Company Announcements

FULL YEAR RESULTS FOR THE YEAR ENDED 30 NOV 2023

Source: RNS
RNS Number : 6000G
musicMagpie plc
13 March 2024
 

 

13 March 2024

musicMagpie plc

("musicMagpie", or "the Group")

FULL YEAR RESULTS FOR THE YEAR ENDED 30 NOVEMBER 2023

 

Margin improvement and overhead reduction delivers 15.4% increase in EBITDA

 

musicMagpie, a circular economy pioneer specialising in refurbished consumer technology, disc media and books in both the UK and US, announces its audited full year results for the year ended 30 November 2023 ("FY23").

 

Financial and Operational highlights

 

·      Adjusted EBITDA up 15.4% to £7.5m (2022: £6.5m) driven by tight control of margins and costs

·      Consumer Technology revenue of £95.4m (2022: £96.6m), representing 70% of Group revenue

·      Increase in gross margin to 27.7% (2022: 26.3%) with continued focus on margin expansion

·      Consumer Technology gross profit increased 15.8% from £20.2m to £23.4m

·      Cash generative before investing and financing activities with net cash from operations of £8.1m (2022: £6.2m)

·      £30m revolving credit facility with HSBC UK and NatWest committed until July 2026

·      Year-end net debt of £13.1m (2022: £7.9m) following investment in rental assets 

·      Rental book provides recurring revenues, with year-end active renters contributing approximately £3.6m of committed revenue into 2024 and assets with a FY23 year end balance sheet value of £7.2m (2022: £6.6m)

·      Active subscribers to device rental service increased to 37,100 (2022: 30,500)

·      Overheads reduced year on year with additional cost and headcount savings implemented post-year end

 

 


FY23

£m

FY22

£m

Revenue

136.6

145.3

- Consumer Technology

95.4

96.6

- Disc Media and Books

41.2

48.7

Gross profit

37.9

38.1

Adjusted EBITDA1

7.5

6.5

Depreciation, amortisation and impairments

(10.0)

(4.9)

Shared based payments

0.1

(0.2)

Non-underlying items

(2.5)

(0.2)

Financial expense

(1.9)

(0.9)

Loss before taxation

(6.8)

(1.5)

Net Debt

(13.1)

(7.9)

 

Notes

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

 

Q1 trading and outlook:

The Group finished the 2023 financial year with a record Black Friday period which contributed to a 15.4% increase in EBITDA for FY23.   Q1 FY24 has recently closed and trading was in line with management's expectations.  This positive start to the new financial year, combined with the recent changes made in the US to the Group's Consumer Technology buying strategy and operations, cost reduction exercises in the UK and lower investment levels into our Rental offering, give the Board confidence in the Group's FY24 and medium-term prospects.

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

"Following a successful end to FY23 we are pleased with FY24's Q1 performance.  Having recently made changes to our US Consumer Technology buying strategy and operations, and implemented further cost savings in the UK, we believe that musicMagpie is well positioned for the remainder of the year.  We expect second-use markets to continue to grow which will complement our strategy of unlocking a 'world of inventory' from consumers homes and providing them with a solution that is 'smart for you, smart for the planet' across of our existing product categories and potential new product categories.  As such we remain confident in musicMagpie's future prospects."

 

 

 

 

- Ends -

Enquiries

musicMagpie plc

Steve Oliver, CEO

Ian Storey, COO

Tel: +44 (0) 870 479 2705

Matthew Fowler, CFO

 

 

Shore Capital (Nominated Adviser and Broker)

Tel: +44 (0) 20 7408 4090

Mark Percy

 

Malachy McEntyre

 

Daniel Bush

 


 

 

 

Powerscourt (Financial Public Relations)

Rob Greening

Sam Austrums

Oliver Banks

Tel: +44 (0) 20 7250 1446

 

Notes to Editors

 

About musicMagpie plc

Operating through two trusted brands - musicMagpie in the UK and decluttr in the US - musicMagpie's core strategy is simple: to provide consumers with a smart, sustainable and trusted way to buy, rent and sell refurbished consumer technology and physical media products with sustainability running to the very heart of its operations. Founded in 2007, the Group has an established presence in the UK, with operations in Stockport, Greater Manchester, and in the US in Atlanta, Georgia.

 

musicMagpie has a strong environmental and social focus, as demonstrated by its trademarked 'smart for you, smart for the planet' ethos. Nearly 400,000 consumer technology products were resold in FY23. In addition, the Group re-sells approximately 8.4m books and disc media each year that could have ended up as waste. The Group has been given the London Stock Exchange's Green Economy Mark in recognition of its contribution to the global green economy.

 

When selling to musicMagpie, the customer is offered a fixed valuation via the website, provided with free logistics to ship the products and (subject to it being 'as described') receives payment for their product on the day of arrival at the Group's warehouse. The Group has  partnered with Asda to give customers the option of using its SMARTDrop Kiosks in store for a fast and easy way to recycle phones for instant payment. Customers purchasing from musicMagpie receive branded refurbished product for a fraction of the price of buying new.

 

The Group has the highest number of seller reviews on both Amazon and eBay and has consistently achieved extremely positive feedback scores. The Group also has a 4.4* rating on UK Trustpilot with almost 285,000 reviews, and is honoured to have won Best Refurbished in the Uswitch Telecoms Awards 2023 as well as Best Online Retailer and Best Secondary Market Provider at the Mobile News Awards 2023.

 

For further information please visit: www.musicmagpieplc.com

 


Chief Executive Officer's review

Our ambition is to continue to be a leader in the circular economy and drive profitable growth through second-life products. We will achieve this by executing our fast, trusted and convenient business model across our technology and media products, as well as expanding into other product areas that present opportunities.

'Buy'

Buying is the cornerstone of our model, it's the 'fuel for our fire' and allows us to sell and rent profitably. Innovation in this area allows us to be competitive on price and market-leading on trust, convenience and customer service. FY23 was the first year in which our innovative SMARTDrop kiosks were fully installed across a network of 290 Asda stores. These kiosks, which provide a fast and effective way for people to sell their devices for an immediate cash payment, have grown in popularity to the point where at peak approximately 43% of all of our smart phones are being sourced via this route. As well as allowing us to buy devices through a differentiated route, the kiosks also bring significant marketing and brand awareness benefits to our business.  During the year we rolled out several pricing initiatives for the kiosks that see differentiated fee structures for purchases made using this channel. This allows us to buy for slightly lower prices, while still delivering a fantastic service to those customers who want immediate payment and/or who value a secure and instantaneous drop off option.

The non-kiosk buying route, which still accounts for the majority of our buying activities, involves the consumer posting their product(s) to our warehouse using the provided choice of free logistics services, and upon arrival, detailed quality checks are undertaken before payment to the customer is made. During the year we have installed and trained Artificial Intelligence (AI) models to understand our phone grading systems. Over time, we expect AI to perform most of our cosmetic grading and thereby enhancing consistency of grading and also providing a productivity cost saving to the business.

Towards the end of the financial year, in line with our renewed focus on gross profit, we took steps in the US to increase our gross margins by reducing buying prices, which naturally reduces volumes but improves the unit economics, selling less product but for greater margin.  As volume reduced through the operation, we reduced the headcount accordingly.  Our unit economics going into the next financial year are expected to improve which will boost the profitability of the division.  While executing this strategy we have seen interesting opportunities emerge where we are able to source product in the US and sell that product more profitably in the UK rather than in its home location.  If these opportunities continue, we envisage there may become a point where the US Technology business acts purely as a sourcing avenue for the UK rather than a standalone trading business that sells in its own territory.

 'Sell'

Against a tough consumer macro environment, Group revenues were down on prior year, but overall gross margin was 27.7%, up from 26.3% in the prior year. This was achieved not only from buying product for less, but from selling product with a clear target margin so that all our sales channels, (ebay, Amazon, Walmart and Backmarket) delivered similar returns.

Our routes to market are either direct via the musicMagpie store, or indirect via third-party platforms. The musicMagpie store continues to provide a slightly higher gross margin and a deeper level of customer ownership than selling through platforms; however, we recognise the need to service customers through all channels and tactically distribute product on whatever channel they may wish to purchase as long as that sale delivers sufficient gross margin. So the key is to understand the specific margins of each channel and actively manage sales to acceptable minimums so that while we are channel agnostic we are not gross margin agnostic.

Looking forward into 2024 we expect our enhanced Buy Now Pay Later ('BNPL') offering to have a positive impact on revenues. As we refine our product offering we see the combination of outright sale, BNPL and renting as the full suite of options that refurbished tech buyers require, and which will support our future sales growth. There is a place for instalment purchase plans (BNPL) for cash conscious consumers as well as renting for upgrade and sustainability conscious consumers.  As BNPL provides immediate revenue and cash to the business it will complement the longer payback rentals that will continue into 2024.  Looking further ahead than 2024, we aspire to grow our product base and hope to grow new product category lines to meaningful levels.

 

 'Rent'

Our monthly rental subscription model is a disruptive and differentiated offering that provides an attractive and flexible usage offer for refurbished smart phones and other consumer technology products. The model provides a variety of advantages to consumers including a lower cost outlay, a defined renewal pathway and a sustainable approach to consumer technology usage.

Having launched in October 2020, we have now grown the Rental book to 37,100 renters and expanded the offering to include rentals to businesses under the Magpie Circular offering. The advantages to musicMagpie are the quality recurring revenues that rentals provide and the certainty of ownership of devices that we can build into our demand planning models.

To build the rental book requires a carefully balanced approach to opportunity cost, because each phone rented has the lost opportunity of an outright sale, and while the rental over the long term provides more profits, an outright sale in the short term provides immediate cash. During the second half of the year we began to refine the rental product to a more segmented basis and one that is aimed at a narrow customer subset - this refined product is aimed at customers with higher credit ratings and a greater propensity to renew. In the short term, we see our Rental product as a profitable and complementary line of business, but not one that we intend to grow to a mass market.

Total Rental revenues for 2023 were £8.3m (2022: £5.3m), and gross profit was £7.4m (2022: £4.2m).  With the current refined product, we expect to see similar levels of revenues in 2024, but without the requirement for significant capital investment.  We do not expect our rental book to grow and indeed it is possible that it will modestly decline over time as we continue to refine our rental strategy and balance it with outright sales and our BNPL offering.

Sustainability

At musicMagpie, we strive to promote circularity by extending the life of products and preventing devices and physical media from ending up in landfills. We believe that as the market shifts towards subscription and rental models, this trend presents significant opportunities for us.

To support this mission, we have implemented a range of sustainability measures to improve our environmental impact. These include reducing our carbon footprint, limiting waste, and decreasing resource consumption. Additionally, we actively engage with customers, suppliers, and local communities to educate and collaborate on sustainable practices. By taking a holistic approach to circularity and sustainability, we strive to not only benefit our business, but also contribute to a more sustainable future for all, in line with our 'smart for you, smart for the planet' ethos.

Looking after our people

I would like to take this opportunity to thank all our amazing colleagues across the Group. This business had humble beginnings, starting as it did in my garage in 2007 but has always placed colleagues at the heart of everything it does. I can say with absolute conviction that, without all of the amazing Magpies with whom I work, this business would not be the innovative circular economy champion that it is today, and I am blessed to work with such talented, ambitious and passionate people who care so deeply.

Cost base

As both a buyer and seller of products we can avoid the main impacts of inflation by managing our buy-sell prices. However, inflation across the remainder of our cost base is still an issue.  For the second year in a row, we increased rates of pay for our lower-paid colleagues ahead of any statutory deadlines.

We believe we can mitigate the impact of this increase by continuing with our regular cost control reviews. For our UK energy consumption, we took steps in 2022 to hedge against price rises and secure fixed future costs. While the current impact of these contracts is a modest £0.1m loss against current market rates, we are pleased to have certainty of pricing and to remain insulated from future price volatility for at least another 22 months.

We have a strong commitment to leaving no stone unturned in our efforts to control costs, and overheads in 2023 were £30.4m (2022: £31.7m).  This is an ongoing exercise to reduce costs and increase our profits and post-year end we took the difficult decision to implement further cost and headcount reductions in both the UK and US to right size the business and support our future profits.

Outlook

I have no doubt that second-use markets will continue to grow as consumer adoption increases in all manner of areas. musicMagpie must maintain its position in its established markets and be agile and purposeful in exploiting new and expanding markets as they emerge. Our mantra of being 'here to help' will continue to apply to consumers, corporates and the environment, and will become ever more relevant in the years to come. We will seek to unlock a 'world of inventory' from consumers homes and provide them with a solution that is 'smart for you, smart for the planet' across both of our existing product categories and potential new product categories going forward. I remain hugely proud of this business, its people, and the positive impact that we are making on our community, wider society and the environment whilst acknowledging that we need to continue to focus on the future financial performance to maximise the potential success, long term security and welfare of the business.

Steve Oliver

Chief Executive Officer

12 March 2024

 


 

 

Financial review

The Group has been intensely focused on cash and profits in the year and as a result gross margin increased year over year which led to a static gross profit despite the decline in revenue. Revenue for the year ended 30 November 2023 was £136.6m (2022: £145.3m). Gross profit was £37.9m (2022: £38.1m) with gross margin of 27.7%, up from 26.3% in the prior year.

Consumer Technology

Consumer Technology revenue was £95.4m (2022: £96.6m) and now represents the dominant category in the Group with 70% of total revenues. Within this segment, the Rental business grew from £5.3m to £8.25m as active renters increased from 30,500 to 37,100. Owing to a shift in the rental model, the level of active renters is expected to remain broadly static over the forthcoming year and the Group does not have plans to increase the rental base significantly as this would require further cash investment. The second component of Consumer Technology, outright sales, saw revenue decline by £4.0m to £87.2m (2022: £91.2m), but gross profit was static at £16.0m. The Group has focused on expanding its margin on outright sales via a number of initiatives as well as managing the sale of stock across the various sales platforms in a more sophisticated manner in order to achieve minimum expected gross margin targets. Maintaining gross profit on a lower turnover has helped reduce overhead costs from £31.6m to £30.4m, with lower activity and lower marketing spend, and this supported the increase in EBITDA year over year.

Disc Media and Books

Revenue for the year was £41.2m (2022: £48.7m). This category is declining as expected, mainly owing to the continued reduction in the sale of both new and second-hand physical media as consumers increasingly consume content in different ways, for example online streaming. We are starting to see a deceleration in this sales decline as the more rapidly declining DVD and gaming segments become much less significant and books, which are more resilient therefore generate an increasing share of overall sales. Gross margin slipped back a little from 36.9% to 35.2% with the small decline owing to slightly higher direct costs despite the higher trading margin on purchased product.

 

Earnings

The following table analyses the results for the year from EBITDA to loss after tax.

 

2023

2022

Movement

EBITDA

7.5

6.5

1.0

Depreciation, amortisation and impairments

(10.0)

(6.6)

(3.4)

Equity-settled share-based payments

0.1

(0.2)

0.3

Other non-underlying items

(2.5)

(0.2)

(2.3)

Operating loss

(4.9)

(0.5)

(4.4)

Net interest cost

(1.9)

(0.9)

(1.0)

Loss before tax

(6.8)

(1.4)

(5.4)

Tax

(0.1)

(3.3)

3.2

Loss after tax

(6.9)

(4.7)

(2.1)


Adjusted EBITDA is a non-GAAP alternative performance measure. See Note 30 to the financial statements for further definition and reconciliation.

 

Overheads reduced £1.3m from the prior year following tight cost control and include fee and salary reductions taken by the CEO, the COO and the Non-Executive Directors.  The overhead reduction contributed to the EBITDA improvement from £6.5m to £7.5m.

Depreciation, amortisation and impairments increased to £10.0m from £6.6m in the prior year. All components were up, depreciation was £5.9m (2022: £3.9m), amortisation was £2.5m (2022: £1.9m) and impairments were £1.5m up from £0.8m.

The increase in depreciation resulted from an increase in the average value of devices out on rent during the year and the depreciation policy which is 33% reducing balance. Impairments were up slightly and relate to losses on the assets out on rent.

Amortisation increased to £2.5m and follows the increased development spend over recent years. Actual development spend is on a downwards trajectory after investment over recent years; however, owing to the lag on the amortisation policy, the non-cash income statement charge is expected to peak during 2024.

There was a £2.5m charge (2022: £0.2m charge) for other non-underlying items.  When reviewing the gross margin improvement likely to be achieved in our forecast models, it was identified that the recoverable amount of the discounted cashflows was less than the carrying value of the assets and this resulted in a £1.1m (2022: £nil) write-down in the value of goodwill In addition there was a non-underlying expense related to a mark to market on a fixed price electricity supply contract plus some costs consistently treated as non-underlying in 2022. The Group has in place various contracts to purchase electricity at fixed prices for periods up to autumn 2026. These prices provide certainty over planning and forecasting and set rates as close to the levels paid by the Group during 2022. Under IFRS accounting the value of these contracts has been marked to the external market price of electricity at reporting dates. Owing to a reduction in the market price of electricity to below the fixed price in the contracts, the Group has booked a non-cash liability of £0.1m at November 2023. At 30 November 2022 the Group had an asset of £1.1m and so a charge of £1.2m has been processed through the accounts to reverse this previous asset and book the current year liability. As there is less than two years left on the contracts, the volatility on the mark-to-market accounting will reduce over time.

The interest charge for the year was £1.9m (2022: £0.9m) with the increase owing both to the increase in average debt and the increase in interest rates in the market. With the adjusted strategy for rental, the expectation is that gross debt and thus interest charges will fall over time.

The loss before tax for the period was £6.8m. The taxation charge was £0.1m (2022: £3.2m charge), with the prior year charge related to movements in deferred taxation on historical share-based payments. The Group has historically benefitted from the UK's R&D tax regime with above the line tax credits of around £0.2m per year related to its development spend on its recent large infrastructure projects. It is becoming increasingly difficult to qualify for the credits and the tax authority appears more willing to challenge and reject claims. The Group is unlikely to submit further claims now that the major project spend has completed and the tax authority landscape has changed.

After taxation the total loss for the period was £6.9m (2022: £4.7m).

Net assets

The balance sheet is summarised as follows:

 

2023

£m

2022

£m

Fixed assets

13.1

14.0

Capitalised development

8.4

6.6

Inventory

7.4

8.8

Debtors

2.0

2.6

Creditors

(8.2)

(9.3)

Operating net assets

22.7

22.7

Goodwill and other intangibles

4.4

5.8

Deferred tax

1.8

1.9

Net debt

(13.1)

(7.9)

Lease liabilities

(3.4)

(4.1)

Derivative

(0.1)

1.1

Net assets

12.3

19.5

 

Operating net assets stayed level at £22.7m despite an increase in rental assets of £0.6m and increase in capitalised development spend of £1.8m. As noted above, tight working capital management saw inventory reduce from £8.8m to £7.4m, and together with the reduction in fixed asset spend, this offset the increase in rental assets and the capitalised development spend. Net debt increased £5.2m as described in the cash flow section below. With the retained loss for the period of £6.9m (2022: £4.7m), net assets reduced from £19.5m to £12.3m.


Cash flow

The cash flow in the year is summarised in the table below:


2023

£m

2022

£m

Net cash from operations

8.1

6.2

Acquisition of PPE



- Rental assets

(6.2)

(6.6)

- Other

(0.2)

(3.0)

Development costs

(4.1)

(4.6)

Cash outflow from investing

(10.5)

(14.2)

New loan drawings

5.9

13.5

Interest and lease

(2.5)

(1.6)

Other

-

0.1

Cash flow from financing

3.4

11.9

Cash increase

1.0

3.9

FX

(0.2)

0.1

Cash carried forward

7.6

6.8

Gross debt

(20.7)

(14.7)

Net debt

(13.1)

(7.9)

Future value of contract rental revenues

3.6

n/a

Current value of assets out on rent

7.2

n/a

Notional net debt after rental cash

(2.3)

n/a

 

 

Net cash generated from operating activities was £8.1m up 30.6% from the prior year £6.2m, and this was driven by both an improved adjusted EBITDA in the period but also continued control of working capital that saw £0.9m cash inflow (2022: £1.0m inflow) over the year. Inventory reductions made a significant contribution to the working capital inflows with closing stock of £7.4m being £1.4m lower than 2022.

The £8.1m of cash from operations was consumed by £10.5m of spend on capital expenditure and development spend. Capital expenditure was £6.4m in total and was almost entirely allocated to rental assets of £6.2m (2022: £6.6m), driven by the additional value of assets out on rent. When rental devices are returned at the end of a rental period, they are transferred back into stock and sold as normal. The value of assets out on rent therefore represents future potential cash. The fact that the devices will depreciate over time is offset by the expected gross margin at sale. Development expenditure was down from £4.6m in the prior year to £4.1m and as noted above we expect this spend to continue to decline following the completion of a number of major upgrades over recent years.

 

After £5.9m of net drawings from the loan facility, the net increase in cash was £1.0m (2022: £3.9m) and net debt closed at £13.1m (2022: £7.9m). Stated after future rental cash flows, notional net debt is £2.3m, albeit the rental cash flows will only be crystallised over time as the contracts progress to expiry.

The Group relies on a £30m committed revolving credit facility with HSBC UK and NatWest which expires in July 2026. There are two financial covenants on the lending: that leverage (the size of net debt to EBITDA) shall be less than 2.5 times and that interest cover (EBITDA divided by interest) shall be greater than four times.  The Group continues to operate with net debt.  Leverage following Black Friday in November 2023 was 1.7 times but during other months of the year increases above this position, but still within the covenant limits.  There are several levers available to manage debt, including reducing the number of assets that go out on rent each week.

Matthew Fowler

Chief Financial Officer

12 March 2024

 

 

 

 

 

Consolidated Statement of Comprehensive Income

 

 

 


 

 

Note

Year ended

30 November 2023

£000

Year ended

30 November 2022

£000

 

Turnover

 

4 , 5

 

136,601

 

145,279

Cost of sales


(98,737)

(107,138)

Gross profit


37,864

38,141

Operating expenses


(40,224)

(38,478)

Operating expenses - non-underlying items

6

(2,527)

(174)

Total operating expenses


(42,751)

(38,652)

Adjusted EBITDA*

329

7,452

                        6,471

Depreciation of property, plant and equipment

14

(5,943)

(3,877)

Impairment of property, plant and equipment

14

(1,463)

     (835)

Loss on disposal of property, plant and equipment

14

-

(19)

Amortisation of intangible assets

15

(2,538)

                    (1,910)

Equity - settled share-based payments

25

132

                        (167)

Other non - underlying items

6

(2,527)

                        (174)

Operating loss

       

        7

(4,887)

(511)

Financial expense

10

(1,877)

(946)

Loss before taxation


(6,764)

(1,457)

Taxation

11

(89)

(3,278)

Loss for the period attributable to the equity holders of the parent


 

(6,853)

 

(4,735)

Other comprehensive income




Items that may be reclassified to profit and loss

Foreign exchange differences on translation of foreign operations


 

(282)

 

145

Total comprehensive loss for the year attributable to the

equity holders of the parent


 

(7,135)

 

(4,590)



 

Pence

 

Pence

- basic loss per share

13

(6.8)p

(4.8)p

- diluted loss per share

13

(6.8)p

(4.8)p

 

*Adjusted EBITDA is a non-GAAP measure. See note 30 for definition and reconciliation.

 

 

 

Consolidated Statement of Financial Position

 


 

 

Note

As at

30 November 2023

£000

As at

30 November 2022

£000

Assets

Property, plant and equipment

 

14

 

13,068

 

13,995

Intangible assets

15

12,827

12,379

Deferred tax asset

12

1,847

1,909

Derivative financial asset

19

-

578

Total non-current assets


27,742

28,861

Inventories

17

7,387

8,824

Trade and other receivables

18

1,996

2,602

Derivative financial asset

19

-

555

Cash and cash equivalents

20

7,600

6,806

Total current assets


16,983

18,787

Total assets


44,725

47,648

 

Liabilities

Trade and other payables

 

 

21

 

 

8,241

 

 

9,340

Lease liabilities

23

831

687

Derivative financial liability

22

96

-

Other interest-bearing loans and borrowings

         23

203

-

Total current liabilities


9,371

10,027

Net current assets


7,612

                         8,760

 

Other interest-bearing loans and borrowings

 

23

 

20,496

 

14,675

Lease liabilities

23

2,582

3,403





Total non-current liabilities


23,078

18,078

Total liabilities


32,449

28,105

Net assets


12,276

19,543

 

Equity

Share capital

 

 

27

 

 

1,078

 

 

1,078

Share premium

27

14,449

14,449

Capital redemption reserve

27

1,108

1,108

Merger reserve

27

(991)

(991)

Translation reserve

27

                             (257)

25

Retained earnings


(3,111)

3,874

Equity attributable to the equity holders of the parent


12,276

19,543

 

 

 

Consolidated Statement of Changes in Equity



Share

capital

Share

premium

Capital redemption

reserve

Merger

reserve

Translation

reserve

Retained

earnings

Total

Equity


note

£000

£000

£000

£000

£000

£000

£000

As at 1 December 2021

 

1,078

14,449

1,108

(991)

(120)

8,760

24,284

Loss for the year


-

-

-

-

-

(4,735)

(4,735)

Foreign currency translation


-

-


-

145


145

Total comprehensive income/ (loss) for the year


-

-

-

-

145

(4,735)

(4,590)

Share-based payments

25

-

-



-

167

167

Tax effects of share-based payment charge







(318)

(318)

Balance as at 30 November 2022


1,078

14,449

1,108

(991)

25

3,874

19,543


Loss for the year


-

-

-

-

               -

(6,853)

(6,853)

Foreign currency translation


-

-


-

           (282)


(282)

Total comprehensive income/ (loss) for the year


-

-

-

-

           (282)

(6,853)

(7,135)

Share-based payments

25

-

-



                -

(132)

(132)


Balance as at 30 November 2023


1,078

14,449

1,108

(991)

          (257)

(3,111)

12,276

 

Consolidated Cash Flow Statement

 

 


Year ended

30 November 2023

£000

Year ended

30 November 2022

£000

Net cash flows from operating activities

Loss for the year

 

(6,853)

 

(4,735)

Adjustments for:

Financial expense

 

1,877

 

946

Taxation expense

89

3,278

Depreciation of property, plant and equipment

5,943

3,877

Impairment of property, plant and equipment

1,463

835

Loss on disposal of property, plant and equipment

-

19

Amortisation of intangible assets

2,538

1,910

Goodwill impairment

1,100

-

Fair value loss/(gain) on derivative instruments

1,229

(1,133)

Share-based payments (credit)/ expense

(132)

167


 


Working capital adjustments

Decrease in inventories

 

 

1,437

 

 

(805)

Decrease in trade and other receivables

579

1,122

(Decrease)/increase in trade and other payables

(1,143)

712

Net cash from operations

8,127

6,193

 

Cash flows used in investing activities

Acquisition of property, plant and equipment

 

 

(6,429)

 

 

(9,661)

Capitalised development expenditure

(4,086)

(4,555)

Net cash used in investing activities

(10,515)

(14,216)

 

Cash flows from financing activities

Net proceeds from loans

 

 

5,954

 

 

21,026


 



 


Financial expenses paid

(1,668)

(577)

Lease liabilities paid

(730)

(868)

Interest paid on lease liabilities

(138)

(169)

Repayment of other loans

-

(7,500)

Net cash from financing activities

3,418

11,912

 

Net increase in cash and cash equivalents

 

1,030

 

3,889

Cash and cash equivalents brought forward

6,806

2,849

Effect of exchange rate fluctuations on cash

(236)

68

Cash and cash equivalents carried forward

7,600

6,806


Notes

 

1.  CORPORATE INFORMATION

 

The Directors of musicMagpie plc (the "Company") present their full year report and the audited Consolidated Financial Statements for the year ended 30 November 2023.

musicMagpie plc is a public limited company incorporated in the United Kingdom whose shares are publicly traded           on the AIM market of the London Stock Exchange and is incorporated and domiciled in the UK. Its registered office address is One Stockport Exchange, Railway Road, Stockport, Cheshire, SK1 3SW.

The Company's financial statements are included in the consolidated financial statements of musicMagpie plc, which can be obtained from its registered office address. The Company has taken advantage of the exemption permitted by Section 408 of the Companies Act 2006 not to present its own profit and loss account.

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

 

Whilst the financial information included in this announcement has been prepared on the basis of UK-adopted International Accounting Standards ("Adopted IFRSs"), this announcement does not itself contain sufficient information to comply with Adopted IFRSs. The Group financial statements have been prepared and approved by the directors in accordance with UK-adopted International Accounting Standards.

The Group expects to publish full Consolidated Financial Statements in April 2024. The financial information set out in this announcement does not constitute the Group's Consolidated Financial Statements for the years ended 30 November 2023 or 2022 but is derived from those Financial Statements which were approved by the Board of Directors on 12 March 2024. The auditor, RSM UK Audit LLP, has reported on the Group's Consolidated Financial Statements and the report was unqualified and did not contain a statement under section 498 (2) or 498 (3) of the Companies Act 2006.

The statutory financial statements for the year ended 30 November 2023 have not yet been delivered to the Registrar of Companies and will be delivered following the Company's Annual General Meeting.

The Group financial statements consolidate those of the Company and its subsidiaries (together referred to as the "Group"). The Group financial statements are prepared on the historical cost basis except where UK-adopted International Accounting Standards require an alternative treatment.

The Group's accounting policies are set out in the 2022 Annual Report and Accounts and have been applied consistently in 2023

 

2.  ACCOUNTING POLICIES

 

2.1   Basis of Preparation

 

The consolidated financial statements have been prepared in accordance with UK adopted International Accounting Standards  and with those parts of the Companies Act 2006 applicable to companies reporting under International Accounting Standards. The Group has chosen to prepare the parent company financial statements in accordance with Financial Reporting Standard 101: Reduced Disclosure Framework ("FRS 101"). The financial statements have been prepared under the historical cost convention, except for derivative financial instruments which are measured at fair value through profit or loss.

The accounting policies that follow set out those policies that apply in preparing the financial statements for the year ended 30 November 2023 and the Group and Company have applied the same policies throughout the year.

The following exemptions from the requirements of IFRS have been applied in the preparation of the Company's financial statements and, where relevant, equivalent disclosures have been made in the Group accounts of the parent, in accordance with FRS 101:

 

·     Presentation of a Statement of Cash Flows and related notes;

·     Disclosure of the future impact of new International Financial Reporting Standards in issue but not yet effective at the reporting date;

·     Financial instrument disclosures;

·     A reconciliation of the number and weighted average exercise prices of share options, how the fair value of share-based payments was determined and their effect on profit or loss and the financial position;

·     Related party disclosures for transactions between the parent and  wholly owned members of the Group;

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

 
Basis of Consolidation

 

A subsidiary is an entity that is controlled by the parent. The results of subsidiary undertakings are included in the consolidated statement of comprehensive income from the date that control commences until the date that control ceases. Control is established when the Group has the power to govern the operating and financial policies of an entity so as to obtain benefits from its activities. In assessing control, the musicMagpie Group takes into consideration potential voting rights that are currently exercisable.

All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.

 

2.2  Going Concern

 

The financial statements are prepared on a going concern basis which the directors believe to be appropriate for the following reasons. The Group made a loss before taxation of £6,764,000 during the year ended 30 November 2023 (year ended 30 November 2022: loss of £1,457,000).  At the year-end date it had net current assets of £7,612,000 (year ended 30 November 2022: £8,760,000).  The Group has access to a £30m committed credit facility.  The drawings on the facility are controlled by two financial covenants: leverage, being adjusted EBITDA to net debt, and interest cover, being adjusted EBITDA divided by interest. The Group currently meets its day to day working capital requirements through cash reserves and from its' credit facility.

In reviewing its forecasts for going concern, the key consideration of the Group is whether it can demonstrate ongoing compliance with the financial covenants on the facility.  In completing their going concern assessment, the directors have reviewed the trading and cash flow forecasts for the period to the end of March 2025 and have incorporated reasonable downside sensitivities.  The downside sensitivities were based on reductions in adjusted EBITDA, the key covenant metric.  In the worse case scenarios mitigating actions available to the business were included in the assessments.  In these forecasts the directors have confirmed that the Group will be able to continue to meet quarterly covenant tests and remain within the borrowing limits set out within its bank facility agreement. 

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

 

2.3   Foreign currency

 

Transactions in foreign currencies are translated to the functional currency at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the foreign exchange rate ruling at that date.  The functional currency of the Company is sterling.

 

The assets and liabilities of foreign operations are translated to the presentational currency, sterling, at foreign exchange rates ruling at the reporting date. The revenues and expenses of foreign operations are translated at an average rate for the year where this rate approximates to the foreign exchange rates ruling at the dates of the transactions. Foreign exchange differences arising on retranslation are recognised in profit or loss.

 

2.4   Financial instruments

 

Financial assets

 

Financial assets comprise trade and other receivables (including intercompany balances) and cash and cash equivalents.

Trade receivables are initially measured at transaction price, and subsequently at their amortised cost subject to any impairment in accordance with IFRS 9.

Trade and other receivables are recognised initially at the amount of consideration that is unconditional. The Group holds these receivables with the objective of collecting contractual cash flows and therefore measures them subsequently at amortised cost using the effective interest method.

Cash and cash equivalents comprise cash in hand, cash at bank, cash in transit and call deposits. Cash in transit comprise of cash collected from the customers by third party e-commerce platforms but not yet received by the Group. These balances are considered to be highly liquid, with minimal risk of default and are typically received within a week.

The assessment of impairment of trade receivables and other receivables, including intercompany balances is in accordance with IFRS 9. Impairment is assessed by reference to expected recoverability of assets, including the underlying profitability and cash flows from subsidiaries from whom intercompany balances are owed. A loss allowance for expected credit losses (ECL) is recognised on all receivable balances subsequently measured at amortised cost as follows:

For trade receivables, lifetime ECLs are recognised using the 'simplified approach' permitted under IFRS 9.

For other financial instruments, lifetime ECLs are recognised when there has been a significant increase in credit risk since initial recognition. However, if the credit risk on the financial instrument has not increased significantly since initial recognition, the loss allowance for that financial instrument is measured at an amount equal to 12-month ECL.

 Lifetime ECL represents the expected credit losses that will result from all possible default events over the expected life of a financial instrument. In contrast, 12-month ECL represents the portion of lifetime ECL that is expected to result from default events on a financial instrument that are possible within 12 months after the reporting date.

Credit risk on a financial instrument (including intercompany balances), is assumed not to have increased significantly since initial recognition if the financial instrument is determined to have low credit risk at the reporting date. A financial instrument is determined to have low credit risk if:

·      the financial instrument has a low risk of default;

·      the debtor has a strong capacity to meet its contractual cash flow obligations in the near term; and;

·      adverse changes in economic and business conditions in the longer term may, but will not necessarily, reduce the ability of the borrower to fulfil its contractual cash flow obligations.

Financial liabilities

 

Financial liabilities comprise trade and other payables, and interest-bearing loans. These are measured at initial recognition at fair value and subsequently at amortised cost using the effective interest rate method. Interest expense and foreign exchange gains and losses are recognised in profit or loss. Any gain or loss on derecognition is also recognised in profit or loss.

Classification of financial instruments issued by the Group

 

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

 

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

 

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

 

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

Inter-company balances are classified as non-current in the financial statements.  In arriving at this classification, management have looked at the financial position of the subsidiary entities and  their relative ability to meet balances owing and considered scenarios where there are possible issues with repayment.

2.5   Property, plant and equipment

 

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

 

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

 

The Company assesses at each reporting date whether property, plant and equipment are impaired. Equipment rented out to consumers are impaired to a residual value when the device is deemed to be unrecoverable, the residual value being the amount expected to be received when the debt is sold on to a 3rd party.

 

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

 

Plant and machinery

6 - 7 years

Straight line

Motor vehicles

3 years

Straight line

Fixtures and fittings

6 - 7 years

Straight line

Computer and office equipment

3 years

Straight line

Rental assets

33%

Reducing balance

 

Depreciation methods, useful lives and residual values are reviewed at each reporting date.

 

2.6   Business combinations

 

All business combinations are accounted for by applying the acquisition method. Business combinations are accounted for using the acquisition method as at the acquisition date, which is the date on which control is transferred to the Group.

 

The Group measures goodwill at the acquisition date as:

•  the fair value of the consideration transferred; plus

•  the recognised amount of any non-controlling interests in the acquiree; plus

•  the fair value of the existing equity interest in the acquiree; less

•  the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed.

 

When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss.  Costs related to the acquisition, other than those associated with the issue of debt or equity securities, are expensed as incurred.

 

2.7   Intangible assets

 

Goodwill

 

Goodwill is stated at cost less any accumulated impairment losses. This represents Goodwill in the business as a whole and this is not amortised but is tested annually for impairment.

 

Research and development

 

Expenditure on development activities is capitalised if the product or process is technically and commercially feasible and the Group intends and has the technical ability and sufficient resources to complete development, future economic benefits are probable and if the Group can measure reliably the expenditure attributable to the intangible asset during its development. Development activities involve a plan or design for the production of new or substantially improved products or processes. The expenditure capitalised includes the cost of materials, direct labour and an appropriate proportion of overheads. Capitalised development expenditure is stated at cost less accumulated amortisation and less accumulated impairment losses. Research and other development expenditure is expensed as incurred.

 

Other intangible assets

 

Expenditure on internally generated goodwill and brands is recognised in the income statement as an expense as incurred.

Other intangible assets that are acquired by the Group are stated at cost less accumulated amortisation and less accumulated impairment losses.

 

Amortisation

 

Amortisation is charged to the profit or loss on a straight-line basis over the estimated useful lives of intangible assets unless such lives are indefinite. Intangible assets with an indefinite useful life and goodwill are systematically tested for impairment at each reporting date. Other intangible assets are amortised from the date they are available for use. The estimated useful lives are as follows:

•  Website development                                                                                    3 - 5 years

•  Capitalised IT development costs                                                                 3 - 5 years

•  Acquired intangibles (proprietary software)                                                10 years

•  Domains                                                                                                       10 years

 

 

2.8   Investments

 

Investments in subsidiaries are held at cost, less any provision for impairment.

 

2.9   Inventories

 

Inventories are stated at the lower of cost and net realisable value. Cost is based on the first-in first-out principle. The cost of inventories includes the average cost of purchase and other costs, such as inbound delivery and direct labour, in bringing them to their existing location and condition.  Net realisable value is measured by reference to sales prices in the market or products that can be readily sold and by an assessment of the harvestable value of components of a device if sale is not possible.

 

2.10  Impairment of non-financial assets excluding inventories and deferred tax assets

 

The carrying amounts of the Group's non-financial assets, other than inventories and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset's recoverable amount is estimated. For goodwill, and intangible assets that have indefinite useful lives or that are not yet available for use, the recoverable amount is estimated each year at the same time.

The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For the purpose of impairment testing, assets that cannot be tested individually are Grouped together into the smallest Group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or Groups of assets (the "cash-generating unit"). For the purpose of impairment testing, goodwill is allocated to a single cash-generating unit, or ("CGU"), being the Group as a whole reflecting the lowest level  at which the business is monitored for internal reporting purposes.

An impairment loss is recognised if the carrying amount of an asset or its CGU exceeds its estimated recoverable amount. Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of the CGU are allocated first to reduce the carrying amount of any goodwill allocated to the units, and then to reduce the carrying amounts of the other assets in the unit (Group of units) on a pro rata basis.

An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

 

2.11  Employee benefits

 

Defined contribution plans

 

A defined contribution plan is a post-employment benefit plan under which the Group pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution pension plans are recognised as an expense in profit or loss in the periods during which services are rendered by employees.

 

Short-term benefits

 

Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognised for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.

Share based payments

 

Share-based payment arrangements in which the Group receives goods or services as consideration for its own equity instruments are accounted for as equity-settled share-based payment transactions, regardless of how the equity instruments are obtained by the Company.

The grant date fair value of share-based payments awards granted to employees is recognised as an employee expense, with a corresponding increase in equity, over the period in which the employees become unconditionally entitled to the awards. The fair value of the awards granted is measured using either Monte Carlo option pricing model or Black Scholes model, taking into account the terms and conditions upon which the awards were granted. The amount recognised as an expense is adjusted to reflect the actual number of awards for which the related service and non-market vesting conditions are expected to be met, such that the amount ultimately recognised as an expense is based on the number of awards that do meet the related service and non-market performance conditions at the vesting date. See note 25 for details of employee share options incentive plans operated by the Group.

 

2.12 Provisions

 

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

 

2.13 Revenue

 

Revenue is income generated from the sale or rental of goods in the ordinary course of the Group's business activities. In accordance with IFRS 15, revenue is recognised when any performance obligations in a contract with a customer has been satisfied.  The Group's revenues are derived from the supply of goods (technology, media and books) and the rental of mobile phones to customers.

Sale of goods

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

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

 

Rental of devices

 

The Group earns rental income on devices rented to customers over fixed terms. The ownership of the devices does not pass to the customer at the end of the contract term and there is no option to purchase the device at any point during the contract term. Rental payments are received on a monthly basis and early termination charges are payable if the contract is terminated before the end of the term by the customer. The Group recognises revenue for these rental items on a straight-line basis over the period of the rent. Revenue for terminations is recognised at the point termination is agreed.

 

2.14  Financial expense

Financial expense includes interest payable on borrowings and other finance charges incurred.

 

2.15  Taxation

 

Tax on the profit or loss for the year comprises current and deferred tax. Tax is recognised in the income statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.

Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.

Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: the initial recognition of goodwill; the initial recognition of assets or liabilities that affect neither accounting nor taxable profit other than in a business combination, and differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the reporting date.

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilised. Deferred tax assets and liabilities are offset where there is a legally enforceable right to offset current tax assets and liabilities and where the deferred tax balances relate to the same taxation authority.

2.16  Leases as lessee

 

At the commencement date of the lease, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

Recognition and measurement

At commencement or on modification of a contract that contains a lease component, along with one or more other lease or non-lease components, the Group accounts for each lease component separately from the non- lease components. The Group allocates the consideration in the contract to each lease component on the basis of its relative stand-alone price and the aggregate stand-alone price of the non-lease components.

The Group recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use assets comprise the initial measurement of the corresponding lease liability, lease payments made at or before the commencement day, less any lease incentives received and any initial direct costs. They are subsequently measured at cost less accumulated depreciation and impairment losses.

The right-of-use asset is depreciated using the straight-line method from the commencement date to the end of the lease term, unless the lease transfers ownership of the underlying asset to the Group by the end of the lease term or the cost of the right-of-use asset reflects that the Group will exercise a purchase option. In that case, the right-of-use asset will be depreciated over the useful life of the underlying asset, which is determined on the same basis as those of property and equipment. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group's incremental borrowing rate. The Group has applied the incremental borrowing rate for calculating the lease liability of 5%. The incremental borrowing rate is the rate of interest that the Group would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value to the right-of-use assets in a similar economic environment. The Group determines its incremental borrowing rate with reference to its existing and historical cost of borrowing adjusted for the term and security against such borrowings.

 

Lease payments included in the measurement of the lease liability comprise the following:

•  fixed payments, including in-substance fixed payments;

•  variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date

•  amounts expected to be payable under a residual value guarantee; and

•  the exercise price under a purchase option that the Group is reasonably certain to exercise,

•  lease payments in an optional renewal period if the Group is reasonably certain to exercise an extension option, and

•  penalties for early termination of a lease unless the Group is reasonably certain not to terminate early.

 

The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, there is a change in the Group's estimate of the amount expected to be payable under a residual value guarantee, if the Group changes its assessment of whether it will exercise a purchase, extension or termination option or if there is a revised in- substance fixed lease payment.

When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, to the extent that the right-of-use asset is reduced to nil, with any further adjustment required from the remeasurement being recorded in profit or loss.

The Group presents right-of-use assets in 'property, plant and equipment' and lease liabilities on the face of the statement of financial position. The Group applies IAS 36 to determine whether a right-of-use asset is impaired and accounts for any identified impairment loss as described in policy 2.10.

2.17  Short-term leases and leases of low-value assets

 

The Group has elected not to recognise right-of-use assets and lease liabilities for lease of low-value assets and short-term leases. The Group recognises the lease payments associated with these leases as an expense on a straight-line basis over the lease term.

 

2.18 Derivative financial instruments

 

The Group accounts for derivative instruments under IFRS 9 Financial Instruments.  The Group does not hedge account.  Derivative instruments are measured at fair value through the profit and loss at each reporting date.

3.1   Significant accounting judgements and estimates

 

Judgements made by the Directors in the application of these accounting policies that have significant effect on the financial statements and estimates with a significant risk of material adjustment in the next year are discussed below.

Key sources of estimation uncertainty

 

• Impairment of assets - in testing for impairment of investments, goodwill and other intangible assets, management have made certain assumptions concerning the future development of the business that are consistent with its annual budget and forecasts into perpetuity. Should these assumptions regarding the discount rate or growth in the profitability not be achieved in line with the Board's plans then it is possible that investments and other assets included in the statement of financial position could be impaired further. See further details in note 15.

• Inventory provisioning - the Group carries significant amounts of inventory against which there are provisions for slow moving lines. The provisioning policies require a degree of judgement and the use of estimates around future sales based on the historical demand for product lines.  As product is almost always in a condition ready for immediate sale, any costs necessary to make stock sellable are immaterial. In addition, management make use of this historical sales data regarding selling price of items in order to ensure that inventories are valued at the lower of cost and net realisable value. Inventories at the year-end were valued at £7,387,000 (Year ended 30 November 2022: £8,824,000) which included a provision for slow moving lines of £696,000 (Year ended 30 November 2022: £729,000).  If the estimate of future demand for product were under or overstated by 25% the provision would be impacted by £174,000 (£182,000).

• The Group has a derivative financial instrument in the Statement of Financial Position in the form of a forward contract to purchase electricity at a fixed price.  The mark to market of the forward contract requires various estimates to arrive at a fair value for the instrument at year end, which was a liability of £100k (2022: asset of £1,133k).  The valuation included a risk free fair value, a credit valuation adjustment and a debit valuation adjustment.  The main assumptions used to value these were the expected SONIA interest rate, the credit worthiness of both the Group and the electricity supplier, the implied volatility of electricity and the forward price of electricity in the market.  See note 6.  If the Group was assumed to have maximum creditworthiness the debit value adjustment of the liability would not be material.

 

Critical accounting judgements in applying the Group's accounting policies

 

Certain critical accounting judgements (apart from those involving estimations included above) in applying the Group's accounting policies are described below.

 

·    The Group has deferred taxation assets on the balance sheet of £1,847,000 (2022: £1,909,000).  In arriving at the carrying value management have made judgments as to whether the deferred taxation will be utilized in future periods.  When concluding that the deferred taxation assets will be utilized management have had regard to the board approved one year budget and the group's five year plan.  These future forecasts show the Group to profitable owing to the long term benefit to profits from the investment and planned growth in Rental.  Based on the growth plans of Rental, and utilization of the deferred taxation assets occurs within 5-7 years.

 

3.2  New accounting standards and interpretations issued but not effective at the balance sheet date

 

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

•  Amendments to IAS 8: Definition of Accounting Estimates (effective 1 January 2023).

•  Amendments to IAS 1 and IFRS Practice Statement 2: Disclosures of Accounting Policies (effective 1 January 2023).

•  Amendments to IAS 12: Deferred Tax related to Assets and Liabilities arising from a Single Transaction (effective 1 January 2023).

• Amendments to IAS 1 Presentation of Financial Statements: Classification of Liabilities as Current or Non-current and Classification of Liabilities as Current or Non-current (effective 1 January 2024).

 

The Group has not early adopted any accounting standards.

4.  Segmental reporting

 

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

 

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

 

Year ended 30 November 2023

Technology

Media and books

Total


Outright sales

Rental income

Total




£000

£000

£000

£000

£000

Revenue

87,184

8,250

95,434

41,167

136,601

Gross profit

15,964

7,406

23,370

14,494

37,864

Processing wages

(4,088)

-

(4,088)

(7,609)

(11,697)

Contribution after direct labour

11,876

7,406

19,282

6,885

26,167







Trading margin (%)

29.6

100.0

35.7

82.6

49.2

Gross margin (%)

18.3

89.8

24.5

35.2

27.7

Trading margin is the sale proceeds less the cost of the product and is one method used by the Company to assess profitability of segments and product lines.

Contracted rental income outstanding at the year ended 30 November 2023 amounted to approximately £3,600k (year ended 30 November 2022: £3,000k) which is due predominantly in the next 12 months.

 

Year ended 30 November 2022

Consumer Technology

Media and books

Total


Outright sales

Rental income

Total




£000

£000

£000

£000

£000

Revenue

91,213

5,345

96,558

48,721

145,279

Gross profit

15,944

4,207

20,151

17,990

38,141

Processing wages

(4,428)

-

(4,428)

(8,218)

(12,646)

Contribution after direct labour

11,516

4,207

15,723

9,772

25,495







Trading margin (%)

26.8

100.0

30.9

82.4

48.2

Gross margin (%)

17.5

78.7

20.9

36.9

26.3

The CODM does not review asset and liability information in segmental formats and as such no presentation of assets and liabilities is presented for the segments.

 


5.  Revenue

Disaggregation of revenue

 

An analysis of revenue by geographical market is given below:

 

 

 

 

Year ended

 

 

Year ended


                                           30 November 2023

£000

30 November 2022

£000

United Kingdom

99,883

102,727

Within the European Community

2,353

4,086

United States of America

29,585

34,362

Outside the European Community (excluding the USA)

4,780

4,104

Total

136,601

145,279

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

 

 

 

 

Year ended

 

 

Year ended


                                           30 November 2023

£000

30 November 2022

£000

United Kingdom

108,210

110,233

United States of America

28,391

35,046

Total

136,601

145,279

 

 

 

 

6.   Other non-underlying items

 

 

Year ended

 

 

Year ended


                                           30 November 2023

£000

30 November 2022

£000




Non-underlying (loss)/ gain

(1,229)

1,133

Impairment of Goodwill

(1,100)

-

Other non-underlying costs

(198)

(1,307)

Total

(2,527)

(174)

 

Underlying performance excludes the above (losses)/gains and expenses which consist of the following in line with historic treatments, or because they are large or one-off in nature. For 2023 these consisted of:

-      Mark to market loss made by the Group on various forward contracts for the purchase of electricity.  The purchase price for electricity that the Group has contracted at is above the market price of electricity at the reporting date and a resulting liability of £0.1m has been booked at the balance sheet date.  In the prior year the contract was an asset of £1.1m and so a £1.2m loss has been booked in the period (2022: £1.1m gain)

-    Impairment of Goodwill held on consolidation £1.1m (2022: £nil) booked following sensitivity analysis on the Group forecasts, see note 15

-       Dual running IT costs £0.1m (2022: £0.9m)

-       Non-recurring redundancy and re-organisational costs £0.1m (2022: £nil)

-       Covid-19-related expenditure £nil (2022: £0.2m); and

-       VAT provision relating to a pre-Brexit tax structure £nil (2022: £0.2m).

 


 

7. Operating loss

 

 

included in the operating loss are the following:

Year ended

30 November 2023

£000

Year ended

30 November 2022

£000

Amortisation of intangible assets

2,538

1,910

Depreciation of property, plant & equipment:



Owned assets

5,147

3,152

Right-of-use assets

796

725

Impairment of property, plant and equipment

1,463

835

Loss on disposal of property, plant and equipment

-

19

Auditor's remuneration:



Audit of these financial statements*

184

177

Net forex losses/ (gains) in the period

282

(145)

 

* £15,000 (year ended 30 November 2022: £15,000) related to the audit of the company.

 

The Group undertook no R&D that needed to be expensed in the year (year ended 30 November 2022: £nil).

 

 


8.   Remuneration of directors

 

 

Year ended

 

 

Year ended

 

Short term benefits

                                           30 November 2023

£000

30 November 2022

£000

Directors' emoluments

691

664

Employers pension contributions

11

9

Total

702

673





 

Included in the above are amounts paid to non-executive directors of £207,000 (year ended 30 November 2022: £230,000).

 

The aggregate of emoluments of the highest paid director were £290,000 (year ended 30 November 2022: £318,000). Pension contributions included in these amounts and paid on his behalf were £7,000 (period ended 30 November 2022: £7,000).

 

 


9.   Staff numbers and costs

 

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

 


Group

2023

Group

2022



Office and administration

178

202



Warehouse

412

481



Total

590

683



 

The aggregate payroll costs of these persons were as follows:






         Group

                2023

   

£000

          Group

           2022

             £000

 


Wages and salaries

16,756

17,790



Social security costs

1,462

1,317



Other pension costs

271

271



Equity-settled share-based payments (see note 25)

(132)

167



Total

18,357

19,545



 

In addition to the above payroll costs, a further £2,440,000 (year ended 30 November 2022: £2,661,000) has been capitalised as they relate to website and IT development costs.

 

Included in the above wages and salaries costs are temporary staff who were paid £2,142,000 during the year (Year ended 30 November 2022: £3,010,000).


 

 

10. Financial expense

 

 

Year ended

 

 

Year ended


30 November 2023

30 November 2022


£000

£000

Interest on bank and other loans

1,371

323

Interest expense on lease liabilities

138

169

Other non-underlying financial expense

149

152

Bank interest and similar charges

219

302


1,877

946

 

11.   Taxation

 

 

 


Year ended 30 November 2023

£000

Year ended 30 November 2022

£000

Current tax expense



UK corporation tax on profits for the period

32

40

Adjustments in respect of previous periods

(5)

132

Total current tax expense

27

172




Deferred tax credit

Origination and reversal of timing differences

53

3,014

Adjustment in respect of previous periods

9

92

Total deferred tax charge

62

3,106




Total tax charge in the income statement

89

3,278




Equity items



Deferred tax current year charge

-

318

Total

-

318

 

 

 

Reconciliation of effective tax rate

 


Year ended 30 November 2023

£000

Year ended 30 November 2022

£000

Loss before taxation

(6,764)

(1,457)

Tax using the UK corporation tax rate of 23% (2022: 19%)

(1,556)

(277)

Other tax adjustments, reliefs and transfers

300

20

Adjustments in respect of prior periods - current tax

Adjustments in respect of prior periods - deferred tax

(5)

9

132

92

Tax rate changes

Research and Development Expenditure Credit

(67)

26

-

40

Share options

78

3,000

Deferred tax not recognised

1,304

271

Total tax charge in the income statement

89

3,278

 

 

 

12.   Deferred tax


Tax losses £000

 

Capital allowances

£000

 

Share options* £000

 

Others

£000

 

Total

£000

At 1 December 2022

1,893

(610)

417

209

1,909

Credited/(debited) to profit or loss

77

(5)

(78)

(56)

(62)

Debited to equity






At 30 November 2023

1,970

(615)

339

153

1,847

 

In the budget on 3 March 2021, the UK Government announced an increase in the main UK corporation tax rate from 19% to 25% with effect from 1 April 2023. The change in rate was substantively enacted on 24 May 2021.

 

The deferred tax asset is calculated at 23% (2022 25%) based on the rate substantively enacted at the reporting date. Deferred tax assets and liabilities are offset where there is a legally  enforceable right to offset.

 

The deferred taxation asset is related to share-based payments has been revalued using the share price at the balance sheet date.  Owing to the reduction in the share price from November 2022 to November 2023 the value of the share based payments deferred taxation asset has fallen

 

In addition to the above, the group has unrecognised deferred tax assets in respect of carried forward losses amounting to £3,253,000 (year ended 30 November 2022: £1,676,000).

 

 

 

13.   Loss per share

 

 

 

note

 

 

Year ended

30 November 2023

£000

 

 

Year ended

30 November 2022

£000

Loss for the period


(6,853)

(4,735)



Number

Number

Weighted average number of shares

            1 , 2

98,612,385

98,588,041

Diluted number of shares


101,070,385

101,153,813



 

Pence

 

Pence

Basic loss per share (pence)


(6.8)

(4.7)

Diluted loss per share (pence)

(same as basic)

(6.8)

(4.7)

 

Notes:




1                 The  weighted average number of shares and diluted number of shares excludes share held by the Employee Benefit Trust in respect of share options outstanding and exercisable at the end of the year. See note 25 for further details.

2                 No adjustment has been made to the diluted weighted average number of shares for the sharesave share option schemes as these have an antidilutive effect.

               

 

 

 

14.  Property, plant and equipment,

 

 

 

 

 

 

Right-of-use lease assets

 

 

Plant and machinery

 

 

Fixtures and fittings

 

 

Rental assets

 

Computer and office equipment

 

 

 

Total


£000

£000

£000

£000

£000

£000

Cost







Balance at 1 December 2021

4,538

3,457

2,668

3,258

4,297

18,218

Additions

2,620

2,203

447

8,018

261

13,549

Effect of movements in foreign currency

161

24

30

-

8

223

Impairment

-

-

-

(1,120)

-

(1,120)

Disposals


(2,928)

(1,245)

(1,395)

(2,937)

(8,505)

Balance at 30 November 2022

7,319

2,756

1,900

8,761

1,629

22,365

Additions

53

56

97

8,505

99

8,810

Effect of movements in foreign currency

(109)

(11)

(14)

-

(6)

(140)

Impairment

-

-

-

(3,156)

-

(3,156)

Disposals


-

-

(2,818)

-

(2,818)

 

Balance at 30 November 2023

 

7,263

 

2,801

 

1,983

 

11,292

 

1,722

 

25,061

 

Depreciation







Balance at 1 December 2021

2,829

2,875

2,078

420

3,897

12,099

Charge for the year

725

316

235

2,385

216

3,877

Effect of movements in foreign currency

78

12

20

-

5

115

Impairment

-

-

-

(283)

-

(283)

Disposals

-

(2,839)

(1,262)

(401)

(2,936)

(7,438)

Balance at 30 November 2022

3,632

364

1,071

           2,121

1,182

8,370

Charge for the year

796

446

270

4,194

237

5,943

Effect of movements in foreign currency

(75)

(8)

(11)

-

(5)

(99)

Impairment

-

-

-

(1,308)

-

(1,308)

Disposals

-

-

-

(913)

-

(913)

 

Balance at 30 November 2023

 

4,353

 

802

 

1,330

 

4,094

 

1,414

 

11,993








Net book value







At 30 November 2023

2,910

1,999

653

7,198

308

13,068

At 30 November 2022

3,687

2,392

829

6,640

447

13,995








Once rental contracts pass a certain ageing of delinquency, the contracts are considered irrecoverable and the value of the handsets on rent impaired down to zero value. The profit impact of the impairment in the year was £1,463,000 (2022: £). The cash impact of the impairment was £2,610,000 (2022: £1,120,000).

 



15.  Intangible assets

 

 

 

        Goodwill

 

 

Website and IT development

 

 

Proprietary software

 

 

 

        Domains

 

 

 

              Total


£000

£000

£000

£000

£000

Cost






Balance at 1 December  2021

4,848

10,257

3,000

53

18,158

Additions

-

4,555

-

-

4,555

Disposals

-

(4,841)

-

-

(4,841)

Balance at 30 November 2022

4,848

9,971

3,000

53

17,872

Additions

-

4,086

-

-

4,086







 

Balance at 30 November 2023

4,848

14,057

3,000

53

21,958

 

Amortisation and impairment






Balance at 1 December 2021

-

6,667

1,782

29

8,478

Charge for the year

-

1,605

300

5

1,910

Disposals

-

(4,895)

-

-

(4,895)

Balance at 30 November 2022

-

3,377

2,082

34

5,493

Charge for the year

-

2,233

300

5

2,538

Impairment

1,100

-

-

-

1,100







 

Balance at 30 November 2023

 

1,100

 

5,610

 

2,382

 

39

 

9,131







Net book value






At 30 November 2023

3,748

8,447

618

14

12,827

At 30 November 2022

4,848

6,594

918

19

12,379








 

All amortisation of intangible assets is charged to the consolidated statement of comprehensive income and is included within operating expenses (see note 7).

 

 

 

Intangible assets and goodwill

 

The Group has two cash generating units (CGUs): a Rental CGU and a non-rental CGU.  Goodwill arising from the acquisition of Entertainment Magpie Holdings Limited in September 2015 is allocated to the non-rental CGU.  Intangible assets are then allocated between the CGUs based on the specific nature of cost.

 

Goodwill is tested annually for impairment on the basis of value in use calculations using discounted cash flows. The key assumptions of these calculations are shown below:

 


30 November 2023

30 November 2022

Period on which management approved forecasts are based

5 years

5 years

Growth rate applied beyond approved forecast period

(10%)

(10%)

Discount rate Pre-tax

8%

11%

 

 

The method used to calculate the discounted cashflows for each CGU uses the same forecast model, but with specific assumptions for each that reflect the differing nature of each CGU. The methodology for each is as follows:

A standard discounted cashflow model is used. The discounted cashflow valuation uses the board approved budget and five-year plan for the first five years. The 5-year forecasts for the non-rental CGU included contributions of new product categories as the business intends to expand its recommerce business into new areas, and annual improvements in gross margin as a result of strategic decision making by management.  For years 6 to 10 there is an assumption of negative sales growth. This negative growth assumption allows for the declining business of Disc Media and Books, offset by the increasing sales from Consumer Technology.  The net overall sales decline assumption allows for the unpredictability of these out years across both segments. Year ten uses a terminal value on the cashflow from that year for the non-rental CGU; no terminal values are used in the rental CGU as it is still a relatively new business and it is not clear if the business model will sustain after year 10. Inflation in the cost base is captured in the board approved plans.

The key assumptions upon which management have based their cash flow projections are:

·      The weighted average cost of capital (WACC) used to discount the future cashflows, which has reduced in the year owing to the fall in the expected rate of return on equity, (the cost of debt element in the WACC has remained virtually unchanged).

·      The contribution of new product categories, which are a key facet to future revenue and profit growth

·      The plans around gross margin improvements in the Consumer Technology segment, which follow on from recent gross profit improvements in the year and expect ongoing improvements year over year

 

Sensitivities

 

The following sensitivities were run on the valuation approaches:

 

1.    Increasing the WACC to 15%: in isolation this would not change the outcome of the review.

2.    Reducing the rate of growth of gross margin improvements in the future years

 

When reviewing the gross margin improvements likely to be achieved in the forecast models, it was identified that the recoverable amount of the discounted cashflows was less than the carrying value of the assets.  Accordingly an impairment to goodwill of £1.1m was included in these financial statements.

 

 

16. Subsidiaries

The Group consists of the parent Company, musicMagpie plc, incorporated in the UK and a number of subsidiaries held directly/indirectly by the parent. The table below shows details of all subsidiaries of musicMagpie Plc as at 30 November 2023.

 

Name of subsidiary

Company number

Principle place of business

Class of shares held

Proportion of ownership

Principle activity

Entertainment Magpie Group Limited ^

09775280

United Kingdom

Ordinary

100%

Intermediate holding company

Entertainment Magpie Holdings Limited*^

07578858

United Kingdom

Ordinary

100%

Intermediate holding company

Entertainment Magpie Limited*

06277562

United Kingdom

Ordinary

100%

Purchase & resale of electronic items and replay  media products

MM Guernsey Limited*^ X

52777

Guernsey

Ordinary

100%

Refurbishment & dispatch of replay media products

Mozo Media Limited *^

06759026

United Kingdom

Ordinary

100%

Refurbishment & dispatch of replay media products

Entertainment Magpie, Inc*

33-1225350

United States of America

Ordinary

100%

Purchase & resale of electronic items and replay  media products

 

*Held indirectly via Entertainment Magpie Group Limited

^ the company has met the relevant conditions for the directors to take advantage of the exemption conferred by s479A of the Companies Act 2006

 

X  Entity under formal wind up processes at the balance sheet date

 



17. Inventories

 

 

Year ended

 

 

Year ended


                                                      30 November 2023

£000

30 November 2022

£000

Goods for resale

7,387

8,824

Total

7,387

8,824

 

Goods for resale recognised as cost of sales in the year ended 30 November 2023 amounted to £68,550,000 (year ended 30 November 2022: £75,336,000). The write-down of inventories to net realisable value and reversals are included in cost of sales.

 

The Company's closing inventory value is £nil (2022 - £nil)

 


18. Trade and other receivables

 

Current assets

 

 

 

 

Group

 

 

 

 

 

Group



2023

 

2022



£000

 

£000


Trade receivables

631


701


Amounts due from Group companies

-


-


Other receivables

260


216


Prepayments and accrued income

1,105


1,685


Total

1,996


2,602


 





Non-current assets

Group

 

Group


 

2023

 

2022


 

£000

 

£000


Amounts due from Group companies

-


       -


Total

-


       -


 





   Information related to the Group's exposure to credit risk, market risk and impairment losses on receivables are included in note 28.    Due to the short-term nature of the current receivables, their carrying amount is considered to be the same as their fair value determined using level 3 inputs.

 

 

19. Derivative financial asset

 

2023

 

2022


£000

£000

Derivative financial asset



Derivatives not designated as hedging instruments

-

1,133

Total

-

1,133




Current and non-current:



Current

-

555

Non-current

-

578

Total

-

1,133

 

The derivative financial assets are all net settled; therefore, the maximum exposure to credit risk at the reporting date is the fair value of the derivative assets which are included in the consolidated financial statement of financial position. The derivative financial asset as at 30 November 2022 is now a derivative financial liability as at 30 November 2023 (see note 22 for details).

 


20. Cash and cash equivalents

 

 

 

2023

 

2022


£000

£000

Cash and cash equivalents

7,600

6,806

Total

7,600

6,806

 

 

 

21. Trade and other payables

 

 

 

        Group

        Group


 

 

2023

2022


 

 

£000

£000

Trade payables



6,360

        6,166

Other taxation and social security



463

            542

Other payables and accruals



1,418

         2,632

Total



8,241

         9,340

 





Due to the short-term nature of the current payables, their carrying amount is considered to be the same as their fair value determined using level 3 inputs.
 

 

22. Derivative financial liability

 

 

2023

 

2022


£000

£000

Derivative financial liability



Derivatives not designated as hedging instruments

96

-

Total

96

-




Current and non-current:



Current

96

-

Non-current

-

-

Total

96

-

 

The derivative financial liabilities are all net settled; therefore, the maximum exposure to credit risk at the reporting date is the fair value of the derivative liabilities which are included in the consolidated financial statement of financial position.

 

 

 

23. Interest-bearing loans and borrowings

This note provides information about the contractual terms of the Group's interest-bearing loans and borrowings, which are measured at amortised cost. For more information about the Group's exposure to interest rate and foreign currency risk, see note 28.

 

 

 

2023

£000

 

2022

£000

Current liabilities

 

 

 

 

Bank loan interest

203

-

Lease liabilities

831

687

Total

1,034

687

 

Non-current liabilities

 


Bank loans

20,496

14,675




Lease liabilities

2,582

3,403

Total

23,078

18,078

 Falling due within one year

1,034

 687

Falling due after more than one year

23,078

18,376

Total

24,112

19,063

Unamortised debt issue costs

(254)

(298)

Total interest-bearing loans and borrowings

23,858

18,765

 

The Group has a £30m committed Revolving Credit Facility ("RCF") arrangement with HSBC UK and Natwest banks. This agreement expires in July 2026.  The financial covenants of the facility are that leverage, measured as net debt divided by EBITDA, must be less than 2.5 times and that interest cover, measured as EBITDA divided by finance charges, must be greater than 4 times.

The banks have security over Group assets in the form of debentures and cross guarantees from all material entities in the Group.

 

The Company has no borrowings.

 

Terms and debt repayment schedule

 

 

30 November 2023

 

 

 

 

 

 

 

Currency

 

 

 

 

 

 

 

Interest rate

 

 

 

 

 

 

 

Year of maturity

 

 

 

 

 

 

 

Debt value

 

 

 

 

 

 

 

Carrying value





£000

£000

Bank loans

GBP

SONIA + 1.95 -2.5%

2026

20,953

20,699

Lease liabilities

GBP

5%

2023 - 2027

2,791

2,791

Lease liabilities

USD

5%

2027

622

622

Total




24,366

24,112

 

Interest on the Revolving Credit Facility is dependent on the average base rate in the market and adjusted for the Groups leverage.

 

 

30 November 2022

Currency

Interest rate

Year of maturity

Debt value

Carrying value





£000

£000

Bank loans

GBP

SONIA + 1.95 -2.5%

2026

14,973

14,675

Lease liabilities

GBP

5%

2023 - 2027

3,194

3,194

Lease liabilities

USD

5%

2027

896

896

Total




19,063

18,765

 

 

 

Changes in liabilities from financing activities

 

 

30 November 2023

 

 

 

Bank loan

 

 

Lease liabilities

 

 

 

Total


 

 

£000

 

£000


£000

Balance at 30 November 2021

 

 

887

 

1,923


2,810

Changes from financing cash flows

Lease additions

 

 

 

-

 

 

3,035


 

3,035

Proceeds from new loan

 

 

21,026

 

-


21,026

Repayment of existing loans

 

 

(7,500)

 

-


(7,500)

Interest paid

 

 

(207)

 

(169)


(376)

Payment of lease liabilities

 

 

-

 

(868)


(868)

Total

 

 

14,206

 

3,921


18,127

 

Other changes

Interest expense

 

 

 

 

323

 

 

 

169


 

 

492

Other movements

 

 

146

 

-


146

Total

 

 

469

 

169


638

Balance at 30 November 2022

 

 

14,675

 

4,090


18,765


 

 

 

 

 


 

Changes from financing cash flows

Lease additions



 

-


 

53


 

53

Proceeds from new loan



8,204


-


8,204

Repayment of existing loans



(2,250)


-


(2,250)

Interest paid



(1,450)


(138)


(1,588)

Payment of lease liabilities



-


(730)


(730)

Total



19,179


3,275


22,454

Other changes

Interest expense



 

1,371


 

138


 

1,509

Other movements



149


-


149









Total



1,520


138


1,658

Balance at 30 November 2023



20,699


3,413


24,112

 

Other movement in other loans and bank loans represents additional loan fees paid during the year and amortisation of those loan fees.

 

 

 

24.       Right of use assets and lease liabilities

 

All leases where the Group is a lessee are accounted for by recognising a right-of-use asset and a lease liability.  There are no short term or low value leases.

 

Amounts recognised in the consolidated statement of financial position

 

 

Right of use assets

 

Land and buildings

£000

Balance at 1 December 2021

 

1,709

Additions to right of use asset                                                                                            

 

2,620

Effect of movements in foreign currency

 

83

Depreciation

 

(725)

Balance at 30 November 2022

 

3,687

Additions to right of use asset

 

53

Effect of movements in foreign currency

 

(34)

Depreciation

 

(796)

Balance at 30 November 2023

 

2,910

 

 

 

 

 

Leases

 

Land and buildings

£000

Balance at 1 December 2021

 

1,923

Additions to lease liabilities                                                                                          

 

3,035

Interest expense

 

169

Depreciation

 

(1,037)

Balance at 30 November 2022

 

4,090

Additions to lease liabilities                                                                                          

 

53

Interest expense

 

138

Depreciation

 

(868)

Balance at 30 November 2023

 

3,413

 

 

 

 

 

 

Amounts recognised in the consolidated income statement

 

Land and buildings

Year ended

30 November 2023

£000

Year ended

30 November 2022

£000

Depreciation charge on right of use assets

796

725

Interest on lease liabilities

138

169

Total

934

894

 

 

 

 

 

Lease liabilities - Maturity analysis of contractual undiscounted cash flows

 


Carrying

amount

Contractual

cash flows

 

1 year or less

 

1-2 years

 

2-5 years

More than

5 years

£000

£000

£000

£000

£000

£000

30 November 2023

3,413

3,677

937

953

1,304

483

30 November 2022

4,090

4,916

867

969

2,357

723

 


25. Employee benefits

 

Defined contribution pension

The Group operates defined contribution pension schemes. The pension cost charge for the year represents contributions payable by the Group to the schemes and amounted to £265,000 (year ended 30 November 2022: £271,000).

 

Share based payments

 

EBT

On 8 February 2021, the Group adopted a new employee share option plan granting options to employees which would vest and become exercisable only on the occurrence of an exit event (including an IPO). The non-cash fair value charge recognised in relation to these in the period to 30 November 2021 under IFRS 2 'Share-based Payment' was £17,284,000. 

 

In August 2018, the Group granted equity-settled share options to certain employees. The non-cash fair value charge recognised in the period in respect of these equity-settled share options under the same vesting criteria as above was £95,000.  Both the February 2021 and August 2018 options are fully expensed and covered in total by shares held in the musicMagpie Employee Benefit Trust.

 

Sharesave

The Group has issued two sharesave schemes in an attempt to encourage share ownership by employees.  The 2021 scheme was not disclosed in the prior year owing to materiality and is shown here for the first time to give comparability with the 2022 scheme.  Both schemes were open to all employees of the Group.  A maximum of up to £500 per month can be invested into the schemes for a three year period starting on the grant date.  The option price of each award was set three days prior to the grant date.  The options have a ten year life.  Each option vests after 36 months and there are no performance criteria attached to vesting.  Vesting and exercise are subject to various conditions around individual service.  Participants do not need to exercise the options and can alternatively take cash out of the scheme at any time.

 

Long Term Incentive Plan (LTIP)

The Group operates an LTIP scheme for the Directors and certain senior managers.  There was one grant of options during the year and this is the only grant outstanding at the year end.  The number of options granted and their vesting criteria are determined by the Group's Remuneration Committee.  The vesting criteria are performance related and are set out in detail within the Directors Remuneration Report.  The options vest over three years (subject to the vesting criteria) and have a ten year life.  Vesting and exercise are subject to various conditions around individual service.

 

Details of the share options outstanding during the year are as follows:

 


Number

Weighted exercise price

Weighted average remaining contracted life

Sharesave

2023

2022

2023

2022

2023

2022

Outstanding at 1 December

554,192

48,672





Granted during the year

-

508,720





Forfeited

(217,112)

(3,200)





Outstanding at 30 November

337,080

554,192

£0.57

£0.56

8.3 yrs

9.75 yrs


 

 






Number


Weighted exercise price

Weighted average remaining contracted life

EBT

2023

2022

2023

2022

2023

2022

Outstanding at 1 December

9,195,902

9,195,902





Outstanding at 30 November

9,195,902

9,195,902

£0.00

£0.00

4.4yrs

5.4yrs


 

 







Number


Weighted exercise price

Weighted average remaining contracted life

LTIP

2023

2022

2023

2022

2022

2022

Outstanding at 1 December

2,565,772

-





Granted during the year

-

2,565,772





Lapsed

107,772

-





Outstanding at 30 November

2,458,000

2,565,772

nil p

nil p

8.25

9.25

 

No options were exercised or granted in the EBT, the sharesave scheme or LTIP during the  year

 

 

 

 

Fair value of share options and assumptions

 


As at 30 November 2023

 


LTIP

EBT

Sharesave 2022

Sharesave 2021

Fair value at measurement date

£0.45

£1.88

£nil

£0.35

Share price at grant

£0.45

£1.88

£0.31

£1.82

Exercise price

£0.00

nil

£0.45

£1.82

Expected volatility

25.0%

45.0%

25.0%

25.0%

Expected dividends

0.0%

0.0%

0.0%

0.0%

Risk free interest rate

2.0%

0.6%

2.0%

1.25%

Option life

3.25 years

0.2 years

3.25 years

3.25 years

 

The sharesave and LTIP were calculated using a Black Scholes option pricing model.  The EBT was valued using a Monte Carlo option pricing model.

 

Volatility has been calculated using the standard deviation of the Group's daily share price since IPO in April 2021.  An additional 3% was added to the calculated volatility to account for the share price history being less than the valuation period.  Volatility in the prior year was calculated by reference to a peer group as there was insufficient data to calculate volatility for the Group independently.

 

Staff costs - equity settled share-based payments

 



Year ended 30 November 2023

£000

Year ended 30 November 2022

£000

Sharesave


8

27

LTIP


(140)

140



(132)

167

 

 


26. Related parties

 

Transactions with key management personnel

 

The Directors of musicMagpie plc together with the Senior Leadership Team (SLT) are considered to be the key management personnel of the Group for the purposes of this disclosure.  The Directors of musicMagpie plc and their immediate relatives control 12.3%  of the voting shares of the Group.

 

Group

 

The compensation of the Directors, including amounts paid for services provided to the directors totalled £702,000 (Year ended 30 November 2022: £673,000). See note 8 for further details.

 

Compensation for other members of the Senior Leadership Team not included in the above totalled £1,004,000. (Year ended 30 November 2022: £1,095,000)

 

In addition, Equity-settled share-based payment charges and Employers NI with key management personnel totalled £67,000 (Year ended 30 November 2022: £371,000).

 

Transactions with the Employee Benefit Trust

 

There were no movements in EBT during the year (2022: no movements) and at the year end date, the EBT holds 9,195,902 shares representing 8.53% of the share capital of the Company to satisfy future exercises of outstanding and exercisable share option awards. 

 


 

27. Capital and reserves

 

The authorised, issued and fully paid number of shares are set out below:

 

 

 

# £0.01 each

 

£'000

30 November 2021 - Ordinary shares

 

107,772,050

1,078

Shares issued in the year

 

36,237  

-

30 November 2022 - Ordinary shares

 

107,808,287

1,078

30 November 2023 - Ordinary shares

 

107,808,287

1078

The ordinary shares have full voting, dividend and capital distribution rights, including on winding up. They are non-redeemable.  On the 4 August 2022 the Company issued 36,237 ordinary shares.

 

Share premium

The share premium reserve represents the excess amount of value received on the issuance of share capital above the nominal value per share. Costs associated with the issue of new share capital have been offset against this balance.

Capital redemption reserve

The capital redemption reserve represents a non-distributable reserve into which amounts are transferred following the redemption or purchase of own shares.

 

Translation reserve

The translation reserve comprises all foreign currency differences arising from the translation of the financial statements of foreign  operations.

 

Merger reserve

The merger reserve in the Company represents the fair value of consideration given in excess of the nominal value of the ordinary shares issued in the acquisition share for share exchange with Entertainment Magpie Group Limited, net of the nominal value of the bonus shares issued.

 

The merger reserve in the Group represents the nominal value of the bonus shares issued.

 

 



28. Financial instruments and Risk Management

 

The Group has exposure to the following risks arising from financial instruments: Credit risk

Liquidity risk

Market risk, including currency risk and interest rate risk

 

The Group's overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential. Adverse effects on the Group's financial performance. Other than for energy costs, the Group does not use derivative financial instruments to manage risk exposures. This note presents information about the Group's exposure to each of the above risks, the Group's objective, policies and processes for measuring and managing risk, and the Group's management of capital.

 

Risk management framework

The Board of Directors has overall responsibility for the establishment and oversight of the Group's risk management framework. The Group's risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group's activities.

 

 

Capital risk management

 

musicMagpie plc considers its capital comprises share capital, share premium and retained earnings.

The Group's objectives when managing capital are to safeguard its ability to continue as a going concern in order to optimise its return to shareholders. The Board's policy is to retain a strong capital base so as to maintain investor, creditor, and market confidence and to sustain future growth. The Directors regularly monitor the level of capital in the Group to ensure that this can be achieved. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

 

Credit risk

Credit risk is the risk of financial loss to the Group if a counterparty to a financial instrument fails to meet its contractual obligation. Credit risk arises from cash and cash equivalents, deposits with banks and financial institutions, as well as credit exposures to wholesale and retail customers, including outstanding receivables and committed transactions.

As the principal business of the Group is cash sales direct with consumers, the Group's trade receivables are small. Accordingly, the Group does not systematically report outstanding receivables analysed by credit quality, in particular with respect to the credit quality of financial assets that are neither past due nor impaired. The carrying amount of financial assets recorded in the financial statements represents the Group's maximum exposure to credit risk and any associated impairments are immaterial. 

The Group applies the IFRS 9 when measuring expected credit losses for trade receivables.  Given the very low trade receivables balances, the low expected loss rates and the known credit status of the customers, the loss allowance is less than £1,000. Group balances are also assessed under IFRS9 and impairment provisions for receivables from related parties and loans to related parties are recognised based on a forward looking expected credit loss model. The methodology used to determine the amount of the provision is based on whether there has been a significant increase in credit risk since initial recognition of the financial asset. Where appropriate the Group balances are impaired.

Exposure to credit risk

 


30 November

2023

£000

30 November 2022 

£000

Trade and other receivables

891


   917

Cash and cash equivalents

7,600


6,806

Total

8,491


7,723

 

Liquidity risk




 

Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Group's approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, both under normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group's reputation.

 

All financial instruments other than borrowings and lease liabilities have contractual maturities within one year. The following are contractual undiscounted cash flows:

-

Contractual cash flows

30 November 2023

Carrying


1 Year or

Between 1

Between 2

More than 5


amount

Total

Less

and 2 years

and 5 years

years


£000

£000

£000

£000

£000

£000

Trade and other payables

7,778

7,778

7,778

-

-

-

Bank loans

20,699

20,953

203

-

20,750

-

Derivative financial liability

96

96

96

-

-

-

Lease liabilities

3,413

3,677

937

953

1,304

483

Total

31,890

32,408

8,918

953

22,054

483

Contractual cash flows

30 November 2022

Carrying


1 Year or

Between 1

Between 2

More than 5


amount

Total

Less

and 2 years

and 5 years

years


 

£000

£000

£000

£000

£000

Trade and other payables

8,798

8,798

8,798

-



Bank loans

14,675

          14,973

177

-

              14,796


Lease liabilities

4,090

4,916

867

969

           2,357

                        723

Total

27,659

28,783

9,938

969

 17,153 

                          723

 

Market risk

 

Market risk is the risk that changes in the market prices, such as foreign exchange rates and interest rates will affect the Group's net income. The Group's exposure to market risk predominantly relates to interest and currency risk.

 

Interest rate risk

 

The Group's interest rate risk arises from its variable and fixed rate instruments being borrowings and finance lease liabilities. Borrowings issued at variable rates exposes the Group to cash flow interest rate risk. Borrowings issued at fixed rates expose the Group to fair value interest rate risk. The Group monitors the levels of fixed to floating debt held to manage these risks and aims to ensure that it has appropriate cash facilities to meet liabilities as they fall due.

 

At the reporting date, the interest rate profile of the Group's interest-bearing financial instruments was as follows:

 


30 November

30 November

2023

2022

 

Fixed rate instruments

£000

£000

Lease liabilities

3,413

4,090

Total

3,413

4,090

 

Variable rate instruments

Bank loans

 

 

20,953

 

 

14,973

Total

20,953

14,973

 

Sensitivity analysis



 

A change of 150 basis points in interest rates at the reporting date would have decreased equity and profit or loss by £270,000 (2022: 100 basis points £106,000). This calculation assumes that the change occurred at the reporting date and had been applied to risk exposures existing at that date.

 

This analysis assumes that all other variables, in particular foreign currency rates, remain constant and considers the effect of financial instruments with variable interest rates. The analysis is performed on the same basis for all the periods presented.

 

Currency risk

 

The Group operates in the UK and US; revenue and costs are typically denominated in local currency. Gains and losses arising on retranslation of monetary assets and liabilities that are not denominated in the functional currency of individual companies are recognised in the consolidated statement of comprehensive income. The Group does not hedge these transaction differences.

 

Gains and losses arising on the retranslation of US operations' net assets into the consolidation currency are recognised in other comprehensive income and held separately in a translation reserve in equity. The Group does not hedge these translation differences.

 

The Group's exposure to foreign currency risk is as follows:

 


30 November 2023

30 November 2022


GBP Sterling

US Dollars

Total

GBP Sterling

US Dollars

Total

£000

£000

£000

£000

£000

£000

Cash and cash equivalents

6,594

1,006

7,600

5,834

972

6,806

Trade and other receivables

787

104

891

836

81

917

Trade and other payables

(7,147)

(631)

(7,778)

(7,915)

(883)

(8,798)

Borrowings

(20,699)

-

(20,699)

(14,675)

-

(14,675)

Lease liabilities

(2,791)

(622)

(3,413)

(3,194)

(896)

(4,090)

Total

(23,256)

(143)

(23,399)

(19,114)

(726)

(19,840)

 

 

The following significant exchange rates were applied:


 

30 November

2023

30 November

2022

Average rate for the financial period






US Dollars



1.24


1.26

Balance sheet rate






US Dollars



1.27


1.21

Sensitivity analysis






 

A 10 percent weakening of the US Dollar against the pound sterling at 30 November 2023 would have decreased equity and profit or loss by £20,000  (2022: £20,000). This calculation assumes that the change occurred at the balance sheet date and had been applied to risk exposures existing at that date.

 

A 10 percent strengthening of the US Dollar against the pound sterling would have had the equal but opposite effect on the US Dollar to the amounts shown above, on the basis that all other variables remain constant.

 

Fair values

 

IFRS 7 'Financial Instruments: Disclosure' requires fair value· measurements to be undertaken using a fair value hierarchy that reflects the significance of the inputs used in the measurements, according to the following levels:

 

Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities

Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices)

Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

 

 

 


2023

2022


Carrying

amount

 

Fair value

   Carrying

amount

 

Fair value


£000

Borrowings (Level 3)

20,699

20,953

14,675

14,973

Derivative financial liability (Level 2)

96

96

-

-

Total

20,795

21,049

14,675

14,973

 

 


29. Alternative Performance Measures

 

Management assess the performance of the Group using a variety of alternative performance measures. In the discussion of the Group's reported operating results, alternative performance measures are presented to provide readers with additional financial information that is regularly reviewed by management. However, this additional information presented is not uniformly defined by all companies including those in the Group's industry.

Accordingly, it may not be comparable with similarly titled measures and disclosures by other companies. Additionally, certain information presented is derived from amounts calculated in accordance with IFRS but is not itself an expressly permitted GAAP measure. Such measures are not defined under IFRS and are therefore termed 'non-GAAP' measures and should not be viewed in isolation or as an alternative to the equivalent GAAP measure.

 

The following are the key non-GAAP measures used by the Group.

 

Adjusted (loss)/ profit before tax

Adjusted profit before tax means (loss)/profit before tax, before equity-settled share-based payments and other non- underlying items including non- underlying financial expense relating to deal and early termination fees from previous financing.

 


Year ended

30 November 2023

£000

Year ended

30 November 2022

£000

Loss before tax

(6,764)

(1,457)

Equity-settled share-based payments

(132)

167

Other non-underlying items

2,527

174

Adjusted loss profit before tax

                                                   (4,369)

(1,116)

 

 



 

Adjusted EBITDA

 

Adjusted EBITDA means Adjusted (loss)/ profit before tax before depreciation, impairment of property, plant and equipment and amortisation of intangible assets and financial expense.

 

 

Year ended

30 November 2023

£000

Year ended

30 November 2022

£000

Adjusted loss before tax

(4,369)

(1,116)

Depreciation of property, plant and equipment

5,943

3,877

Impairment of property, plant and equipment

1,463

835

Loss on disposal of property, plant and equipment

-

19

Amortisation of intangible assets

2,538

1,910

Financial expense

1,877

946

Adjusted EBITDA

7,452

6,471

 

Adjusted operating cash flow

Adjusted operating cash flow is calculated as Adjusted EBITDA adjusted for movements in working capital.

 

 


Year ended 30 November 2023

£000

Year ended

30 November 2022

£000

Adjusted EBITDA

7,452

6,471

Movements in working capital

                                               2,102

      1,029

Adjusted operating cash flow

9,554

7,500

 

 

 

 

Cash conversion %

This is calculated as cash generated from operating activities in the Consolidated Cash Flow Statement, adjusted to exclude cash payments for exceptional items, as a percentage of Adjusted EBITDA.

 


Year ended 30 November 2023

£000

Year ended

30 November 2022

£000

Net cash generated from operations (from Consolidated Cash Flow

Statement)

 

8,123

 

6,193

Other non-underlying cash items

198

174

Cash generated from operations before non-underlying items paid

8,321

6,367

 

Adjusted EBITDA

 

7,452

 

6,471

Cash conversion %

111.7%

98.4%

 

Net debt



 

This is calculated as cash and cash equivalent balances less outstanding external loans. Unamortised loan arrangement fees are netted against the loan  balance in the financial statements but are excluded from the calculation of net cash/(debt). Lease liabilities and hire purchase are not included in the calculation of net debt.

 


Year ended

30 November 2023

 

Year ended

30 November 2022

 


£000

£000

Cash and cash equivalents

6,806

6,806

 

Loans and accrued loan interest

 

(20,699)

 

(14,675)

Unamortised loan arrangement fees

(254)

(298)

External loans

(20,953)

(14,973)




Net debt

(14,147)

(8,167)

 

 

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