MusicMagpie reports robust first-half performance

Refurbished consumer technology specialist musicMagpie reported a robust first-half performance in a trading update on Monday, despite initial challenges.

The AIM-traded company said it experienced a challenging start to the half-year, due to postal strikes and low consumer confidence impacting the months of December and January.

However, its trading performance gradually strengthened from February onwards, resulting in a strong second quarter with EBITDA reaching £2m, marking a significant 42% increase compared to the same period in 2022.

Overall, the company's EBITDA for the traditionally-quieter first six months of the year amounted to £2.8m, demonstrating growth of 7.7% compared to the first six months of 2022, aligning with the board's expectations.

During the period, musicMagpie said it prioritised cost control and improving gross margins instead of focusing solely on revenue growth from lower-margin products.

In the first half, consumer technology revenue amounted to £41.2m, constituting two-thirds of total revenue but down from £46m year-on-year.

On the other hand, sales of disc media and books continued their anticipated decline, reaching £20.8m, down from £25.3m.

A notable achievement was the strong increase in gross margin, which rose by 3.1 percentage points compared to the prior year.

MusicMagpie said the improvement was driven by a number of factors, including a higher proportion of products sourced directly from consumers, an increased contribution from sales made through the musicMagpie store, and the growing impact of rental subscriptions.

In addition, the implementation of effective cost control measures resulted in lower overheads, contributing positively to the company's performance in the second quarter.

The board said the rental service for consumer technology products also saw a notable rise in active customers, reaching around 39,000 by 31 May, compared to 24,000 a year earlier and 30,500 at the end of November.

Looking ahead to the second half, musicMagpie said it was planning to introduce an enhanced buy-now-pay-later option, which was expected to further boost consumer technology sales and provide increased choice for consumers.

The company said it would continue to focus on higher credit quality customers with its evolving rental offer, aimed at supporting long-term profit growth while managing working capital and debt utilisation more effectively.

To support its operations and growth plans, musicMagpie extended its £30m revolving credit facility by one year, ensuring committed facilities through to July 2026.

As at 31 May 2023, the company's net debt totalled £13.7m.

“We are pleased with our performance in what is always the seasonally quieter half of the year for musicMagpie,” said co-founder and chief executive officer Steve Oliver.

“It is especially gratifying to see that our profit improvement has been driven by an increased margin.”

Oliver said that was achieved both by focusing on higher-margin sales through the musicMagpie online store, as well as the continued strong growth of its rental offering.

“While we remain very mindful of the current tough consumer environment, the momentum in our business as we head into the second half means that we are confident of achieving our full year expectations.”

At 0830 BST, shares in musicMagpie were up 10.93% at 19.69p.

Reporting by Josh White for Sharecast.com.