Last close As at 05/08/2026
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Research: Consumer
musicMagpie’s (MMAG) trading update for the six months to 31 May 2023 indicates that trading improved in Q2 following a weaker Q1, which was affected by postal strikes and low UK consumer confidence. Management’s focus on higher margin customers and cost savings achieved in the first half resulted in year-on-year EBITDA growth of 7.7%, despite a 13% decline in revenue. We have lowered our FY23 and FY24 revenue estimates by 13% and 16% and EBITDA estimates by 11% and 8% respectively.
musicMagpie |
Margins improving despite volatile trading |
H123 trading update |
Retail |
19 June 2023 |
Share price performance
Business description
Next events
Analysts
musicMagpie is a research client of Edison Investment Research Limited |
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musicMagpie’s (MMAG) trading update for the six months to 31 May 2023 indicates that trading improved in Q2 following a weaker Q1, which was affected by postal strikes and low UK consumer confidence. Management’s focus on higher margin customers and cost savings achieved in the first half resulted in year-on-year EBITDA growth of 7.7%, despite a 13% decline in revenue. We have lowered our FY23 and FY24 revenue estimates by 13% and 16% and EBITDA estimates by 11% and 8% respectively.
Year end |
Revenue (£m) |
EBITDA (£m) |
PBT* |
EPS* |
DPS |
EV/EBITDA |
P/E |
11/21 |
145.5 |
12.2 |
7.9 |
6.11 |
0.0 |
2.2 |
2.9 |
11/22 |
145.3 |
6.5 |
(0.9) |
(0.71) |
0.0 |
4.2 |
N/A |
11/23e |
134.3 |
8.2 |
(2.2) |
(1.56) |
0.0 |
3.3 |
N/A |
11/24e |
138.6 |
10.5 |
(0.6) |
(0.40) |
0.0 |
2.6 |
N/A |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
EBITDA growth in H1 despite lower revenue
Total revenue fell 13% to c £62m in H123, comprising an 18% decline in Disc Media and Books and a 10% fall in Consumer Technology revenue, reflecting management’s focus on higher quality sales and disruption due to postal strikes in Q1. Despite the fall in revenue, group gross margin improved by 3.1pp year-on-year to c 29.7% due to the greater proportion of products sourced direct from consumers (lower cost), a greater proportion of sales through MMAG’s store (higher margin) and a growing rental contribution (higher margin). The improved gross margin along with a focus on cost control in the period resulted in EBITDA of £2.8m, of which £2m was in Q2 (+42% y-o-y). Active customers at end-May of 39k (FY22-end: 30.5k) reflects a slowdown in customer acquisition since February (36k), as management focused on higher quality and more profitable credit customers. The launch of an enhanced ‘buy now pay later’ offer in H223 should help Consumer Technology sales by providing greater choice for consumers, while simultaneously supporting MMAG’s working capital management and debt utilisation. Net debt increased to £13.7m (FY22: £8.2m) and the £30m revolving credit facility has been extended by a year to July 2026.
FY23 EBITDA downgrade of 11%
We have lowered our FY23 revenue expectations by 13% to reflect a greater decline in Disc Media and Books of 15% (previously 9%) and a slower rate of growth in Rentals of 74% (previously 105%) as management focuses on higher quality customers. The improved gross margin and operating cost controls results in an upgrade to our EBITDA margin estimates of 12bp in FY23 to 6.1% and 64bp in FY24 to 7.6%. We now expect EBITDA of £8.2m in FY23 and £10.5m in FY24.
Valuation: Discount to peers and DCF valuation
On our updated FY23 forecasts, MMAG trades on 0.2x EV/sales and 3.3x EV/EBITDA, which represents a discount to median FY23 peer multiples of 52% for EV/sales and 55% for EV/EBITDA.
Exhibit 1: Financial summary
£m |
2020 |
2021 |
2022 |
2023e |
2024e |
||
30-November |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
INCOME STATEMENT |
|||||||
Revenue |
|
|
153.4 |
145.5 |
145.3 |
134.3 |
138.6 |
Cost of Sales |
(108.6) |
(101.2) |
(107.1) |
(95.4) |
(96.8) |
||
Gross Profit |
44.8 |
44.3 |
38.1 |
38.9 |
41.9 |
||
EBITDA |
|
|
13.9 |
12.2 |
6.5 |
8.2 |
10.5 |
Operating profit (before amort. and excepts.) |
|
|
11.3 |
8.5 |
(0.2) |
(1.1) |
0.9 |
Amortisation of acquired intangibles |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Exceptionals |
(1.3) |
(4.6) |
(0.2) |
0.0 |
0.0 |
||
Share-based payments |
(0.4) |
(17.4) |
(0.2) |
(0.3) |
(0.5) |
||
Reported operating profit |
9.6 |
(13.5) |
(0.5) |
(1.3) |
0.4 |
||
Net Interest |
(2.1) |
(0.6) |
(0.8) |
(1.1) |
(1.5) |
||
Joint ventures & associates (post tax) |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Exceptionals |
(0.6) |
(0.7) |
(0.2) |
0.0 |
0.0 |
||
Profit Before Tax (norm) |
|
|
9.2 |
7.9 |
(0.9) |
(2.2) |
(0.6) |
Profit Before Tax (reported) |
|
|
7.0 |
(14.8) |
(1.4) |
(2.4) |
(1.1) |
Reported tax |
1.6 |
2.7 |
(3.3) |
0.5 |
0.1 |
||
Profit After Tax (norm) |
10.5 |
6.4 |
(0.8) |
(1.7) |
(0.4) |
||
Profit After Tax (reported) |
8.6 |
(12.1) |
(4.7) |
(1.9) |
(0.9) |
||
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 |
(0.8) |
(1.7) |
(0.4) |
||
Net income (reported) |
8.6 |
(12.1) |
(4.7) |
(1.9) |
(0.9) |
||
Average Number of Shares Outstanding (m) |
100.0 |
104.9 |
107.8 |
107.8 |
107.8 |
||
EPS - basic normalised (p) |
|
|
10.52 |
6.11 |
(0.71) |
(1.56) |
(0.40) |
EPS - normalised fully diluted (p) |
|
|
10.52 |
6.11 |
(0.71) |
(1.56) |
(0.40) |
EPS - basic reported (p) |
|
|
8.57 |
(11.55) |
(4.38) |
(1.79) |
(0.87) |
Dividend (p) |
0.00 |
0.00 |
0.00 |
0.00 |
0.00 |
||
Revenue growth (%) |
N/A |
(5.1) |
(0.2) |
(7.6) |
3.2 |
||
Gross Margin (%) |
29.2 |
30.4 |
26.3 |
29.0 |
30.2 |
||
EBITDA Margin (%) |
9.0 |
8.4 |
4.5 |
6.1 |
7.6 |
||
Normalised Operating Margin |
7.4 |
5.8 |
(0.1) |
(0.8) |
0.6 |
||
BALANCE SHEET |
|||||||
Fixed Assets |
|
|
13.9 |
21.1 |
28.9 |
30.9 |
30.6 |
Intangible Assets |
8.4 |
9.7 |
12.4 |
13.8 |
13.4 |
||
Tangible Assets |
3.9 |
6.1 |
14.0 |
14.6 |
14.7 |
||
Investments & other |
1.7 |
5.3 |
2.5 |
2.5 |
2.5 |
||
Current Assets |
|
|
14.5 |
14.6 |
18.8 |
21.2 |
24.2 |
Stocks |
6.8 |
8.0 |
8.8 |
10.8 |
11.1 |
||
Debtors |
2.5 |
3.7 |
2.6 |
3.1 |
3.2 |
||
Cash & cash equivalents |
5.1 |
2.8 |
6.8 |
6.2 |
8.8 |
||
Other |
0.0 |
0.0 |
0.6 |
1.1 |
1.2 |
||
Current Liabilities |
|
|
(18.7) |
(9.0) |
(10.0) |
(11.2) |
(11.3) |
Creditors |
(10.9) |
(8.4) |
(9.3) |
(10.5) |
(10.6) |
||
Tax and social security |
(0.1) |
(0.3) |
0.0 |
0.0 |
0.0 |
||
Short term borrowings |
(7.0) |
0.0 |
0.0 |
0.0 |
0.0 |
||
Other |
(0.7) |
(0.4) |
(0.7) |
(0.7) |
(0.7) |
||
Long Term Liabilities |
|
|
(7.3) |
(2.4) |
(18.1) |
(23.1) |
(26.1) |
Long term borrowings |
(4.2) |
(0.9) |
(14.7) |
(19.7) |
(22.7) |
||
Other long term liabilities |
(3.1) |
(1.6) |
(3.4) |
(3.4) |
(3.4) |
||
Net Assets |
|
|
2.4 |
24.3 |
19.5 |
17.9 |
17.4 |
Minority interests |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Shareholders' equity |
|
|
2.4 |
24.3 |
19.5 |
17.9 |
17.4 |
CASH FLOW |
|||||||
Operating Cash Flow |
13.9 |
11.8 |
5.6 |
8.2 |
10.5 |
||
Working capital |
(0.6) |
(4.9) |
1.0 |
(1.4) |
(0.2) |
||
Exceptional & other |
(1.3) |
(4.2) |
(0.5) |
0.0 |
0.0 |
||
Tax |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Net operating cash flow |
|
|
12.0 |
2.6 |
6.2 |
6.8 |
10.3 |
Capex |
(1.9) |
(7.2) |
(14.2) |
(10.4) |
(8.4) |
||
Acquisitions/disposals |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Net interest |
(2.7) |
(2.3) |
(0.6) |
(1.1) |
(1.5) |
||
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) |
(1.0) |
(0.9) |
(0.9) |
||
Net Cash Flow |
6.3 |
6.9 |
(9.6) |
(5.6) |
(0.5) |
||
Opening net debt/(cash) (excluding leases) |
|
|
12.6 |
6.3 |
(1.8) |
8.2 |
13.4 |
FX |
0.0 |
0.0 |
0.1 |
0.0 |
0.0 |
||
Other non-cash movements |
(6.4) |
(8.2) |
9.9 |
5.3 |
0.5 |
||
Closing net debt/(cash) |
|
|
6.3 |
(1.8) |
8.2 |
13.4 |
13.9 |
Source: musicMagpie accounts, Edison Investment Research
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Research: TMT
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