loss over the estimated useful lives of each part of an item of Property, plant and equipment . Leased assets are depreciated over the shorter of the lease term and their useful lives. The estimated useful lives are as follows:

Plant and machinery	6 - 7 years	Straight line
Motor vehicles	3 years	Straight line
Fixtures and fittings	6 - 7 years	Straight line
Computer and office equipment	3 years	Straight line
Rental assets	1 - 7 years	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.

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 Monte Carlo option pricing 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 24 for details of employee share options incentive plans operated by the Group.

2.12 Provisions

A provision is recognised in the statement of financial position when the Group has a present legal or constructive obligation as a result of a past event, that can be reliably measured and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre- tax rate that reflects risks specific to the liability.

2.13 Revenue

Revenue is income generated from the sale or rental of goods in the ordinary course of the Group’s business activities. In accordance with IFRS 15, revenue is recognised when any performance obligations in a contract with a customer has been satisfied.

The Group’s revenues are derived from the supply of goods (technology, media and books) and the rental of mobile phones to customers.

Sale of goods

Revenue represents the fair value of amounts receivable for goods and is stated net of discounts, value added taxes and returns. The Group does not operate any loyalty programmes. The supply of goods contains a single performance obligation with the customer to deliver the goods and revenue is recognised on dispatch of goods to the customer. For goods sold direct to consumers, payment is usually received at the point of sale. For goods sold via wholesale channels, a sales invoice is raised on dispatch.

Revenues for goods and services are recognised on despatch to the customer instead of delivery to the customer for practical reasons.

Rental of devices

The Group also earns rental income on devices rented to customers over a fixed term. The ownership of the device does not pass to the customer at the end of the contract term and there is no option to purchase the device at any point during the contract term. Rental payments are received on a monthly basis and early termination charges are payable if the contract is terminated before the end of the term by the customer.

The contracts for the rental of devices are classified as operating leases in accordance with IFRS 16 ‘Leases’. The Group recognises lease payments received under operating leases as income on a straight-line basis over the lease term. Early termination charges are recognised as income in the period in which the contract is terminated.

2.14 Financial expense

Financial expense includes interest payable and finance charges on shares classified as liabilities recognised in profit or loss using the effective interest method.

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

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 the ‘property, plant and equipment’ policy.

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.

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

· The Group makes an estimate of the useful economic life of property, plant, equipment and intangible assets. 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. See further details in note 14 and 15.

· Impairment of assets - in testing for impairment of investments, goodwill and other intangible assets, management have made certain assumptions concerning the future development of the business that are consistent with its annual budget and forecasts into perpetuity. Should these assumptions regarding the discount rate or growth in the profitability be unfounded then it is possible that investments and other assets included in the statement of financial position could be impaired. See further details in note 15.

· 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. Inventories at the year-end were valued at £8,019,000 (Year ended 30 November 2020: £6,835,000) which included a provision for slow moving lines of £529,000 (Year ended 30 November 2020: £871,000).

· Valuation of employee share options – the valuation of employee share options is inherently subjective as it involves a number of inputs which are not market observable. See further details in note 24.

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.

· Capitalisation of website and IT development costs – judgement is applied to assess whether the criteria for capitalisation of costs is met.

3.2 New accounting standards and interpretations issued but not yet effective

The following Adopted IFRSs have been issued but have not been applied in these financial statements. Their adoption is not expected to have a material effect on the financial statements unless otherwise indicated:

· Amendments to IFRS 9, IAS 39, IFRS 7 and IFRS 16: Interest Rate Benchmark Reform – Phase 2 (effective date 1 January 2021).

· Amendments to IFRS 16: Covid-19-related Rent Concessions beyond 30 June 2021 (effective date 1 April 2021).

· Amendments to IAS 37: Onerous Contracts—Cost of Fulfilling a Contract (effective 1 January 2022).

· Amendments to References to the Conceptual Framework in IFRS 3 (effective 1 January 2022).

· Amendments to IAS 16: Property, Plant and Equipment—Proceeds before Intended Use (effective 1 January 2022).

· Annual Improvements to IFRS Standards 2018-2020 (effective 1 January 2022).

· IFRS 17 Insurance Contracts (effective 1 January 2023).

· 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 date to be confirmed).

4. Segmental reporting

The Chief Operating Decision Maker (CODM) has been determined to be the Chief Executive Officer, with support from the Board. Information reported to the Chief Executive Officer for the purposes of resource allocation and assessment of segment performance is focused on product categories. The principal product categories and the Group’s reportable segments under IFRS 8 are Technology, Media and Books.

An analysis of the results for the period by reportable segment is as follows:

Year ended 30 November 2021		Technology		Media	Books	Total
	Outright sales	Rental income	Total
	£000	£000	£000	£000	£000	£000
Revenue	84,245	1,809	86,054	50,715	8,736	145,506

Gross profit	19,976	1,311	21,284	19,673	3,338	44,295
Processing wages	(3,988)	-	(3,988)	(7,423)	(802)	(12,213)
Contribution after direct labour	15,985	1,311	17,296	12,251	2,536	32,082
Trading Margin (%)	32.5	100.0	33.9	80.3	90.0	53.4
Gross margin	23.7	72.4	24.7	38.8	38.2	30.4

Contracted rental income outstanding at the year ended 30 November 2021 amounted to £1,864,805 (Year ended 30 November 2020: £3,000).

Year ended 30 November 2020		Technology		Media	Books	Total
	Outright sales	Rental income	Total
	£000	£000	£000	£000	£000	£000
Revenue	83,491	5	83,496	58,848	11,006	153,350

Gross profit	19,363	4	19,367	21,016	4,401	44,784
Processing wages	(3,660)	-	(3,660)	(7,132)	(861)	(11,653)
Contribution after direct labour	15,703	4	15,707	13,884	3,540	33,131
Trading Margin (%)	31.9	100.0	31.9	78.2	88.3	53.7
Gross margin	23.2	80.0	23.2	35.7	40.0	29.2

5. Revenue

Disaggregation of revenue

An analysis of revenue by geographical market is given below:

	Year ended 30 November 2021 £000	Year ended 30 November 2020 £000
United Kingdom	108,005	107,770
Within the European Community other than United Kingdom	4,225	6,076
United States of America	29,274	33,267
Outside the European Community (excluding the USA)	4,002	6,237
TOTAL	145,506	153,350

An analysis of revenue by country of origination is given below:

	Year ended 30 November 2021 £000	Year ended 30 November 2020 £000
United Kingdom	115,403	119,082
United States of America	30,103	34,268
TOTAL	145,506	153,350

Due to the nature of the Group's business, it is not materially affected by seasonal or cyclical trading.

6. Other non-underlying items	Year ended	Year ended
	30 November 2021 £000	30 November 2020 £000
IPO related costs	3,998	220
Other non-underlying costs	623	1,063
Total	4,621	1,282

IPO related expenditure relates to costs incurred in relation to admitting musicMagpie plc onto the Alternative Investment Market (“AIM”) on 22 April 2021. Other non-underlying costs relate to non-recurring redundancy, additional COVID related expenditure costs and non-executive monitoring fees.

7. 7. Operating (loss)/profit included in the (loss)/profit are the following	Year ended 30 November 2021 £000	Year ended 30 November 2020 £000
Amortisation of intangible assets	1,517	1,261
Depreciation of property, plant & equipment:
Owned assets	1,130	671
Right-of-use assets	627	629
Impairment of property, plant and equipment	410	-
Loss on disposal of property, plant and equipment	12	-
Auditor's remuneration:
Audit of these financial statements*	145	85
Other assurance services	205	-
Other services in relation to taxation	-	13
* £15,000 (period ended 30 November 2020: £10,000) related to the audit of the company.
8. Remuneration of directors


	Year ended	Year ended
	30 November 2021	30 November 2020
Short term benefits	£000	£000
Directors’ emoluments	626		466
Employers pension contributions	2		-
Amounts paid to third parties in respect of directors’ services	10		25
Total	638		491

The aggregate of emoluments of the highest paid director were £326,000 (period ended 30 November 2020: £219,000). Pension contributions paid on his behalf were £2,000 (period ended 30 November 2020: £nil).

Information on Directors’ remuneration for the year ended 30 November 2021 is set out in the Remuneration Committee Report of the Annual Report. This discloses the amounts paid to the Directors for qualifying services provided to the Company from the IPO. Note 8 includes these amounts combined with amounts paid to the directors for services provided to former parent company (Entertainment Magpie Group Limited) prior to that date. The comparative information relates to directors’ remuneration of the former parent company.

9. Staff numbers

The average number of persons employed by the Group (including directors) during each financial period, analysed by category, was as follows:

	Group 2021	Group 2020	Company 2021	Company 2020
Office and administration	198	159	11	-
Warehouse	449	459	-	-
Total	647	618	11	-
The aggregate payroll costs of these persons were as follows:
	Group 2021 £000	Group 2020 £000	Company 2021 £000	Company 2020 £000
Wages and salaries	18,083	16,337	1,027	-
Social security costs	1,188	1,256	164	-
Other pension costs	317	165	5	-
Equity-settled share-based payments (see note 24)	17,379	381	5,908	-
Total	36,967	18,139	7104	-

In addition to the above payroll costs, a further £2,040,000 (Year ended 30 November 2020: £869,000) has been capitalised as they relate to website and IT development costs.

Included in the above wages and salaries costs are temporary staff who were paid £3,024,000 during the year (Year ended 30 November 2020: £2,846,000).

10. Financial expense	Year ended	Year ended
	30 November 2021	30 November 2020
	£000	£000
Interest expense on loan notes	176	421
Interest on bank and other loans	209	1,130
Interest expense on lease liabilities	107	197
Other non-underlying financial expense	438	605
Bank interest and similar charges	369	318
Interest expense on preference shares classified as liabilities	-	20
	1,299	2,691

11. Taxation

	Year ended 30 November 2021	Year ended 30 November 2020
	£000	£000
Current tax expense
UK corporation tax on profits for the period	636	54
Adjustments in respect of previous periods	19	-
Total current tax expense	655	54

Deferred tax credit
Origination and reversal of timing differences	(2,372)	(1,666)
Adjustment in respect of previous periods	(18)	-
Effect of changes in tax rates	(959)	-
Total deferred tax credit	(3,349)	(1,666)
Total tax credit in the income statement	(2,694)	(1,612)

Equity items
Current tax	(439)	-
Deferred tax current year charge/(credit)	(318)	-
Total	(757)	-

Reconciliation of effective tax rate

	Year ended 30 November 2021	Year ended 30 November 2020
	£000	£000
(Loss) / profit before tax	(14,819)	6,958
Tax using the UK corporation tax rate of 19% (2020: 19%)	(2,816)	1,322
Other tax adjustments, reliefs and transfers	923	(164)
Adjustments in respect of prior periods – current tax	(52)	-
Tax rate changes	(959)	-
Share options	563	-
Deferred tax not recognised	(124)	-
Tax losses recognised in the period	(229)	(1,104)
Deferred tax recognised	-	(1,666)
Total tax credit in the income statement	(2,694)	(1,612)

12. Deferred tax

Tax losses

£000

Decelerated capital allowances

£000