Company Statement of Financial Position

Registered number 12977343

 

	Note	As at 30 November 2021 £000
Assets Investments	16	14,285
Total non-current assets		14,285
Trade and other receivables	19	11,476
Total current assets		11,476
Net assets		25,761
Equity Share capital	26	1,078
Share premium	26	14,449
Capital redemption reserve	26	1,108
Merger reserve	26	801
Retained earnings		8,325
Equity attributable to the equity holders of the parent		25,761

 

The Company has taken advantage of the exemption permitted by Section 408 of the Companies Act 2006 not to present its own profit and loss account. The Company made a loss of £8,959,000 for the period.

These financial statements were approved by the board of directors on 1 March 2022 and were signed on behalf by:

S Oliver

CEO

 

Consolidated Statement of Changes in Equity

		Share	Share	Capital redemption	Merger	Translation	Retained	Total
		capital	premium	reserve	reserve	reserve	earnings	Equity
	note	£000	£000	£000	£000	£000	£000	£000
As at 1 December 2019		14	1,690	-	-	(72)	(8,077)	(6,445)
Profit for the year		-	-	-	-	-	8,570	8,570
Foreign currency translation		-	-	-	-	(86)	-	(86)
Total comprehensive income for the year		-	-	-	-	(86)	8,570	8,484
Share-based payments	24	-	-	-	-	-	381	381
Balance as at 30 November 2020		14	1,690	-	-	(158)	874	2,420
				Capital
		Share	Share	Redemption	Merger	Translation	Retained	Total
		capital	premium	reserve	reserve	reserve	earnings	Equity
	note	£000	£000	£000	£000	£000	£000	£000
As at 1 December 2020		14	1,690	-	-	(158)	874	2,420
Loss for the year		-	-	-	-	-	(12,125)	(12,125)
Foreign currency translation		-	-		-	38		38
Total comprehensive (loss)/income for the year		-	-	-	-	38	(12,125)	(12,087)
Cancellation of share premium	26	-	(1,690)	-	-	-	1,690	-
Reclassification of shares	26	1,100	-	-	-	-	-	1,100
Repurchase of deferred shares	26	(1,108)	-	1,108	-	-	-	-
Bonus issue of shares		991	-	-	(991)	-	-	-
Shares issued	26	81	14,922			-	-	15,003
Issue costs of shares Interest on preference shares waived by the	26	-	(473)			-	-	(473)
owners	25	-	-			-	185	185
Share-based payments	24	-	-			-	17,379	17,379
Tax effects of share-based payment charge							757	757
Balance as at 30 November 2021		1,078	14,449	1,108	(991)	(120)	8,760	24,285

 

Company Statement of Changes in Equity

				Capital
		Share	Share	Redemption	Merger	Retainer	Total
		capital	Premium	Reserve	Reserve	Earnings	Equity
	note	£000	£000	£000	£000	£000	£000
As at 27 October 2020		-	-	-	-	-	-
Loss for the period		-	-	-	-	(8,959)	(8,959)
Total comprehensive loss for the period		-	-	-	-	(8,959)	(8,959)
Share based payments	24				-	17,284	17,284
Share for share exchange	26	14	-		1,792	-	1,806
Reclassification of shares	26	1,100	-		-	-	1,100
Repurchase of deferred shares	26	(1,108)		1,108			-
Bonus issue of shares	26	991	-		(991)	-	-
Shares issued	26	81	14,922		-	-	15,003
Issue costs of shares	26	-	(473)		-	-	(473)
Balance as at 30 November 2021		1,078	14,449	1,108	801	8,325	25,761

 

 

Consolidated Cash Flow Statement

 

	Year ended 30 November 2021 £000	Year ended 30 November 2020 £000
Net cash flows from operating activities (Loss)/profit for the period	(12,125)	8,570
Adjustments for: Financial expense	1,299	2,691
Taxation expense	(2,694)	(1,612)
Depreciation of property, plant and equipment	1,755	1,300
Impairment of property, plant and equipment	410	-
Loss on property, plant and equipment	12	-
Amortisation of intangible assets	1,517	1,261
Share-based payments expense	17,379	381
Taxation paid	-	-
Working capital adjustments Increase in inventories	(1,184)	(642)
Increase in trade and other receivables	(1,216)	(367)
(Decrease)/Increase in trade and other payables	(2,522)	397
Net cash from operations	2,631	11,979
Cash flows used in investing activities Acquisition of property, plant and equipment	(4,404)	(442)
Capitalised development expenditure	(2,837)	(1,472)
Net cash used in investing activities	(7,241)	(1,914)
Cash flows from financing activities Proceeds from new loan	1,000	310
Proceeds from shares issued	15,002	-
Costs incurred on IPO charged to Share Premium	(473)	-
Financial expenses paid	(2,275)	(2,682)
Lease liabilities paid	(618)	(846)
Interest paid on lease liabilities	(131)	(243)
Repayment of other loans	(6,000)	(3,500)
Repayment of shareholder loan notes	(4,200)	-
Net cash from/(used in) financing activities	2,305	(6,961)
Net (decrease)/increase in cash and cash equivalents	(2,305)	3,104
Cash and cash equivalents brought forward	5,140	2,036
Effect of exchange rate fluctuations on cash	14	-
Cash and cash equivalents carried forward	2,849	5,140

 

Notes

 

1. CORPORATE INFORMATION

 

The Directors of musicMagpie plc (the "Company") present their full year report and the audited Consolidated Financial Statements for the year ended 30 November 2021.

musicMagpie plc is a public limited company incorporated in the United Kingdom whose shares are publicly traded on the Alternative Investment Market (AIM) of the London Stock Exchange and is incorporated and domiciled in the UK. Its registered address is One Stockport Exchange, Railway Road, Stockport, Cheshire, SK1 3SW.

The Company's financial statements are included in the consolidated financial statements of musicMagpie plc. The Company has taken advantage of the exemption permitted by Section 408 of the Companies Act 2006 not to present its own profit and loss account.

The Company, musicMagpie plc is the ultimate group company of the consolidated group.

 

2. ACCOUNTING POLICIES

 

2.1  Basis of Preparation

 

The consolidated financial statements have been prepared in accordance with International Accounting Standards in conformity with the requirements of the Companies Act 2006 and with those parts of the Companies Act 2006 applicable to companies reporting under International Accounting Standards. The Group has chosen to prepare the parent company financial statements in accordance with Financial Reporting Standard 101: Reduced Disclosure Framework ("FRS 101"). The financial statements have been prepared under the historical cost convention.

The accounting policies that follow set out those policies that apply in preparing the financial statements for the year ended 30 November 2021 and the Group and Company have applied the same policies throughout the year.

The following exemptions from the requirements of IFRS have been applied in the preparation of the Company's financial statements and, where relevant, equivalent disclosures have been made in the Group accounts of the parent, in accordance with FRS 101:

·      Presentation of a Statement of Cash Flows and related notes;

·      Disclosure of the future impact of new International Financial Reporting Standards in issue but not yet effective at the reporting date;

·      Financial instrument disclosures;

·      A reconciliation of the number and weighted average exercise prices of share options, how the fair value of share-based payments was determined and their effect on profit or loss and the financial position;

·      Related party disclosures for transactions with the parent or wholly owned members of the group;

Disclosure of the objectives, policies and processes for managing capital.

 

Initial public offering ("IPO")

 

On 22 April 2021, the Company was admitted to the Alternative Investment Market (AIM) of the London Stock Exchange. These Consolidated Financial Statements are the Company's first subsequent to its admission.

The Admission Document for the IPO contains the audited Historical Financial Information of the Company on pages 66 to 106 (the "Historical Financial Information") presented under International Financial Reporting Standards ("IFRS"). The comparative figures for the financial year ended 30 November 2020 are an extract of the Company's historical financial information for that year. Prior to the restructuring the Group was not in existence in its current form, as described in this note. A statutory audit performed in accordance with the Companies Act 2006 was not performed and hence no audit opinion was issued in respect of the historical comparatives presented in these consolidated financial statements. However, as part of the process of Admission to listing on AIM and to trading on the London Stock Exchange, an accountant's report, undertaken by RSM UK Audit LLP, in accordance with the Standards for Investment Reporting 2000 ("SIR 2000") issued by the Auditing Practices Board in the United Kingdom, was issued on the Historical Financial Information included in the Admission Document. The accountant's report, dated 16 April 2021, included an unqualified opinion on the historical information presented. Statutory accounts for the year ended 30 November 2020, prepared under Financial Reporting Standard 102, were approved by the Board of Directors on 16 April 2021 and delivered to the Registrar of Companies. The report of the auditor on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 498 (2) or (3) of the Companies Act 2006. Note 25 of the Historical Financial Information refers to the transition to IFRS and sets out the main items contributing to the change in financial information compared with that reported under UK GAAP as at the transition date.

 

Group Reorganisation

In connection with the admission to AIM, the Group undertook a group reorganisation of its corporate structure which resulted in the Company, musicMagpie plc becoming the ultimate holding company of the Group. The creation of the Company was not conditional upon the IPO. The Company acquired 100% of the share capital of Entertainment Magpie Group Limited ("EMGL") on 31 March 2021 through a share for share exchange.

The insertion of the Company as a new holding company was such that the group reorganisation has been accounted for as a continuation of the existing group rather than an acquisition in accordance with the IFRS 3 guidance in respect of reverse acquisition accounting. Management determined that the Company was formed only to issue equity interests to affect a business combination and does not appear to meet the characteristics of an acquirer following the guidance given in paras. B15 to B18 of IFRS3. In applying the guidance it was determined that:

•  EMGL was significantly greater in size than the Company;

•  the shareholders and the Board of EMGL initiated the restructure of the Group to achieve an IPO;

•  the owners of EMGL still retained majority voting rights after the combination; and

•  no premium was paid as part of the share for share exchange.

 

Management also determined that the Company did not meet the definition of a business. Accordingly, the insertion of the Company on top of the existing group does not constitute a business combination under IFRS 3 'Business Combinations' and instead has been accounted for as a common control transaction. Merger accounting has been used to account for this transaction.

Under merger accounting principles, the assets and liabilities of the subsidiaries are consolidated at book value in the Group financial statements.

These consolidated financial statements of the Group are the first set of financial statements for the newly formed Group and the prior period has been presented as a continuation of the former EMGL Group on a consistent basis as if the Group reorganisation had taken place at the start of the earliest period presented. The prior period comparatives are those of the EMGL Group since no substantive economic changes have occurred. 

 

Basis of Consolidation

A subsidiary is an entity that is controlled by the parent. The results of subsidiary undertakings are included in the consolidated statement of comprehensive income from the date that control commences until the date that control ceases. Control is established when the Group has the power to govern the operating and financial policies of an entity so as to obtain benefits from its activities. In assessing control, the musicMagpie Group takes into consideration potential voting rights that are currently exercisable.

All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.

 

2.2  Going Concern

 

The financial statements are prepared on a going concern basis which the directors believe to be appropriate for the following reasons. The group generated a loss of £12,125,000 during the year ended 30 November 2021 (year ended 30 November 2020: profit of £8,570,000) but this was largely driven by non-cash items including a share- based payments expense totaling £17,379,000. At the year-end date it had net current assets of £5,598,000 (year ended 30 November 2020: liabilities of £4,232,000).

The group presently meets its day to day working capital requirements through cash reserves and its bank facilities which are subject to various facility limits and covenants. The directors have reviewed the trading and cash flow forecasts for the 12 month period from the date of approval of the financial statements as part of their going concern assessment and having incorporated reasonable downside sensitivities have confirmed that the group will be able to continue to meet quarterly covenant tests and remain within the borrowing limits set out within its bank facility agreement.

The Directors therefore believe there is a reasonable expectation that the Group can continue as a going concern for at least the next 12 months from the date of approval of the financial statements.   Accordingly, they continue to adopt the going concern basis in preparing the financial statements.

 

2.3  Foreign currency

 

Transactions in foreign currencies are translated to the functional currency at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the foreign exchange rate ruling at that date and the foreign exchange differences arising on translation are recognised in profit or loss.

The assets and liabilities of foreign operations are translated to the presentational currency, sterling, at foreign exchange rates ruling at the reporting date. The revenues and expenses of foreign operations are translated at an average rate for the year where this rate approximates to the foreign exchange rates ruling at the dates of the transactions. Foreign exchange differences arising on retranslation are recognised in the profit or loss.

 

2.4  Financial instruments

 

Financial assets

Financial assets comprise trade and other receivables (including intercompany balances) and cash and cash equivalents.

Trade receivables are initially measured at transaction price, and subsequently at their amortised cost subject to any impairment in accordance with IFRS 9.

Trade and other receivables are recognised initially at the amount of consideration that is unconditional. The Group holds these receivables with the objective of collecting contractual cash flows and therefore measures them subsequently at amortised cost using the effective interest method.

Cash and cash equivalents comprise cash in hand, cash at bank, cash in transit and call deposits. Cash in transit comprise of cash collected from the customers by third party e-commerce platforms but not yet received by the Group. These balances are considered to be highly liquid, with minimal risk of default and are typically received within a week.

The assessment of impairment of trade receivables and other receivables, including intercompany balances is in accordance with IFRS 9. Impairment is assessed by reference to expected recoverability of assets, including the underlying profitability and cash flows from subsidiaries from whom intercompany balances are owed. A loss allowance for expected credit losses (ECL) is recognised on all receivable balances subsequently measured at amortised cost as follows:

For trade receivables and intercompany balances, lifetime ECL are recognised using the 'simplified approach' permitted under IFRS 9.

For other financial instruments, lifetime ECLs are recognised when there has been a significant increase in credit risk since initial recognition. However, if the credit risk on the financial instrument has not increased significantly since initial recognition, the loss allowance for that financial instrument is measured at an amount equal to 12-month ECL.

Lifetime ECL represents the expected credit losses that will result from all possible default events over the expected life of a financial instrument. In contrast, 12-month ECL represents the portion of lifetime ECL that is expected to result from default events on a financial instrument that are possible within 12 months after the reporting date.

Credit risk on a financial instrument (including intercompany balances), is assumed not to have increased significantly since initial recognition if the financial instrument is determined to have low credit risk at the reporting date. A financial instrument is determined to have low credit risk if:

·      the financial instrument has a low risk of default;

·      the debtor has a strong capacity to meet its contractual cash flow obligations in the near term; and;

·      adverse changes in economic and business conditions in the longer term may, but will not necessarily, reduce the ability of the borrower to fulfil its contractual cash flow obligations.

 

Financial liabilities

Financial liabilities comprise trade and other payables (including intercompany balances), and interest bearing loans. These are measured at initial recognition at fair value and subsequently at amortised cost using the effective interest rate method. Interest expense and foreign exchange gains and losses are recognised in profit or loss. Any gain or loss on derecognition is also recognised in profit or loss.

Classification of financial instruments issued by the Group

Financial instruments issued by the Group are treated as equity only to the extent that they meet the following two conditions:

a)  they include no contractual obligations upon the Group to deliver cash or other financial assets or to exchange financial assets or financial liabilities with another party under conditions that are potentially unfavourable to the musicMagpie Group; and

 

b) where the instrument will or may be settled in the Group's own equity instruments, it is either a non- derivative that includes no obligation to deliver a variable number of the musicMagpie Group's own equity instruments or is a derivative that will be settled by the musicMagpie Group's exchanging a fixed amount of cash or other financial assets for a fixed number of its own equity instruments.

 To the extent that this definition is not met, the proceeds of issue are classified as a financial liability. Where the instrument so classified takes the legal form of the musicMagpie Group's own shares, the amounts presented in these financial statements for called up share capital and share premium account exclude amounts in relation to those shares.

Inter-company balances are classified as current in the financial statements due to the low credit risk of the issuer given its profitability in the short term.

 

2.5  Property, plant and equipment

 

Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses. Property, plant and equipment includes assets rented to customers (Rental Assets) which, as we retain ownership of the device throughout the contractual term, the cost of the asset is capitalised and depreciated over its expected remaining useful economic life.

Where parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment.

The Company assesses at each reporting date whether property, plant and equipment are impaired.

Depreciation is charged to profit and loss over the estimated useful lives of each part of an item of Property, plant and equipment . Leased assets are depreciated over the shorter of the lease term and their useful lives. The estimated useful lives are as follows:

 

Plant and machinery	6 - 7 years	Straight line
Motor vehicles	3 years	Straight line
Fixtures and fittings	6 - 7 years	Straight line
Computer and office equipment	3 years	Straight line
Rental assets	1 - 7 years	Reducing balance

 

Depreciation methods, useful lives and residual values are reviewed at each reporting date.

 

2.6  Business combinations

 

All business combinations are accounted for by applying the acquisition method. Business combinations are accounted for using the acquisition method as at the acquisition date, which is the date on which control is transferred to the Group.

The Group measures goodwill at the acquisition date as:

·      the fair value of the consideration transferred; plus

 

·      the recognised amount of any non-controlling interests in the acquiree; plus

 

·      the fair value of the existing equity interest in the acquiree; less

 

·      the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed.

When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss.

Costs related to the acquisition, other than those associated with the issue of debt or equity securities, are expensed as incurred.

 

2.7  Intangible assets

 

Goodwill

Goodwill is stated at cost less any accumulated impairment losses. This represents Goodwill in the business as a whole and this is not amortised but is tested annually for impairment.

Research and development

Expenditure on development activities is capitalised if the product or process is technically and commercially feasible and the Group intends and has the technical ability and sufficient resources to complete development, future economic benefits are probable and if the Group can measure reliably the expenditure attributable to the intangible asset during its development. Development activities involve a plan or design for the production of new or substantially improved products or processes. The expenditure capitalised includes the cost of materials, direct labour and an appropriate proportion of overheads. Capitalised development expenditure is stated at cost less accumulated amortisation and less accumulated impairment losses. Research and other development expenditure is expensed as incurred.

Other intangible assets

Expenditure on internally generated goodwill and brands is recognised in the income statement as an expense as incurred.

Other intangible assets that are acquired by the Group are stated at cost less accumulated amortisation and less accumulated impairment losses.

  

Amortisation

Amortisation is charged to the profit or loss on a straight-line basis over the estimated useful lives of intangible assets unless such lives are indefinite. Intangible assets with an indefinite useful life and goodwill are systematically tested for impairment at each reporting date. Other intangible assets are amortised from the date they are available for use. The estimated useful lives are as follows:

·	Website development	3 - 5 years
·	Capitalised IT development costs	3 - 5 years
·	Acquired intangibles (proprietary software)	10 years
·	Domains	10 years

 

2.8  Investments

 

Investments in subsidiaries are held at cost, less any provision for impairment

 

2.9  Inventories

 

Inventories are stated at the lower of cost and net realisable value. Cost is based on the first-in first-out principle. The cost of inventories includes the average cost of purchase and other costs, such as inbound delivery and direct labour, in bringing them to their existing location and condition.

 

2.10  Impairment of non-financial assets excluding inventories and deferred tax assets

 

The carrying amounts of the Group's non-financial assets, other than inventories and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset's recoverable amount is estimated. For goodwill, and intangible assets that have indefinite useful lives or that are not yet available for use, the recoverable amount is estimated each year at the same time.

The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the "cash-generating unit"). For the purpose of impairment testing, goodwill is allocated to a single cash-generating unit, or ("CGU"), being the Group as a whole reflecting the lowest level  at which the business is monitored for internal reporting purposes.

An impairment loss is recognised if the carrying amount of an asset or its CGU exceeds its estimated recoverable amount. Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of the CGU are allocated first to reduce the carrying amount of any goodwill allocated to the units, and then to reduce the carrying amounts of the other assets in the unit (group of units) on a pro rata basis.

An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

 

2.11     Employee benefits

 

Defined contribution plans

A defined contribution plan is a post-employment benefit plan under which the Group pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution pension plans are recognised as an expense in profit or loss in the periods during which services are rendered by employees.

 

Short-term benefits

Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognised for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.

 

Share based payments

Share-based payment arrangements in which the Group receives goods or services as consideration for its own equity instruments are accounted for as equity-settled share-based payment transactions, regardless of how the equity instruments are obtained by the Company.

The grant date fair value of share-based payments awards granted to employees is recognised as an employee expense, with a corresponding increase in equity, over the period in which the employees become unconditionally entitled to the awards. The fair value of the awards granted is measured using Monte Carlo option pricing model, taking into account the terms and conditions upon which the awards were granted. The amount recognised as an expense is adjusted to reflect the actual number of awards for which the related service and non-market vesting conditions are expected to be met, such that the amount ultimately recognised as an expense is based on the number of awards that do meet the related service and non-market performance conditions at the vesting date. See note 24 for details of employee share options incentive plans operated by the Group.

 

2.12     Provisions

 

A provision is recognised in the statement of financial position when the Group has a present legal or constructive obligation as a result of a past event, that can be reliably measured and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre- tax rate that reflects risks specific to the liability.

 

2.13     Revenue

 

Revenue is income generated from the sale or rental of goods in the ordinary course of the Group's business activities. In accordance with IFRS 15, revenue is recognised when any performance obligations in a contract with a customer has been satisfied.

The Group's revenues are derived from the supply of goods (technology, media and books) and the rental of mobile phones to customers.

Sale of goods

Revenue represents the fair value of amounts receivable for goods and is stated net of discounts, value added taxes and returns. The Group does not operate any loyalty programmes. The supply of goods contains a single performance obligation with the customer to deliver the goods and revenue is recognised on dispatch of goods to the customer. For goods sold direct to consumers, payment is usually received at the point of sale. For goods sold via wholesale channels, a sales invoice is raised on dispatch.

Revenues for goods and services are recognised on despatch to the customer instead of delivery to the customer for practical reasons.

 

Rental of devices

The Group also earns rental income on devices rented to customers over a fixed term. The ownership of  the device does not pass to the customer at the end of the contract term and there is no option to purchase the device at any point during the contract term. Rental payments are received on a monthly basis and early termination charges are payable if the contract is terminated before the end of the term by the customer.

The contracts for the rental of devices are classified as operating leases in accordance with IFRS 16 'Leases'.  The Group recognises lease payments received under operating leases as income on a straight-line basis over the lease term. Early termination charges are recognised as income in the period in which the contract is terminated.

 

2.14     Financial expense

 

Financial expense includes interest payable and finance charges on shares classified as liabilities recognised in profit or loss using the effective interest method.

 

2.15     Taxation

 

Tax on the profit or loss for the year comprises current and deferred tax. Tax is recognised in the income statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.

Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.

Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: the initial recognition of goodwill; the initial recognition of assets or liabilities that affect neither accounting nor taxable profit other than in a business combination, and differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the reporting date.

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilised. Deferred tax assets and liabilities are offset where there is a legally enforceable right to offset current tax assets and liabilities and where the deferred tax balances relate to the same taxation authority.

 

2.16     Leases

 

At the commencement date of the lease, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

Recognition and measurement

At commencement or on modification of a contract that contains a lease component, along with one or more other lease or non-lease components, the Group accounts for each lease component separately from the non- lease components. The Group allocates the consideration in the contract to each lease component on the basis of its relative stand-alone price and the aggregate stand-alone price of the non-lease components.

The Group recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use assets comprise the initial measurement of the corresponding lease liability, lease payments made at or before the commencement day, less any lease incentives received and any initial direct costs. They are subsequently measured at cost less accumulated depreciation and impairment losses.

The right-of-use asset is depreciated using the straight-line method from the commencement date to the end of the lease term, unless the lease transfers ownership of the underlying asset to the Group by the end of the lease term or the cost of the right-of-use asset reflects that the Group will exercise a purchase option. In that case, the right-of-use asset will be depreciated over the useful life of the underlying asset, which is determined on the same basis as those of property and equipment. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group's incremental borrowing rate. The Group has applied the incremental borrowing rate for calculating the lease liability of 5%. The incremental borrowing rate is the rate of interest that the Group would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value to the right-of-use assets in a similar economic environment. The Group determines its incremental borrowing rate with reference to its existing and historical cost of borrowing adjusted for the term and security against such borrowings.

Lease payments included in the measurement of the lease liability comprise the following:

·      fixed payments, including in-substance fixed payments;

 

·      variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date

 

·      amounts expected to be payable under a residual value guarantee; and

 

·      the exercise price under a purchase option that the Group is reasonably certain to exercise,

 

·      lease payments in an optional renewal period if the Group is reasonably certain to exercise an extension option, and

 

·      penalties for early termination of a lease unless the Group is reasonably certain not to terminate early.

The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, there is a change in the Group's estimate of the amount expected to be payable under a residual value guarantee, if the Group changes its assessment of whether it will exercise a purchase, extension or termination option or if there is a revised in- substance fixed lease payment.

When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, to the extent that the right-of-use asset is reduced to nil, with any further adjustment required from the remeasurement being recorded in profit or loss.

The Group presents right-of-use assets in 'property, plant and equipment' and lease liabilities on the face of the statement of financial position. The Group applies IAS 36 to determine whether a right-of-use asset is impaired and accounts for any identified impairment loss as described in the 'property, plant and equipment' policy.

Short-term leases and leases of low-value assets

The Group has elected not to recognise right-of-use assets and lease liabilities for lease of low-value assets and short-term leases. The Group recognises the lease payments associated with these leases as an expense on a straight-line basis over the lease term.

 

3.1  Significant accounting judgements and estimates

 

Judgements made by the Directors, in the application of these accounting policies that have significant effect on the financial statements and estimates with a significant risk of material adjustment in the next year are discussed below.

Key sources of estimation uncertainty

·      The Group makes an estimate of the useful economic life of property, plant, equipment and intangible assets. When assessing the useful economic life management considers expected usage of the assets; technical, technological, commercial and other types of obsolescence; changes in the market demand for the products related to the assets; the level of maintenance expenditure required to maintain the assets' operating capability and whether the assets' useful life is dependent on the useful life of other assets of the entity. See further details in note 14 and 15.

 

·      Impairment of assets - in testing for impairment of investments, goodwill and other intangible assets, management have made   certain assumptions concerning the future development of the business that are consistent with its annual budget and forecasts into perpetuity. Should these assumptions regarding the discount rate or growth in the profitability be unfounded then it is possible that investments and other assets included in the statement of financial position could be impaired. See further details in note 15.

 

·      Stock provisioning - the Group carries significant amounts of stock against which there are provisions for slow moving lines. The provisioning policies require a degree of judgement and the use of estimates around future sales based on the historical demand for product lines. In addition, management make use of this historical sales data regarding selling price of items in order to ensure that inventories are valued at the lower of cost and net realisable value. Inventories at the year-end were valued at £8,019,000 (Year ended 30 November 2020: £6,835,000) which included a provision for slow moving lines of £529,000 (Year ended 30 November 2020: £871,000).

 

·      Valuation of employee share options - the valuation of employee share options is inherently subjective as it involves a number of inputs which are not market observable. See further details in note 24.

 

Critical accounting judgements in applying the Group's accounting policies

 Certain critical accounting judgements (apart from those involving estimations included above) in applying the Group's accounting policies are described below.

 

·      Capitalisation of website and IT development costs - judgement is applied to assess whether the criteria for capitalisation of costs is met.

 

3.2  New accounting standards and interpretations issued but not yet effective

 

The following Adopted IFRSs have been issued but have not been applied in these financial statements. Their adoption is not expected to have a material effect on the financial statements unless otherwise indicated: 

·      Amendments to IFRS 9, IAS 39, IFRS 7 and IFRS 16: Interest Rate Benchmark Reform - Phase 2 (effective date 1 January 2021).

·      Amendments to IFRS 16: Covid-19-related Rent Concessions beyond 30 June 2021 (effective date 1 April 2021).

·      Amendments to IAS 37: Onerous Contracts-Cost of Fulfilling a Contract (effective 1 January 2022).

·      Amendments to References to the Conceptual Framework in IFRS 3 (effective 1 January 2022).

·      Amendments to IAS 16: Property, Plant and Equipment-Proceeds before Intended Use (effective 1 January 2022).

·      Annual Improvements to IFRS Standards 2018-2020 (effective 1 January 2022).

·      IFRS 17 Insurance Contracts (effective 1 January 2023).

·      Amendments to IAS 8: Definition of Accounting Estimates (effective 1 January 2023).

·      Amendments to IAS 1 and IFRS Practice Statement 2: Disclosures of Accounting Policies (effective 1 January 2023).

·      Amendments to IAS 12: Deferred Tax related to Assets and Liabilities arising from a Single Transaction (effective 1 January 2023).

·      Amendments to IAS 1 Presentation of Financial Statements: Classification of Liabilities as Current or Non-current and                     Classification of Liabilities as Current or Non-current (effective date to be confirmed).

 

 

4.              Segmental reporting

 

The Chief Operating Decision Maker (CODM) has been determined to be the Chief Executive Officer, with support from the Board. Information reported to the Chief Executive Officer for the purposes of resource allocation and assessment of segment performance is focused on product categories. The principal product categories and the Group's reportable segments under IFRS 8 are Technology, Media and Books.

 

An analysis of the results for the period by reportable segment is as follows:

 

Year ended 30 November 2021		Technology		Media	Books	Total
	Outright sales	Rental income	Total
	£000	£000	£000	£000	£000	£000
Revenue	84,245	1,809	86,054	50,715	8,736	145,506
Gross profit	19,976	1,311	21,284	19,673	3,338	44,295
Processing wages	(3,988)	-	(3,988)	(7,423)	(802)	(12,213)
Contribution after direct labour	15,985	1,311	17,296	12,251	2,536	32,082
Trading Margin (%)	32.5	100.0	33.9	80.3	90.0	53.4
Gross margin	23.7	72.4	24.7	38.8	38.2	30.4

Contracted rental income outstanding at the year ended 30 November 2021 amounted to £1,864,805 (Year ended 30 November 2020: £3,000).

 

Year ended 30 November 2020		Technology		Media	Books	Total
	Outright sales	Rental income	Total
	£000	£000	£000	£000	£000	£000
Revenue	83,491	5	83,496	58,848	11,006	153,350
Gross profit	19,363	4	19,367	21,016	4,401	44,784
Processing wages	(3,660)	-	(3,660)	(7,132)	(861)	(11,653)
Contribution after direct labour	15,703	4	15,707	13,884	3,540	33,131
Trading Margin (%)	31.9	100.0	31.9	78.2	88.3	53.7
Gross margin	23.2	80.0	23.2	35.7	40.0	29.2

     

5.              Revenue

 

Disaggregation of revenue

An analysis of revenue by geographical market is given below:

 

	Year ended 30 November 2021 £000	Year ended 30 November 2020 £000
United Kingdom	108,005	107,770
Within the European Community other than United Kingdom	4,225	6,076
United States of America	29,274	33,267
Outside the European Community (excluding the USA)	4,002	6,237
TOTAL	145,506	153,350

 

An analysis of revenue by country of origination is given below:

	Year ended 30 November 2021 £000	Year ended 30 November 2020 £000
United Kingdom	115,403	119,082
United States of America	30,103	34,268
TOTAL	145,506	153,350

 

Due to the nature of the Group's business, it is not materially affected by seasonal or cyclical trading.

 

6.              Other non-underlying items	Year ended	Year ended
	30 November 2021 £000	30 November 2020 £000
IPO related costs	3,998	220
Other non-underlying costs	623	1,063
Total	4,621	1,282

 

IPO related expenditure relates to costs incurred in relation to admitting musicMagpie plc onto the Alternative Investment Market ("AIM") on 22 April 2021. Other non-underlying costs relate to non-recurring redundancy, additional COVID related expenditure costs and non-executive monitoring fees.

 

7.  7.   Operating (loss)/profit   included in the (loss)/profit are the following	Year ended 30 November 2021 £000	Year ended 30 November 2020 £000
Amortisation of intangible assets	1,517	1,261
Depreciation of property, plant & equipment:
Owned assets	1,130	671
Right-of-use assets	627	629
Impairment of property, plant and equipment	410	-
Loss on disposal of property, plant and equipment	12	-
Auditor's remuneration:
Audit of these financial statements*	145	85
Other assurance services	205	-
Other services in relation to taxation	-	13
* £15,000 (period ended 30 November 2020: £10,000) related to the audit of the company.
8. Remuneration of directors
	Year ended	Year ended
	30 November 2021	30 November 2020
Short term benefits	£000	£000
Directors' emoluments	626		466
Employers pension contributions	2		-
Amounts paid to third parties in respect of directors' services	10		25
Total	638		491

 

The aggregate of emoluments of the highest paid director were £326,000 (period ended 30 November 2020: £219,000). Pension contributions paid on his behalf were £2,000 (period ended 30 November 2020: £nil).

Information on Directors' remuneration for the year ended 30 November 2021 is set out in the Remuneration Committee Report of the Annual Report. This discloses the amounts paid to the Directors for qualifying services provided to the Company from the IPO. Note 8 includes these amounts combined with amounts paid to the directors for services provided to former parent company (Entertainment Magpie Group Limited) prior to that date. The comparative information relates to directors' remuneration of the former parent company.

 

9.   Staff numbers

The average number of persons employed by the Group (including directors) during each financial period, analysed by category, was as follows:

 

	Group            2021	Group  2020	Company 2021	Company 2020
Office and administration	198	159	11	-
Warehouse	449	459	-	-
Total	647	618	11	-
The aggregate payroll costs of these persons were as follows:
	Group  2021     £000	Group             2020             £000	Company                2021                £000	Company                2020                £000
Wages and salaries	18,083	16,337	1,027	-
Social security costs	1,188	1,256	164	-
Other pension costs	317	165	5	-
Equity-settled share-based payments (see note 24)	17,379	381	5,908	-
Total	36,967	18,139	7104	-

 

In addition to the above payroll costs, a further £2,040,000 (Year ended 30 November 2020: £869,000) has been capitalised as they relate to website and IT development costs.

Included in the above wages and salaries costs are temporary staff who were paid £3,024,000 during the year (Year ended 30 November 2020: £2,846,000).

 

10. Financial expense	Year ended	Year ended
	30 November 2021	30 November 2020
	£000	£000
Interest expense on loan notes	176	421
Interest on bank and other loans	209	1,130
Interest expense on lease liabilities	107	197
Other non-underlying financial expense	438	605
Bank interest and similar charges	369	318
Interest expense on preference shares classified as liabilities	-	20
	1,299	2,691

 

 

 

11.          Taxation

	Year ended 30 November 2021	Year ended 30 November 2020
	£000	£000
Current tax expense
UK corporation tax on profits for the period	636	54
Adjustments in respect of previous periods	19	-
Total current tax expense	655	54
Deferred tax credit
Origination and reversal of timing differences	(2,372)	(1,666)
Adjustment in respect of previous periods	(18)	-
Effect of changes in tax rates	(959)	-
Total deferred tax credit	(3,349)	(1,666)
Total tax credit in the income statement	(2,694)	(1,612)
Equity items
Current tax	(439)	-
Deferred tax current year charge/(credit)	(318)	-
Total	(757)	-

Reconciliation of effective tax rate

	Year ended 30 November 2021	Year ended 30 November 2020
	£000	£000
(Loss) / profit before tax	(14,819)	6,958
Tax using the UK corporation tax rate of 19% (2020: 19%)	(2,816)	1,322
Other tax adjustments, reliefs and transfers	923	(164)
Adjustments in respect of prior periods - current tax	(52)	-
Tax rate changes	(959)	-
Share options	563	-
Deferred tax not recognised	(124)	-
Tax losses recognised in the period	(229)	(1,104)
Deferred tax recognised	-	(1,666)
Total tax credit in the income statement	(2,694)	(1,612)

 

12.  Deferred tax

	Tax losses £000	Decelerated capital allowances £000	Share options	Others £000	Total £000
At 30 November 2020	926	512	-	228	1,666
Credited/(debited) to profit or loss	431	(410)	3,417	(89)	3,667
Credited/(debited) to equity	-	-	318	-	318
At 30 November 2021	1,357	102	3,735	139	5,333

 

In the budget on 3 March 2021, the UK Government announced an increase in the main UK corporation tax rate from 19% to 25% with effect from 1 April 2023. The change in rate was substantively enacted on 24 May 2021.

 

The deferred tax asset in respect of carried forward losses and tangible fixed asset timing differences is calculated at 25% (2020 19%) based on the rate substantively enacted at the reporting date. Deferred tax assets and liabilities are offset where there is a legally enforceable right to offset

 

.13.   Earnings per share	note	Year ended 30 November 2021 £000	Year ended 30 November 2020 £000
(Loss)/profit for the period		(12,124)	8,570
		Number	Number
Weighted average number of shares - basic	1 , 2 , 3	95,680,242	90,804,098
Diluted number of shares		95,680,242	90,979,098
		Pence	Pence
Basic (loss)/earnings per share (pence)		(12.67)	9.44
Diluted (loss)/earnings per share (pence)		(12.67)	9.42
Notes:

1.     Additional ordinary shares issued as a result of the share split conducted in 2021 (see note 26), have been incorporated in the earnings per share calculation in full without any time apportionment.

2.   The adjustments made in calculating the weighted average number of ordinary and potential ordinary shares have been increased to reflect the share split in full without any time apportionment in the comparative period.

3.    The above weighted average number of shares excludes shares held by the Employee Benefit Trust in respect of share options outstanding and exercisable at the end of the year. See note 24 for further details. No adjustment has been made to the diluted weighted average number of shares for shares options as these have an antidilutive effect.

Adjusted earnings per share is disclosed in Note 28 (Alternative Performance Measures) to show performance undistorted by adjusting items and is therefore considered to show the underlying performance of the Group.

 

14. Property, plant and equipment	Right of use lease assets	Plant and machinery	Motor Vehicles	Fixtures and fittings	Rental assets	Computer and office equipment	Total
	£000	£000	£000	£000	£000	£000	£000
Cost
Balance at 1 December 2019	4,535	3,107	267	2,423	-	3,764	14,096
Additions	-	10	18	131	63	237	459
Effect of movements in foreign currency	-	-	-	-	-	-	-
Disposals	-	-	-	-	-	-	-
Balance at 30 November 2020	4,535	3,117	285	2,554	63	4,001	14,555
Additions	-	339	(0)	113	3,657	295	4,404
Effect of movements in foreign currency	3	1	-	1	-	1	6
Impairment	-	-	-	-	(462)	-	(462)
Disposals	-	-	(285)	-	0	-	(285)
Balance at 30 November 2021	4,538	3,457	-	2,668	3,258	4,297	18,218
Depreciation
Balance at 1 December 2019	1,573	2,377	255	1,662	-	3,500	9,367
Charge for the period	629	200	18	219	1	233	1,300
Effect of movements in foreign currency	-	-	-	-	-	-	-
Disposals	-	-	-	-	-	-	-
Balance at 30 November 2020	2,202	2,577	273	1,881	1	3,733	10,667
Charge for the period	627	297	-	196	471	164	1,755
Effect of movements in foreign currency	-	1	-	1	-	-	2
Impairment	-	-	-	-	(52)	-	(52)
Disposals	-	-	(273)	-	-	-	(273)
Balance at 30 November 2021	2,829	2,875	-	2,078	420	3,897	12,099
Net book value
At 30 November 2021	1,709	582	-	590	2,838	400	6,118
At 30 November 2020	2,333	540	12	673	62	268	3,888
Company

The Company has no tangible fixed assets.

 

15.   Intangible assets and goodwill

	Goodwill	Website development	IT development	Proprietary software	Domains	Total
	£000	£000	£000	£000	£000	£000
Cost Balance at 1 December 2019	4,848	1,083	4,865	3,000	53	13,849
Additions	-	181	1,290	-	-	1,471
Disposals	-	-	-	-	-	-
Balance at 30 November 2020	4,848	1,264	6,155	3,000	53	15,320
Additions	-	195	2,643	-	-	2,837
Disposals	-	-	-	-	-	-
Balance at 30 November 2021	4,848	1,459	8,798	3,000	53	18,157
Amortisation Balance at 1 December 2019	-	977	3,523	1,182	19	5,701
Charge for the period	-	77	879	300	5	1,261
Disposals	-	-	-	-	-	-
Balance at 30 November 2020	-	1,054	4,402	1,482	24	6,962
Charge for the period	-	79	1,132	300	5	1,517
Disposals	-	-	-	-	-	-
Balance at 30 November 2021	-	1,133	5,534	1,782	29	8,479
Net book value At 30 November 2021	4,848	325	3,263	1,218	24	9,679
At 30 November 2020	4,848	210	1,753	1,518	29	8,358

 

All amortisation of intangible assets is charged to the consolidated statement of comprehensive income and is included within operating expenses (see note 7).

 

Company

The Company has no intangible fixed assets.