Revenue meets forecasts but earnings set to miss for Focusrite

Audio hardware and technology company Focusrite said in a trading update on Wednesday that underlying demand for its products remained strong in the year just ended, with registrations for its content creation and audio interface solutions continuing at rates experienced ahead of the pandemic.

The AIM-traded firm said it was also seeing “ongoing strength” in the live and installed sound markets.

As a result, it said it was expecting revenues for the 12 months ended 31 August to be in line with its expectations, at around £180m, up from £173.9m in the prior year.

As it previously reported, there were a number of “global, industry-wide factors” driving up costs, including scarcity of key semiconductors and other components, and high freight costs.

Focusrite said that was putting downward pressure on its gross margins, which was being partially offset by price increases which it expected to continue into the new financial year.

Additionally, reflecting the increased scale of the group including recent acquisitions, the firm said it had continued to invest in its systems, people and direct sales channels in order to drive growth.

As a result, Focusrite said it now expected EBITDA for the 2022 financial year to be “slightly below” the board's expectations.

The directors said cash generation remained a priority, adding that as at 31 August, the company had a net cash balance of nil, down from £17.6m year-on-year.

Focusrite said that reflected the acquisition of Linea Research in May for £12.1m, as well as the planned rebuilding of inventory from the “extremely low levels” at the end of last year, including inventory of both finished goods and scarce components.

“The group continues to see increased demand for solutions that enable the creation and playback of audio content for music, post-production, podcasting, and streaming compared to pre-pandemic levels,” said chief executive officer Tim Carroll.

“We now have nine established brands covering a much broader customer and geographic footprint than in previous years.

“In addition, our acquisitions continue to integrate well.”

Overall, Carroll said the group's revenue was now running at about twice the level it was in the last financial year before the Covid-19 pandemic, adding that current customer registrations remained “robust”.

“We are optimistic about our future prospects, but mindful of the current global economic and political challenges and uncertainties, as well as the ongoing cost pressures in the supply chain.

“Over this past financial year, we have successfully built back our inventory position to provide greater resilience against supply chain volatility and ensure we are able to adequately meet demand as we head into the key holiday season.”

Focusrite said it would announce its final results for the year ended 31 August in late November.

At 1316 BST, shares in Focusrite were down 8.55% at 731.6p.

Reporting by Josh White at Sharecast.com.