Focusrite reports fall in full-year revenue, earnings

(Sharecast News) - Music and audio products company Focusrite reported an 11.2% decline in full-year revenue on Wednesday, to £158.5m, driven by weak demand in its content creation segment as the market continued to de-stock following the Covid-19 pandemic. The AIM-traded firm said adjusted EBITDA for the 12 months ended 31 August fell 34.6% to £25.2m, while operating profit dropped 76.5% to £5.7m.

It said the content creation segment, which includes products used by musicians and producers, saw a 19.1% revenue decline, or 17.4% on an organic constant currency basis.

Despite that, Focusrite retained its market leadership, with subsidiary ADAM Audio achieving revenue growth of 22.6%, or 25.5% on an organic constant currency basis.

In contrast, the audio reproduction division grew revenue by 14.9%, buoyed by strong demand for live events and new product launches in immersive audio technologies.

Gross margins declined by three percentage points to 44.5%, impacted by a previously reported write-down and sale of Vocaster stock, elevated freight costs, and increased promotional activity.

Adjusted operating profit fell 45.4% to £16.6m, with a £5.4m non-cash impairment of Sequential assets further affecting profitability, reflecting current difficulties in the premium synthesiser market.

Net debt rose to £12.5m from £1.3m year-on-year, as Focusrite invested in product development and acquisitions.

The company said it retained strong liquidity, supported by £50m in committed credit facilities, to fund ongoing operations and potential merger and acquisition opportunities.

During the year, Focusrite launched 35 new products and made 53 updates, including Novation's Launchkey MK4 and Sequential's TEO-5 synthesiser.

The acquisitions of Sheriff Technology and panLab further strengthened its position in immersive sound, which the board said was a growing segment.

Despite the earnings decline, Focusrite maintained its dividend at 6.6p per share.

"2024 presented both challenges and opportunities," said chief executive officer Tim Carroll.

"We experienced softness in the Content Creation market, primarily due to inflation impacting consumer confidence and channel de-stocking.

"However, we took proactive steps to address these issues and launched significant new products which will drive future growth when market conditions improve."

Carroll noted that within the content creation segment, the company's underlying end-user registrations were stable over the prior year, indicating ongoing robust demand for products across all channels.

"Our audio reproduction segment delivered strong results.

"Recent acquisitions, combined with a focus on innovative product development, have strengthened our audio reproduction division, driving notable growth despite the broader market conditions.

"The group has new product launches planned for the coming year, which will further strengthen our brand positioning."

Additionally, Tim Carroll said Focusrite had again demonstrated its ability to execute on a "proactive" merger and acquisition strategy, adding that it was continuing to "carefully consider" acquisitions to enhance earnings and expand its market potential, boost research and development capabilities, and add "both scale and dynamism" to the business.

"We remain mindful of the significant global economic and political challenges, as well as ongoing cost pressures, particularly in logistics and the supply chain.

"Consequently, we continue to manage costs carefully, whilst making appropriate investments, and focus on improving gross margins where there is the opportunity to do so.

"Trading in the first three months of the current financial period is in line with expectations."

At 1128 GMT, shares in Focusrite were up 3.86% at 269p.

Reporting by Josh White for Sharecast.com.