Mobile phone and technology recycler and reseller musicMagpie (LON: MMAG) managed to edge up its EBITDA profitability in the six months to May 2023. However, it is still likely to make a pre-tax loss for the year.
Books and media revenues continue to decline, and technology revenues are not growing fast enough to fully make up for that. In fact, in the first half technology revenues also declined, but they are expected to increase for the year as a whole. That is partly down to the rental model spreading revenues.
Interim EBITDA is 7.7% ahead at £2.8m, even though postal strikes hampered progress in the first quarter. Most of that profit was in the second quarter. Group revenues fell 13% to £62m, but gross margins are improving.
The business is second half weighted. An upgraded version of buy now pay later will be introduced by the technology division in the second half.
Full year EBITDA is forecast to improve from £6.5m to £8.7m, but a higher depreciation charge means that the pre-tax loss could increase from £1m to £1.5m.
The business will generate more cash from operations this year, but not enough to cover capital expenditure. Net debt is £13.7m and the upward trend is likely to increase – although there tends to be a higher debt level in May than in November. There is a £30m bank facility that lasts until July 2026.
Shore does not expect musicMagpie to make a pre-tax profit until 2024-25. The company was profitable prior to last year. The share price moved up 0.75p to 18.5p. The April 2021 placing price was 193p.