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MusicMagpie
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=== Revenue: Mid-single-digit growth guidance === As highlighted previously, management’s estimates of market growth rates for the product categories would indicate a weighted average market growth profile of 4–6%, using FY20’s pre-rental business mix, increasing as Technology’s importance to the group grows. As rental income grows, it should be incremental to group revenue growth. Its forecast of c 6–8% revenue growth in FY22–24 is consistent with management’s medium-term guidance. Edison forecasts Technology revenue growth of c 20% to £103m in FY22, 15% growth to £119m in FY23 and further 15% growth to £136m in FY24, to c 89% of total group revenue in the final year. For outright sales, Edison assumes 15% growth in FY22 (helped by the rollout of SMARTDrop kiosks and the launch of corporate recycling) and 10% growth thereafter, lower than the anticipated mid-teens market growth rates indicated earlier, recognising the substitution effect of new rentals. For rental income, Edison assumes the number of active subscribers grows from 13.5k at the end of FY21 and 24k at the end of H122, to c 36k by end FY22, c 62k by FY23, and c 89k by end FY24 that is, net new additions of c 23k, 25k and 27k pa, respectively. The growing number of active subscribers at the period ends reflects an increase in gross customer additions per day to 80, 100 and 120 respectively and a modest annual reduction in the rate of defaults of new customers in the first year (starting at 10% in FY22) and churning customers after the first year (starting at 25% in FY22). Edison assumes revenue per active subscriber per month of £20 in FY22, which increases by 3% thereafter. These assumptions lead to forecasts for rental income of £6m in FY22 (+230% y-o-y), £12m in FY23 (+102% y-o-y), and £19m in FY24 (+58% y-o-y). Edison forecasts revenue declines for Media of 12% to £45m in FY22, and declines of 10% in both FY23 (to £40.2m) and FY24 (to £36.2m). Its FY22 forecast represents a decline of c 2% versus H221’s revenue of £22.7m when annualised. For Books Edison forecasts a revenue decline of c 18% in FY22 to £7m, which is equivalent to H221’s revenue of £3.6m on an annualised basis, and thereafter assume modest growth of c 1% pa. It represents c 5% of its FY22 group revenue forecast and will become a gradually less significant part of the group as Technology increases. Management believes there is still good money to be made in Books and Media well into the future whilst recognising the structural challenges, given the variable operating costs and ability to transfer resources to focus on the higher growth offered by Technology.
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