Pandemic and acquisitions drive huge growth for Focusrite

Audio hardware and technology company Focusrite reported revenue growth of 34% in its final results on Tuesday, to £173.9m, which it put down to continued growth of its core customer base.

The AIM-traded firm said Focusrite products were up 24% to £124.4m, driven primarily by the third generation of its ‘Scarlett’ hardware range.

Revenue for Novation, meanwhile, was ahead 14% as the new generations of ‘Circuit’ and ‘Launchkey’ products gained traction, while Martin Audio grew 23% on an organic constant currency basis, returning to pre-Covid-19 levels at the end of the year.

Focusrite reported growth across all of its major geographic regions, with North America up 47%, Europe, the Middle East and Africa (EMEA) ahead 23%, and the rest-of-world geography growing by 32%.

The company said its gross margin expanded by 2.4 percentage points to 48.4% for the year ended 31 August, as its adjusted EBITDA was 67% firmer at £47.5m.

Its adjusted operating profit was 80% firmer at £41.4m, while basic earnings per share were up 587% and adjusted diluted earnings per share rose 75%, to 48.8p and 57.5p, respectively.

Focusrite said its year-end net cash balance stood at £17.6m, up from £3.3m year-on-year, as the firm repaid its debt drawdown of $10m for Sequential in four months.

The board recommended a final dividend of 3.7p, resulting in a total distribution of 5.2p for the year, which was up 24% on the prior 12 months.

“We are delighted with these outstanding results, having overcome disruption to component suppliers, factories, logistics and changes to working practices,” said founder and executive chairman Phil Dudderidge.

“With so many lockdowns around the world, musicians, podcasters, and other creatives in audio and sound have been investing in Focusrite interfaces and 'studio packs' in record numbers while we work hard to meet that challenging demand.”

Dudderidge said a “major global take-up” in home recording also resulted in “significant growth” in demand for ‘ADAM Audio’ monitor loudspeakers and ‘Novation’ products.

“In the professional audio industry, renewed demand from the live sound market promises further growth in 2022 and 2023 as sound service companies reinvest in the new generation of Martin Audio event systems.”

On the operational front, Focusrite completed the acquisition of Sequential in April for $20m, net of acquired cash, and launched a new brand, ‘Optimal Audio’, in the commercial audio market.

It said it had increased investment in people, technology, IT, management systems and tools, and launched 13 new hardware products within Focusrite, as well as rolling out a number of software and firmware updates.

“Since the year end, demand for the vast majority of our group products has remained strong, and those sectors negatively impacted by Covid-19 are showing ongoing signs of recovery,” said chief executive officer Tim Carroll.

“All the group's acquisitions are settling in well, numerous cross-business initiatives have already been completed and many more are slated to occur later this year, the benefit of which we expect in the latter part of the 2022 financial year and into 2023.

“Our roadmap across all the brands remains robust, with many new product introductions planned to occur later in 2022.”

Accordingly, Carroll said the company was now “cautiously optimistic” about the prospects for modest revenue growth in the current year.

“Our growth strategy continues to pay off; providing focus and clarity on where we should invest and deploy our resources.

“This focus has been a crucial element in enabling us to navigate through the myriad of macroeconomic and pandemic related issues we have encountered across this past year.

“Whilst there remains considerable opportunity for operational leverage across the Group as revenue increases, in 2022 operating costs will increase to reflect current tightness in supply chains, travel resuming and our intention to increase investment, where appropriate, in order to fuel future growth in the business.”

At 1051 GMT, shares in Focusrite were up 7.24% at 1,608.55p.