Half year results for the six months ended 28 February 2023
Focusrite plc, the global music and audio products company supplying hardware and software used by professional and amateur musicians and the entertainment industry, today announces its half year results for the six months ended 28 February 2023.
Commenting on the results, Tim Carroll CEO said:
"Focusrite plc is a much bigger business since pre-COVID with eleven brands operating globally across different, but complementary markets. 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. Pleasingly, our Audio Reproduction division, as anticipated, has experienced strong growth and is 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."
· Revenue decreased by 7.2% reflecting an organic constant currency5 decrease of 19.0%, with market and channel weakness impacting the Focusrite and Novation brands, partially offset by strong double digit growth in the remaining brands
o Content Creation brands revenue was down by 16.1% to £67.4 million (HY22: £80.4 million) with Focusrite and Novation impacted by surplus channel inventory levels and a some softening in the market due to global macroeconomic issues, together with a planned reduction of inventory in advance of upcoming product releases. ADAM and Sequential showing strong growth with prize winning product launches and are helped by weaker prior year comparators
o Audio Reproduction brands revenue is up by 50.7% to £18.8 million (HY22: £12.5 million) benefitting from a resurgence in live events and a strong performance from Linea Research, acquired in March 2022.
· Growth in EMEA region of 3.4% following ongoing changes to strengthen our routes to market. North America was impacted by high levels of inventory in the channel and ROW by market weakness in APAC
· Acquisition of Sonnox on 19 December 2022 for cash consideration of £7.2 million (net of cash acquired of £1.9 million) has performed to plan and is contributing positively to the Group
· Gross margin at 47.1% (HY22: 46.6%) is 0.5% points higher than HY22 and 3.0% points higher than H2 FY22. Freight costs have reduced significantly, with some of that benefit reinvested in promotions to support sales
· Adjusted1 EBITDA2 at £18.1 million, down from HY22 at £22.2 million, reflecting lower sales, notwithstanding stronger gross margins and strong cost control
· Operating profit of £11.5 million (HY22: £16.3 million) impacted by increased amortisation from acquisitions and new product launches
· Launch of 21 new products, including a new Sequential synthesiser and a range of Martin speakers all expected to contribute in the second half of this year
· Net debt3 of £13.2 million (HY22: net cash £18.0 million) has increased to fund acquisitions and to support higher inventory levels during a period of key product transitions
· Interim dividend of 2.1 pence, 13.5% growth compared to HY22 dividend of 1.85 pence
Trading since the half year has remained solid. The outlook for the Group is positive with inventory in the channel beginning to improve and continued strength in the buoyant live sound market. We anticipate revenue growth in the second half to be in line with expectations, driven by a number of planned key product introductions alongside elevated costs due to promotions for existing products. We continue to execute on our established and proven growth strategy combining organic growth with focussed M&A activity.
1 Adjusted for amortisation of acquired intangible assets, sale of trademark and other adjusting items detailed in note 4 to the Interim Statement
2 Comprising earnings adjusted for interest, taxation, depreciation and amortisation.
3 Net debt/cash defined as cash and cash equivalents, overdrafts and amounts drawn against the RCF including the costs of arranging the RCF
4 Restated to include the deferred tax credit arising on the amortisation of acquired intangibles, which was not previously included. See note 1.8 to the interim financial statements
5 Organic constant currency growth. This is calculated by comparing HY22 revenue to HY23 revenue adjusted for HY23 exchange rates and the impact of acquisitions.