musicMagpie PLC (AIM:MMAG) shares have fallen 9% following annual results but house broker Shore Capital remains comfortable with its 2023 financial year forecasts for revenue and adjusted EBITDA which it plans to leave unchanged.
But higher interest costs reflecting the increased amount of loans on the balance sheet have led to the broker increasing its adjusted pre-tax loss forecast £0.8mln to £1.5mln.
Shore Capital assumes continuing demand for rental, "an arguably highly appropriate consumer offering given concerns around high cost of living" and sees related revenues growing from £5.3mln in 2022 to over £10mln by 2025.
“We believe rental will be a key driver of growth over the long term,” the broker commented.
The broker feels the company continues to lay the foundations for future profitability and believes the rental model will be a key element of that development.
“We continue to be impressed with the operational progress,” Shore said.
The comments followed full-year results to the year ended November 30, 2022, which showed a 14% fall in gross profit to £38.1mln from £44.4mln although losses before tax narrowed to £1.5mln from £14.8mln. Revenue was little changed at £145.3mln.
Active subscribers to device rental service increased to 30,500 at the year-end, up from 13,500 in 2021, and were 36,000 by the end of February 2023.
Consumer Technology revenue rose 12.2% to £96.6mln, but gross margin fell to 26.3% from 30.4%.
Shares were trading down 9% at 34p, above erlier lows of 29p.