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Last close As at 26/05/2023
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GBP20m
Research: Consumer
musicMagpie’s (MMAG’s) management has indicated that its full-year results to the end of November 2022 are in line with its expectations. A record Black Friday week offset the previously flagged weaker summer and early autumn trading, with reported revenue of £144.8m marginally below our forecasts. Net debt was better than expected due to improvements in working capital and lower capital investment in rentals. We have lowered our FY23 and FY24 revenue estimates by c 1% while maintaining our EBITDA. On our revised estimates, MMAG trades on FY23 and FY24 multiples of 0.2x EV/sales in both years and EV/EBITDA multiples of 3.3x and 2.7x, respectively.
musicMagpie |
FY22 in line with management’s expectations |
FY22 trading update |
Retail |
8 December 2022 |
Share price performance
Business description
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Analysts
musicMagpie is a research client of Edison Investment Research Limited |
musicMagpie’s (MMAG’s) management has indicated that its full-year results to the end of November 2022 are in line with its expectations. A record Black Friday week offset the previously flagged weaker summer and early autumn trading, with reported revenue of £144.8m marginally below our forecasts. Net debt was better than expected due to improvements in working capital and lower capital investment in rentals. We have lowered our FY23 and FY24 revenue estimates by c 1% while maintaining our EBITDA. On our revised estimates, MMAG trades on FY23 and FY24 multiples of 0.2x EV/sales in both years and EV/EBITDA multiples of 3.3x and 2.7x, respectively.
Year end |
Revenue (£m) |
EBITDA |
PBT* |
EPS* |
DPS |
EV/EBITDA |
P/E |
11/20*** |
153.4 |
13.9 |
9.2 |
10.52 |
0.0 |
2.2 |
2.0 |
1121 |
145.5 |
12.2 |
7.9 |
6.11 |
0.0 |
2.5 |
3.5 |
11/22e |
144.8** |
6.5 |
(0.5) |
(0.37) |
0.0 |
4.7 |
N/A |
11/23e |
154.8 |
9.2 |
(0.5) |
(0.41) |
0.0 |
3.3 |
N/A |
11/24e |
166.9 |
11.3 |
1.2 |
0.87 |
0.0 |
2.7 |
24.3 |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments. **Reported. *** Exceptional COVID-19 impact.
FY22 in line with expectations
Revenue of £144.8m (FY21: £145.5m) was marginally behind our forecast of £146.3m. There was little commentary on the individual revenue streams, beyond highlighting the continuing growth in rentals, with active subscribers of 30.5k at the period end (H122: 24k, FY21: 13.5k). Trading improved in November, with a record Black Friday week. In line with commentary from other UK retailers, summer and early autumn trading was adversely affected by the hot weather and the Queen’s funeral, which supressed consumer expenditure. With the trading update, management has announced the launch of a two-year contract offer in its rentals business. This will provide greater visibility on recurring revenue and the company will naturally benefit from reduced costs in attracting and managing the customer base. As trading is in line with management’s expectations, we believe cash-flow generation was better than expected due to working capital and lower capital investment in rentals, giving a period end net debt position of £8.2m versus our previous forecast of £10.4m.
Updated forecasts
We have marginally lowered our revenue forecasts in FY23 and FY24 to £154.8m and £166.9m, respectively, to reflect management’s commentary, although we have maintained our EBITDA forecasts in all years. We have adjusted our FY22 working capital and capex estimates accordingly with the quoted net debt position.
Valuation: FY23–FY24e EV/sales multiples of 0.2x
Following the revenue downgrade in late September, the share price has rallied 138% from its low of 8.9p. On our updated estimates, MMAG continues to trade on low EV/sales multiples of 0.2x in both FY23e and FY24e.
Exhibit 1: Financial summary
£m |
2020 |
2021 |
2022e |
2023e |
2024e |
||
30-November |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
INCOME STATEMENT |
|||||||
Revenue |
|
|
153.4 |
145.5 |
144.8 |
154.8 |
166.9 |
Cost of Sales |
(108.6) |
(101.2) |
(106.4) |
(111.6) |
(118.4) |
||
Gross Profit |
44.8 |
44.3 |
38.4 |
43.2 |
48.5 |
||
EBITDA |
|
|
13.9 |
12.2 |
6.5 |
9.2 |
11.3 |
Operating profit (before amort. and excepts.) |
|
11.3 |
8.5 |
0.1 |
0.3 |
2.1 |
|
Amortisation of acquired intangibles |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Exceptionals |
(1.3) |
(4.6) |
(0.7) |
0.0 |
0.0 |
||
Share-based payments |
(0.4) |
(17.4) |
(0.5) |
(1.0) |
(1.5) |
||
Reported operating profit |
9.6 |
(13.5) |
(1.1) |
(0.7) |
0.6 |
||
Net Interest |
(2.1) |
(0.6) |
(0.6) |
(0.8) |
(0.9) |
||
Joint ventures & associates (post tax) |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Exceptionals |
(0.6) |
(0.7) |
0.0 |
0.0 |
0.0 |
||
Profit Before Tax (norm) |
|
|
9.2 |
7.9 |
(0.5) |
(0.5) |
1.2 |
Profit Before Tax (reported) |
|
|
7.0 |
(14.8) |
(1.6) |
(1.5) |
(0.3) |
Reported tax |
1.6 |
2.7 |
(0.1) |
(0.1) |
(0.2) |
||
Profit After Tax (norm) |
10.5 |
6.4 |
(0.4) |
(0.4) |
0.9 |
||
Profit After Tax (reported) |
8.6 |
(12.1) |
(1.7) |
(1.6) |
(0.6) |
||
Minority interests |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Discontinued operations |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Net income (normalised) |
10.5 |
6.4 |
(0.4) |
(0.4) |
0.9 |
||
Net income (reported) |
8.6 |
(12.1) |
(1.7) |
(1.6) |
(0.6) |
||
Average Number of Shares Outstanding (m) |
100.0 |
104.9 |
107.8 |
107.8 |
107.8 |
||
EPS - basic normalised (p) |
|
|
10.52 |
6.11 |
(0.37) |
(0.41) |
0.87 |
EPS - normalised fully diluted (p) |
|
|
10.52 |
6.11 |
(0.37) |
(0.41) |
0.87 |
EPS - basic reported (p) |
|
|
8.57 |
(11.56) |
(1.62) |
(1.49) |
(0.52) |
Dividend (p) |
0.00 |
0.00 |
0.00 |
0.00 |
0.00 |
||
Revenue growth (%) |
N/A |
(5.1) |
(0.5) |
6.9 |
7.8 |
||
Gross Margin (%) |
29.2 |
30.4 |
26.5 |
27.9 |
29.0 |
||
EBITDA Margin (%) |
9.0 |
8.4 |
4.5 |
5.9 |
6.7 |
||
Normalised Operating Margin |
7.4 |
5.8 |
0.0 |
0.2 |
1.2 |
||
BALANCE SHEET |
|||||||
Fixed Assets |
|
|
13.9 |
21.1 |
27.2 |
30.8 |
35.3 |
Intangible Assets |
8.4 |
9.7 |
11.1 |
10.3 |
10.8 |
||
Tangible Assets |
3.9 |
6.1 |
10.6 |
14.8 |
18.8 |
||
Investments & other |
1.7 |
5.3 |
5.5 |
5.7 |
5.7 |
||
Current Assets |
|
|
14.5 |
14.6 |
18.4 |
19.5 |
19.4 |
Stocks |
6.8 |
8.0 |
11.0 |
11.4 |
11.8 |
||
Debtors |
2.5 |
3.7 |
3.7 |
4.0 |
4.3 |
||
Cash & cash equivalents |
5.1 |
2.8 |
3.7 |
4.2 |
3.3 |
||
Other |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Current Liabilities |
|
|
(18.7) |
(9.0) |
(9.0) |
(9.3) |
(9.7) |
Creditors |
(10.9) |
(8.4) |
(8.4) |
(8.7) |
(9.1) |
||
Tax and social security |
(0.1) |
(0.3) |
(0.3) |
(0.3) |
(0.3) |
||
Short term borrowings |
(7.0) |
0.0 |
0.0 |
0.0 |
0.0 |
||
Other |
(0.7) |
(0.4) |
(0.4) |
(0.4) |
(0.4) |
||
Long Term Liabilities |
|
|
(7.3) |
(2.4) |
(13.4) |
(18.4) |
(21.4) |
Long term borrowings |
(4.2) |
(0.9) |
(11.9) |
(16.9) |
(19.9) |
||
Other long term liabilities |
(3.1) |
(1.6) |
(1.6) |
(1.6) |
(1.6) |
||
Net Assets |
|
|
2.4 |
24.3 |
23.1 |
22.6 |
23.5 |
Minority interests |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Shareholders' equity |
|
|
2.4 |
24.3 |
23.1 |
22.6 |
23.5 |
CASH FLOW |
|||||||
Operating Cash Flow |
13.9 |
11.8 |
6.5 |
9.2 |
11.3 |
||
Working capital |
(0.6) |
(4.9) |
(3.0) |
(0.3) |
(0.3) |
||
Exceptional & other |
(1.3) |
(4.2) |
(0.6) |
(0.2) |
(0.0) |
||
Tax |
0.0 |
0.0 |
0.0 |
0.0 |
(0.2) |
||
Net operating cash flow |
|
|
12.0 |
2.6 |
2.9 |
8.7 |
10.7 |
Capex |
(1.9) |
(7.2) |
(11.8) |
(11.8) |
(13.1) |
||
Acquisitions/disposals |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Net interest |
(2.7) |
(2.3) |
(0.6) |
(0.8) |
(0.9) |
||
Equity financing |
0.0 |
14.5 |
0.0 |
0.0 |
0.0 |
||
Dividends |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Other |
(1.1) |
(0.7) |
(0.6) |
(0.6) |
(0.6) |
||
Net Cash Flow |
6.3 |
6.9 |
(10.2) |
(4.5) |
(3.9) |
||
Opening net debt/(cash) (excluding leases) |
|
|
12.6 |
6.3 |
(1.8) |
8.2 |
12.7 |
FX |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Other non-cash movements |
(6.4) |
(8.2) |
10.0 |
4.5 |
3.9 |
||
Closing net debt/(cash) (excluding leases) |
|
|
6.3 |
(1.8) |
8.2 |
12.7 |
16.6 |
Source: musicMagpie, Edison Investment Research
|
|
Research: Healthcare
Kazia Therapeutics has announced the publication of pre-clinical data for its second pipeline asset, EVT801 in the journal Cancer Research Communications. The research was conducted by licensing partner Evotec and was the key driver for Kazia in-licensing the asset in 2021. EVT801 is an inhibitor of vascular endothelial growth factor receptors (VEGFR), which play an important role in angiogenesis and lymphangiogenesis (processes that contribute to tumor growth and metastasis), making VEGFR a well-established therapeutic target. While VEGFR inhibitors have been on the market for over a decade, Kazia asserts that by selectively targeting VEGFR3, EVT801 offers a potent and less toxic therapeutic profile than other benchmark drugs, such as Novartis’ Votrient (pazopanib) and Bayer’s Nexavar (sorafenib). EVT801 is currently in a Phase I clinical trial with initial data expected in H1 CY23. Our valuation changes slightly to $143.9m or US$8.81 per basic ADR, reflecting the additional shares issued under the at-the-money (ATM) facility.
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