Focusrite revenue falls amid first-half weakness

The AIM-traded firm put the fall down to an organic constant currency decrease of 19%, with market and channel weakness impacting the Focusrite and Novation brands, partially offset by strong double-digit growth in its remaining brands.

Revenue from content creation brands, including Focusrite and Novation, was down 16.1% at £67.4m for the six months ended 28 February, impacted by surplus channel inventory levels, a softening in the market due to global macroeconomic issues, and a planned reduction of inventory in advance of upcoming product releases.

However, ADAM and Sequential showed strong growth, with prize-winning product launches helped by weaker prior-year comparators.

Revenue from audio reproduction brands increased 50.7% to £18.8m, benefiting from a resurgence in live events and a strong performance from Linea Research, which was acquired in March last year.

The Europe, Middle East and Africa (EMEA) geography saw growth of 3.4%, while North America was impacted by high levels of inventory in the channel, and the rest-of-world by market weakness in the Asia-Pacific region.

Focusrite also acquired Sonnox on 19 December, for £7.2m in cash, which had performed to plan and was contributing positively to the group.

The gross margin for the period was 47.1%, which was 0.5 percentage points higher than the previous year, and three points higher than the second half of the 2022 financial year.

Freight costs reduced significantly, with some of that benefit reinvested in promotions to support sales.

Adjusted EBITDA totalled £18.1m, down from £22.2m year-on-year, reflecting lower sales, notwithstanding stronger gross margins and strong cost control.

Operating profit came in at £11.5m, impacted by increased amortisation from acquisitions and new product launches.

The company launched 21 new products, including a new Sequential synthesiser and a range of Martin speakers, all expected to contribute to its second-half performance.

Net debt was £13.2m, swinging from net cash of £18m year-on-year, as a result of the need to fund acquisitions and support higher inventory levels during a period of key product transitions.

The board announced an interim dividend of 2.1p per share, up 13.5% from the 1.85p first-half distribution in 2022.

Foucsrite said its outlook was positive, with inventory in the channel beginning to improve and continued strength in a buoyant live sound market.

The company said revenue growth in the second half was set to be in line with expectations, driven by a number of planned key product introductions alongside elevated costs due to promotions for existing products.

“Focusrite is a much bigger business since pre-Covid, with 11 brands operating globally across different, but complementary, markets,” said chief executive officer Tim Carroll.

“This past half-year has showcased just how well the group's diversification strategy has paid off, giving us increased resilience in the face of global and industry wide headwinds.

“Revenue in our content creation division has been impacted by industry-wide surplus channel inventory and softening in demand along with a planned channel inventory reduction ahead of a large product release programme coming in the second half.”

Carroll said the company’s audio reproduction division, as expected, had experienced strong growth and was now ahead of pre-pandemic levels.

“Despite challenging markets, the group is still showing material growth over pre-pandemic levels and has retained our strong market share, underscored by rock-solid brand positions.”

At 1253 BST, shares in Focusrite were down 10.87% at 512.5p.

Reporting by Josh White for Sharecast.com.