Circular economy pioneer MusicMagpie has seen revenues take a tumble as the cost-of-living crisis sees shoppers spend less, even on re-con tech.
Interim results for the retailer show a 2% decline in revenue driven by strong growth in Technology (+16%) offset by declines in Disc Media and Books (-23.6%) due to the normalisation of trading post lockdowns. The gross margin is down by 6pps to 26.6% due to change in business mix. Technology has a lower percent margin. Gross profit was £19m, compared to £23.7m in 2021.
However, the company has made significant gains in its subscriptions business, with its rental business performing well, with 24,000 active subscribers at the period end, up 10,500 from the end of FY21 with customer retention of 70%.
Adjusted EBITDA declined by 58% y-o-y due to the substitutional effect of rental revenue for long-term subscription revenue and the decline in Discs and Books.
The move chimes with research out this week that shows that the UK subscription economy is growing strongly, with sectors such as electricals and technology businesses becoming one of the biggest areas of growth for this business model in the years ahead.
Commenting on the results, Steve Oliver, Chief Executive Officer of musicMagpie, says:”In light of the continuing squeeze on consumer spending, we believe that this will become an increasingly attractive option to a wider range of consumers seeking to replace their non-discretionary technology products in a cost-effective way.”
Russell Pointon, Director of Consumer at Edison Group, comments: “With respect to outlook, management expects continued growth from rentals as the base increases whilst Disc Media and Books are expected to perform in line with H122, and Adjusted EBITDA is in line with its expectations for the year. Post the period end management has signed a new committed 3-year £30 revolving credit facility.”