The CEO of musicMagpie has set out his vision for growing the venture he started from his garage to a £1bn market valuation, revealing that he is banking on a B2B push to drive future success.
The circular economy firm, which is best known for buying and selling used consumer electronics items (it claims to have paid out a total of over £325m to customers), floated on AIM last April with a valuation of £200m. Its share price slumped by 70 per cent in September following a profit warning (having already halved in March), with its market cap since recovering to a still relatively pallid £24m.
Now, founder and CEO Steve Oliver has opened up on how he plans to hit a ten-figure valuation by diversifying its revenue streams and moving deeper into the corporate market.
"I think we can get that to a £1bn market capitalisation - in fact, I know we can - if we do these things right," he told CRN.
£1bn plan
Originally focused on buying used DVDs and CDs, musicMagpie started off life in Oliver's garage in 2007.
The number of used DVDs it bought each day rocketed from 600 to 17,000 overnight in 2009 after money-saving pundit Martin Lewis plugged musicMagpie on The Lorraine Kelly Show, before its focus eventually switched to consumer electronics.
Diversifying from the consumer into the corporate space could represent the "biggest pivot of all" for musicMagpie, Oliver said, however.
Having launched a corporate recycling service aimed at IT managers in 2020, in October the firm unveiled ‘musicMagpie Circular', a subscription service allowing businesses to rent and manage Apple iPhones and iPads via subscriptions starting at £13 a month.
"This business has pivoted two, three, four times in a very major way in its 15 or 16-year life. We went from CDs and DVDs to consumer electronics; we went from being the world's biggest seller on eBay and Amazon to selling mostly on our own platform; and we went from selling just in the UK, to selling in the US," Oliver said.
"This could in a sense be the biggest pivot of all, where we start servicing corporates to the same extent that we're servicing consumers. We've just brought in some new senior resource to run musicMagpie Circular and we think it's got massive potential."
Subscription addiction
At the same time, the Stockport-based outfit is on a mission to add rental as a third major revenue stream alongside its buying and reselling activities, Oliver said.
It now has 30,500 subscribers, up 27 per cent since May, according to a full-year pre-close trading update issued on Wednesday morning. Revenues for its year to 30 November 2022 are set to come in roughly flat at £144.8m following "cautious consumer behaviour" during the summer and early Autumn. Trading in November beat expectations, the firm said, however.
Despite a dip in its share price in 2022, musicMagpie has a "clear, focused plan" to reach the £1bn valuation mark by improving both its profits and the multiple investors apply to that profit number, Oliver explained.
He pinpointed monthly subscription as the key to increasing the quality of musicMagpie's earnings in the long term and, in turn, raising its market valuation.
"If I do a monthly subscription, I replace that [one-off sale] with a month-one rental figure of, let's say, £20. And I lose money in that first month because of all the one-off processing costs.
"But after that I start to then make this monthly contribution. As we build that subscriber base, and if we can demonstrate a solid renewal rate, subscription value and sensible, manageable delinquency level, this starts to build a massive pyramid of high-quality, recurring revenue and EBITDA," he explained.
"To be blunt, it's been a bit frustrating at times that people have taken a very short-term view on this. It does involve sacrificing some short-term performance because I'm not selling an item today, I'm renting it. But I'm building something here that has got real medium- to long-term value."
Corporate catalyst
MusicMagpie is a "counter-cyclical business" because it services distressed consumers by giving them cash for old devices (a concept it promoted last summer with its 'Mount Recyclemore' giant e-waste sculpture - see full interview with Oliver carried out at the time, below), Oliver said.
But while consumers may use its services to raise cash, the corporate customers musicMagpie is now courting are more motivated by the sustainability benefits on offer, he added.
"Deloitte, who we service for all their devices across the UK, we can give them exact figures on the amount of e-waste that their recycling is saving, and the equivalent carbon saving. That's clearly very powerful to a corporate," he explained.
"And what's also very important to a corporate is the certified data wipe."
Already counting Softcat as a partner, Oliver said IT resellers and MSPs should see musicMagpie as a friend not a foe.
"I very much feel as though we're a partner, as they're not offering those circular services," he said.
"The whole issue of what to do with the used [device] is, frankly, a bit of an inconvenience. How do we act responsibly in dealing with the old one, whatever the category [of goods], when selling the new one. And if we can effectively help offer their customers a discount, which is what it is - ‘we'll give you £100 back when you buy a new one at £800 - that's really powerful."
Oliver set the £1bn valuation goal is partly in response to suggestions from well-meaning colleagues and friends that he would lack the motivation to continue growing the firm following its IPO.
"It was a huge statement to arrive on the public market, but a number of people said privately to me ‘is that the end of the story'? And I was like, 'no, absolutely not'. It's definitely not the last chapter of the book," he said.
