An “especially strong” Christmas trading period was central to another forecast-beating outing for audio products outfit Focusrite (TUNE). Constant-currency revenues climbed 26 per cent in the half year to 28 February, as sales of the “consumer-priced” product range and successful moves into countries with strong growth potential vindicated two recent strategic pushes.
Alongside this, the working capital position continued to improve. Better management of inventory means stock now turns over four times a year, while a beady eye on distributor relationships has further reduced debtor days. That’s been good for the cash position, which now accounts for more than half of the group’s net assets.
Of course, Focusrite’s real value is held in intellectual property, and its intangible ability to help musicians make music more easily. Chief executive Tim Carroll was vague on the “disruption” he feels future product launches will lead to, although growing downloads of Novation’s free music-making software is now “a material contributor for acquiring new hardware customers”.
Whether this will continue to generate a cash profit growth rate of 30 per cent remains to be seen, although finance chief Jeremy Wilson was keen to nix any suggestion that recent senior manager share sales should be taken as a sign of slowing momentum. “They are paying off mortgages or bits of mortgages,” he told us.
On average, analysts expect adjusted pre-tax profit of £10.7m and EPS of 16p for the August year-end, rising to £11.4m and 16.9p in FY2019.
| FOCUSRITE (TUNE) | ||||
| ORD PRICE: | 435p | MARKET VALUE: | £253m | |
| TOUCH: | 430-440p | 12-MONTH HIGH: | 490p | LOW: 215p |
| DIVIDEND YIELD: | 0.7% | PE RATIO: | 25 | |
| NET ASSET VALUE: | 66p | NET CASH: | £19.7m | |
| Half-year to 28 Feb | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2017 | 32.0 | 4.6 | 7.3 | 0.75 |
| 2018 | 38.8 | 5.8 | 9.0 | 1.0 |
| % change | +21 | +27 | +23 | +33 |
| Ex-div: | 3 May | |||
| Payment: | 30 May | |||
