26th Sep 2022 10:40
(Alliance News) - musicMagpie PLC shares plunged on Monday as it warned that full-year profit will be lower than expected.
Shares in the Stockport, England-based used-technology reseller were down 70% to 8.18 pence each in London on Monday morning.
In July, musicMagpie said it expected an improved trading performance in the second half of its financial year to November 30, 2022.
In the half-year to May 31, it reported revenue of GBP71.3 million down from GBP72.8 million, but its pretax loss narrowed to GBP1.0 million from GBP17.7 million.
On Monday, the company said it still expects that second half profitability will be a "substantial improvement" on the first half, however its Consumer Technology division has been weaker than anticipated.
The Consumer Technology arm represents around two thirds of musicMagpie revenue.
"Cautious consumer behaviour in August and September to date has seen slower growth of outright sales on the musicMagpie store, which the expansion of other sales channels, including the positive launch on Back Market in May 2022, has not been able to fully offset," the company explained.
Further, musicMagpie's device rental service is seeing reduced outright sales, as customers choose to rent instead of making outright purchases.
The company added that whilst rentals have tempered its results for its current financial years, they are "significantly" more profitable over the life of the device and will provide recurring revenue and profitability in future years.
It also warned that October and November, which are historically two of its strongest months, are expected to be hampered by worsening economic outlook and increasing cost of living pressures in the UK.
On the back of this, musicMagpie now expects second half revenue to show slower growth over the first half than previously expected and profit for the year to be below both its expectations as well as the markets.
Looking ahead, the company said its new GBP30 million revolving credit facility will allow it to continue to invest it the rental offering and the SMARTdrop kiosk roll-out with Asda Stores Ltd, which is on track to complete by the end of the financial year.
By Sophie Rose; [email protected]
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