Interim Results for the Six Months Ended 31 May 2022
musicMagpie plc
("musicMagpie", or “the Group”)
INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 MAY 2022
Consumer Technology revenue up 15.9%. Strong progress made in the Group’s device rental subscription service, with future growth to be supported by new £30m bank facility
musicMagpie, a circular economy pioneer specialising in refurbished consumer technology in both the UK and US, follows its half year trading update from 16 June 2022 with announcement of its unaudited interim results for the six months ended 31 May 2022.
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H1 22 £m |
H1 21 £m |
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Revenue |
71.3 |
72.8 |
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Gross Profit |
19.0 |
23.7 |
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Gross Margin |
26.6% |
32.6% |
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Adjusted EBITDA 1 |
2.6 |
6.2 |
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Adjusted (Loss)/ Profit Before Tax 2 |
(0.7) |
4.0 |
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Adjusted (Loss)/ Earnings per Share 3 |
(0.6p) |
3.7p |
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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, all net of taxation, and is therefore considered to show the underlying performance of the Group
Financial highlights
- Group revenue of £71.3m (H1 2021: £72.8m) with growth in Consumer Technology largely offsetting the expected post-pandemic reduction in Disc Media and Books
- Consumer Technology revenue (65% of Group), including subscriptions, was up 15.9% to £46.0m (H1 2021: £39.7m)
- Disc Media and Books revenue fell 23.6% to £25.3m (H1 2021: £33.1m) with the prior year H1 benefitting from pandemic lockdowns
- Gross profit of £19.0m (H1 2021: £23.7m) with gross margin reducing to 26.6% (H1 2021: 32.6%) as a result of the change in overall product mix towards Consumer Technology, with an increased proportion of these products being sourced from intermediary wholesale partners
- Net debt of £3.3m (Nov 2021: £1.8m net cash), consistent with Board expectations, with an investment into Consumer Technology rental assets of £3.6m (H1 2021: £1.4m) and IT platforms of £2.2m (H1 2021: £0.9m)
- New committed 3-year £30m revolving credit facility with HSBC UK and Natwest signed post period end to drive future Rental growth
Operational highlights
- Strong progress from the Group’s device rental subscription service, increasing to 24,000 active subscriptions as at 31 May 2022 (31 May 2021: 7,500)
- Expanded the subscription service from phones to include MacBooks, tablets and games consoles in February 2022
- Subscription revenues of £2.3m in H1 (H1 2021: £0.4m)
- Entered H2 2022 with c£2.0m in contractually committed revenues for the second half, before renewals or growth in new subscriptions
- Expanded sales channels by launching on Back Market, the online marketplace dedicated to refurbished devices
- Expansion of listings following Amazon re-opening refurbished B grade (‘Very Good’) and C grade (‘Good’) conditioned products in the UK and US, as well as the placing of stock in Amazon FBA (‘Fulfilled by Amazon’) warehouses
- Continued roll-out of SMARTdrop Kiosk concept with 170 now in place and around 12,700 devices sold and bought to date: still on track to be in 295 Asda stores across the UK by October 2022, meaning 90% of the UK’s population will be within 15-minute drive of a kiosk
- Matthew Fowler joined from genedrive plc as CFO in April
- Matt Harrison joined from Asda to be Chief Development & Partnership Officer in June 2022, with responsibility for leading the Group’s offering to the corporate market (under the ‘Magpie Circular’ banner)
Outlook
The current economic environment is of course uncertain for many consumer-facing businesses, with numerous well-documented headwinds in the market and squeezed wallets for consumers.
For our strategically important Consumer Technology segment (which represents 65% of Group revenue) we expect an increased contribution in the second half of the year from our growing base of rental subscribers. In addition to sales and rentals through the musicMagpie store, we also expect continued sales revenue growth from the recent expansion of ‘marketplace’ sales through our new partnership with Back Market, and from additional listings with long-term partners such as Amazon. These factors, along with the expectation of lower marketing spend as a percentage of higher revenues, not least owing to the expected contribution from the Black Friday sales period, mean that we have confidence going into the second half of our financial year.
Disc Media and Book sales are expected to perform broadly in-line with the first half and we will start to see softer comparatives as the abnormal pandemic lockdown periods from 2021 fall away. Gross margins across Disc Media and Books are expected to remain resilient.
The Board continues to be confident that the business is well positioned for future growth and Adjusted EBITDA remains in line with its expectations for the full year.
Commenting on the results, Steve Oliver, Chief Executive Officer of musicMagpie, said:
I am pleased that the business has delivered a strong performance in our strategically important Consumer Technology division, which now represents two-thirds of our total revenue.
I am also delighted with the progress being made in our device rental subscription service. In light of the continuing squeeze on consumer spending, we believe that this will become an increasingly attractive option to a wider range of consumers seeking to replace their non-discretionary technology products in a cost-effective way. Whilst the successful growth of this offering has a short-term compression on the financial performance of the business relative to a one-off sale, it will deliver higher revenue and EBITDA over the life of the device. It therefore remains our overriding growth strategy for the medium term, and we are delighted to announce HSBC UK and Natwest’s support in the form of a new £30m three-year revolving credit facility to further support our investment in this area.
Notwithstanding the challenges presented by the current macroeconomic uncertainty, we expect consumers will continue to seek ways to raise cash and save money and as a result, we are confident that the business is well positioned for future growth in H2 2022 and beyond.”
Analyst Conference Call
Steve Oliver (CEO), Matthew Fowler (CFO) and Ian Storey (COO) will host an analyst presentation at 9:00am GMT today, Wednesday 27 July 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
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musicMagpie plc Steve Oliver, CEO Ian Storey, COO |
Tel: +44 (0) 870 479 2705 |
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Matthew Fowler, CFO
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Peel Hunt (Nominated Adviser and Joint Broker) Edward Knight Paul Gillam Tom Ballard |
Tel: +44 (0) 20 7418 8900
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Shore Capital (Joint Broker) Malachy McEntyre Mark Percy Daniel Bush John More |
Tel: +44 (0) 20 7408 4090 |
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Powerscourt (Financial Public Relations) Rob Greening Genevieve Ryan Sam Austrums |
Tel: +44 (0) 20 7250 1446 |
Notes to Editors
Operating through two trusted brands – musicMagpie in the UK and decluttr in the US – musicMagpie’s core strategy is simple: to provide consumers with a smart, sustainable and trusted way to buy, rent and sell refurbished consumer technology and physical media products with sustainability running to the very heart of its operations. Founded in 2007, the Group has an established presence in the UK, with operations in Stockport, Greater Manchester, and in the US in Atlanta, Georgia.
musicMagpie has a strong environmental and social focus, as demonstrated by its trademarked ‘smart for you, smart for the planet’ ethos. Over 400,000 consumer technology products were resold 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's 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. The Group also recently partnered with Asda to give customers the option of using its SMARTdrop Kiosks in store for a fast and easy way to recycle phones for instant cash. Customers purchasing from musicMagpie receive branded refurbished product for a fraction of the price of buying new.
The Group has the highest number of seller reviews on both Amazon and eBay and has consistently achieved extremely positive feedback scores. The Group also has a 4.5* rating on Trustpilot with over 230,000 reviews.