musicMagpie, the Stockport-based specialist in refurbished consumer tech, has announced its trading update for the six months ended 31 May 2023 (“H1 2023”).
The company said it faced a challenging start to H1 2023, with postal strikes and low consumer confidence impacting December and January, but that trading performance strengthened from February onwards, driving a strong Q2 2023 that delivered EBITDA of £2.0m, up 42 per cent on Q2 2022. Overall EBITDA for the traditionally quieter first six months of the year was £2.8m, up 7.7 per cent on H1 2022 and in line with the board’s expectations.
During the period, the group “focussed on cost control and increasing gross margins rather than growing revenues on lower margin products.” Consumer technology revenue for H1 2023 was £41.2m, comprising two thirds of total revenue (H1 2022: £46.0m). Sales of disc media and books continued their anticipated decline, falling to £20.8m (H1 2022: £25.3m).
Gross margin increased strongly by around 3.1 percentage points year on year. MusicMagpie said the improvement was driven by a combination of a higher proportion of product sourced directly from consumers, an increase in the proportion of sales made through the musicMagpie store and the increasing contribution from rental subscriptions. These factors, combined with cost control measures delivering lower overheads, contributed positively to the strong Q2 2023 performance.
Active customers to the rental service for consumer technology products increased to c.39,000 (31 May 2022: 24,000, 30 Nov 2022: 30,500). H2 2023 will see the launch of an enhanced Buy Now Pay Later option which will benefit consumer technology sales and increase choice for consumers. It will sit alongside the group’s evolving rental offer which will focus on more profitable, higher credit quality customers. This will help support long-term profit growth while managing working capital, and thus debt utilisation, more effectively.
The group also announced that it has extended its £30.0m Revolving Credit Facility by one year to provide committed facilities through to July 2026. Net debt on 31 May 2023 was £13.7m.
Traditionally, the group has a much stronger second half weighting to its financial year, owing in part to seasonal peak trading around the Black Friday weekend in November. This seasonality, combined with the continued focus on own store sales and the strong performance achieved in Q2 2023, means the board is “confident in the group achieving its full year expectations,” despite the current tough consumer market.
Steve Oliver, CEO & co-founder of musicMagpie, said: “We are pleased with our performance in what is always the seasonally quieter half of the year for musicMagpie. It is especially gratifying to see that our profit improvement has been driven by an increased margin. This has been achieved both by focusing on higher margin sales through our own musicMagpie online store, as well as the continued strong growth of our rental offering. While we remain very mindful of the current tough consumer environment, the momentum in our business as we head into H2 means that we are confident of achieving our full year expectations.”
The Group will announce its interim results for the six months ended 31 May 2023 on Thursday 13 July 2023.
