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Sweet music for Focusrite shareholders

The audio products group is going from strength to strength as consumer demand widens beyond the professional sphere
May 3, 2017

Judging by the share price trajectory, half-year returns for Focusrite (TUNE) obviously played well with investors as the audio products group nearly doubled net profits to £4.1m while driving the cash balance up by two-thirds since its August year-end, to £9.4m. The cash surge was helped along by a cash conversion rate of 101 per cent, with effective management in this area "a key focus for the executive team". The net effect of sterling's decline has been neutral, with dollar-denominated production costs offset by the increased value of dollar and euro-denominated revenues.

IC TIP: Buy at 228p

The group continues to make inroads into the US market, where sales were up a quarter at constant currencies, driven by higher demand for its RedNet audio interface product range, an improved showing in the Novation segment and strengthening sales of the second generation of its Scarlett USB interface. Management notes the continued switch away from traditional retail outlets in favour of online channels, principally Amazon - a reflection of the growing take-up of the group's products by what might be termed 'recreational amateurs'; there's a lot of would-be Phil Spectors out there it would seem.

Edison expects adjusted pre-tax profits of £8m for the August 2017 year-end, giving rise to EPS of 12.1 (up from £7.7m and 11.8p in FY2016).

FOCUSRITE (TUNE)
ORD PRICE:228pMARKET VALUE:£132m
TOUCH:225-230p12-MONTH HIGH:236pLOW: 138p
DIVIDEND YIELD:0.9%PE RATIO:15
NET ASSET VALUE:49p*NET CASH:£9.4m

Half-year to 28 FebTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201625.92.44.00.65
201732.04.67.30.75
% change+24+89+83+15

Ex-div: 11 May

Payment: 9 Jun

*Includes intangible assets of £5.2m, or 9p a share