Good Friday for musicMagpie offsets soft first half
Consumer tech reseller and recycler musicMagpie had a strong sales performance on Black Friday, and expects to hit £136.6m (2022: £143.3m) of revenues.
In a statement to the stock market this morning, the company described a “record Black Friday period” which helped to “off-set a softer” first half performance.
It went on to say: “Consumer technology revenues for H2 were up 7.5% over the same H2 period in 2022, and for the year were £95.4m (2022: £96.6m). Overall gross margin was 27.7% (2022: 26.2%) as the Group continued to focus on margin expansion as opposed to revenue growth.
“As a result of the gross margin increase and ongoing tight cost control, as well as the strong end to the year, EBITDA is expected to be up 15.4% at £7.5m (2022: £6.5m).”
In November the company announced it had held preliminary takeover talks with both BT and private equity investor Auerlius Group, though both parties announced they wouldn’t be bidding, musicMagpie said the company “continues to seek potential buyers” and thus remains in an offer period.”
The share price has been on a rollercoaster through 2023, hitting a peak of 44.6p at the end of January, before tumbling towards its 11.5p close last night, following the takeover speculation.
Performance wise, the number of active rental subscribers grew by 21% in the year reaching 37,100 as at 30 November 2023 (30 November 2022: 30,500). Total rental revenue for the period was £8.3m, up 57% (2022: £5.3m).
The company also said it would focus on offering rental deals to customers with higher credit ratings and a greater propensity to renew and intends to maintain this managed approach to the subscriber base for the foreseeable future.
Steve Oliver, chief executive and co-founder of musicMagpie, said: “Our strategy of proactively managing the number of active Rental subscribers has also helped in this regard and will support our short-term objectives on profits and cash into 2024, bolstered by an enhanced Buy Now Pay Later offering. I remain confident in the business and our ability to navigate the difficult external market conditions, especially given the outstanding level of trust that consumers continue to have in our brand, as demonstrated by our excellent 4.4* Trustpilot rating based on over 277,000 reviews.”
Net debt as at 30 November 2023 was £13.1m (31 May 2023: £13.6m) and benefitted from management’s focus on cash versus rental growth. Leverage at 30 November 2023, being EBITDA to net debt, was 1.7x (31 May 2023: 2.0x). Net debt is mitigated by future contracted rental revenue of £3.6m and Rental assets on the balance sheet with a net book value of £7.7m.
The business continues to be supported by £30m committed rolling credit facility provided by HSBC and Natwest, due for renewal in July 2026.
Shares in the business jumped more than 20% in early trading following the announcement, reaching a morning high of 14.25p per share.
