Focusrite revenue, earnings fall in final results

Music and audio products company Focusrite reported a 2.9% decrease in revenue in its final results on Tuesday, to £178.5m.

The AIM-traded firm put the decline down to a 9.5% organic constant currency decrease in revenue, partly offset by acquisitions and foreign exchange translation benefits, all within a challenging market environment.

It said content creation revenue decreased 9.7% in the 12 months ended 31 August, although that represented an improvement over the first half, which saw a 16.1% decline.

The board said the latter half of the year saw Focusrite brands returning to growth.

Audio reproduction revenue meanwhile jumped 30.1% thanks to a robust supply chain and a resurgence in demand for live experiences.

Focusrite reported a gross margin increase of 2.2 percentage points, which it attributed to the normalisation of freight costs, although investments in promotions partially offset that to counteract cost-of-living challenges.

Adjusted EBITDA for the year stood at £38.6m, down 7.4% on lower sales and investments in the group’s infrastructure.

Operating profit slid 15.3% to £24.3m, mainly due to increased amortisation from product launches and the amortisation of acquired intangibles.

Focusrite said it launched 32 new products across all its brands during the year, including the fourth generation of its flagship Scarlett audio interface.

Additionally, the acquisition of Sonnox, a well-established software provider, was completed in December last year for a net cost of £7.2m, including £1.9m in cash acquired.

Regarding dividends, Focusrite recommended a final dividend of 4.5p, resulting in a total dividend of 6.6p for the year, up 10% compared to the prior year.

“Despite challenging macroeconomic conditions, our group has delivered a resilient performance, achieving revenue and profit figures in line with market expectations,” said chief executive officer Tim Carroll.

“With our existing portfolio, planned product launches throughout the coming year, streamlined go-to-market strategies, and shared back-office support structures, we are well-positioned to embrace the opportunities and challenges the new year presents.

“Current market conditions for our content creation division remain difficult and our revenue year to date has been impacted by a degree of sales channel destocking.”

However, Carroll said underlying demand for the company’s products, as evidenced by customer registrations, remained satisfactory, adding that performance in the audio reproduction division remained strong.

“Overall, at this early stage and as we head into our key holiday season, our expectations for the year remain unchanged.

“Whilst we remain mindful of the significant global economic and political challenges, as well as ongoing cost pressure in the supply chain, we have successfully built our inventory positions back to more normalised levels and have robust plans for future component supplies as well.”

With key new products launched towards the end of the 2023 financial year and more introductions planned for the year ahead, Tim Carroll said Focusrite was confident in the organic growth potential of its existing brands.

“Additionally, with the benefit of our cash generation, the group has demonstrated its ability to execute on our proactive merger and acquisition strategy, carefully considering acquisitions that not only enhance earnings but also expand our market potential, increase our research and development capabilities, and contribute both scale and dynamism to our business.

“We remain optimistic about our future prospects.”

At 1500 GMT, shares in Focusrite were down 4.8% at 452.2p.

Reporting by Josh White for Sharecast.com.