The financial faders on Focusrite’s (TUNE) corporate mixing desk all pushed higher in the year to August 2017. As we’ve come to expect of the Aim-traded audio products group, margins, constant-currency sales, cash flow and net cash all shot up in a period in which 10 products were launched and a global e-commerce website was established. To further torture (and mix) sound engineering metaphors, shareholders will need assurance that growth isn’t already turned up to 11.
Certainly, the year ended with a remarkably rosy balance sheet, as inventories dropped 27 per cent to £8.3m following rising sales of new products. For companies of Focusrite’s size, such favourable shifts in working capital sometimes suggest fortuitous or massaged timing, rather than good discipline. Offering evidence for the latter, chief financial officer Jeremy Wilson points to further improvements in working capital and cash since the year-end, and rigorous management of distributor relationships.
Equally challenging, from a relationship perspective, is the creation of a loyal customer base. Reigniting the ‘creative spark’ that draws musicians to Focusrite’s products is one of the key planks chief executive Tim Carroll has asked shareholders to judge him on as he enters his second year in the role.
Panmure Gordon now expects EPS of 15.2p for the financial year to August 2018, alongside adjusted pre-tax profit of £12.9m (up from 14.8p and £12.5m in 2017).
| FOCUSRITE (TUNE) | ||||
| ORD PRICE: | 320p | MARKET VALUE: | £186m | |
| TOUCH: | 315-325p | 12-MONTH HIGH: | 355p | LOW: 165p |
| DIVIDEND YIELD: | 0.8% | PE RATIO: | 21 | |
| NET ASSET VALUE: | 57p* | NET CASH: | £14.2m | |
| Year to 31 Aug | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2013 | 36.1 | 5.2 | nil | n/a |
| 2014 | 41.0 | 5.8 | 10.3 | n/a |
| 2015† | 48.0 | 6.5 | 10.4 | 1.80 |
| 2016 | 54.3 | 7.1 | 11.8 | 1.95 |
| 2017 | 66.1 | 9.5 | 15.4 | 2.70 |
| % change | +22 | +33 | +31 | +38 |
| Ex-div: | 28 Dec | |||
| Payment: | 19 Jan | |||
| *Includes intangible assets of £5.0m, or 8.5p a share †Focusrite listed in December 2014 | ||||
