musicMagpie, a Stockport-based specialist in refurbished consumer technology, has issued its interim results for the six months to 31 May 2023 hailing a ‘strong momentum’ in its performance.
After a challenging start to the London-listed company’s financial year amid postal strikes and low consumer confidence, trading performance improved from February onwards. In Q2 2023, there was a 42% increase in EBITDA from Q2 2022.
The circular economy ‘pioneer’ said while first half revenues were down from £71.3m to £61.9m, adjusted EBITDA was up 7.7% from £2.6m in 2022 to £2.8m.
The group noted that its full year profits are expected in the seasonally important second half.
Speaking to Prolific North, co-founder and CEO Steve Oliver said: “To use a football analogy, it’s a game of two halves, we were impacted by postal disruption especially in December, and weak consumer demand.”
With an emphasis on margin and gross profits, digging down and maximising sales on musicMagpie’s own store has left the company “in good shape”.
“We’ve done some good cost savings across the business. So there’s an emphasis on margins, costs down and there’s a good momentum. We’re certainly confident of hitting full year expectations.”
On how consumer habits are shifting, he added: “It’s tough out there still for consumers. Having survived Covid and then an energy cost crisis that we’re now about to potentially have for householders, incomes are going to be further pressed over the next few months.”
But the firm is no stranger to overcoming turbulent economic times.
“We were born in a recession. When we started in a garage in 2007 – 2008, Martin Lewis gave us a lot of coverage in those early years, as he is doing now, in terms of us being a consumer champion service.
“We’ve always positioned ourselves at musicMagpie as here to help. We use that phrase during the pandemic, we’re here to help you get cash for your old stuff, whether that be your old legacy products, disc, media, books.”
Around 70% of the company’s turnover is from consumer tech items, with the percentage of sales on the musicMagpie store increasing to 79%, up from 72% in FY22 versus third party marketplaces. Although the group reports consumer technology revenues for the six months to 31 May of £41.1m – down from £46m last year – gross profit from consumer technology increased 13.5% from £9.6m in 2022 to £10.9m, contributing to 59% of total group gross profit.
Sales of disc media and books are declining in the business – with revenue dipping from £25.3m to £20.9m – but those more traditional media products are still important for some consumers shopping around for alternatives as the cost of living crisis continues to bite.
“It is declining within our business, it’s now 30% of our forecast turnover for this year, it’ll be lower next year and lower the year after that. Is it quite dropping off the cliff that people think it is? I’ve been working with entertainment products now for nearly 25 years and people have told me: ‘They will be dead or gone within five to 10 years’.”
With the rising costs in subscription and streaming services, having physical copies of DVDs or CDs are an alternative for families grappling with mounting costs. SMARTDrop Kiosks now account for 45% of musicMagpie’s consumer technology sourcing in the UK. It follows a successful roll out last year, making it easier for customers to pocket money by recycling their unwanted phones in-store.
“We sell our disc media in 250 Asda stores and they sell very well, indeed. So yes, they’re in decline and they’re in decline in our business in the sales mix, but I think we’ll be here for a while yet.”
There has also been strong progress from the group’s device rental subscription service, increasing to around 39,000 active subscriptions as of 31 May 2023, up from 24,000 in the same period last year.
He adds: “It’s growing nicely, 39,000 at the end of May, which is good growth from the year before. We do need to be sensible with it and make sure we get that balance right between rental and sales.”