Focusrite Share Discussion Threads

[semaj2000] 10/7/2020 11:20

Focusrite says revenue and earnings likely to surpass market expectations -

[capitalist] 10/7/2020 08:03

Nice trading results. Especially liked this bit: "Overall, revenue and profits for the Group are currently ahead of where the Board would expect them to be at this stage of the financial year and it is therefore likely that market expectations for the financial year ending 31 August 2020 will be exceeded."
Dividend up as well.

[rp19] 22/5/2020 20:45

Noticed the last few days that a reasonable number of focusrite and novation products are out of stock on the focusrite website. Hopefully they are able to restock quickly to meet the demand.

[rp19] 13/5/2020 19:56

Thanks for your thoughts. The video highlighted in post 393 is definitely worth a watch if you've not seen it. I think it is a high quality presentation and both the CEO and CFO come across really well. It is a shame the CFO is leaving at the end of the year. Previous RNS has said he is leaving to pursue a range of personal interests.

From the video it is apparent that 'live sound' only makes up part of the Martin Audio offer which is positive and they seem fairly confident that this will come back in time. It is likely that their 'installed sound' will also take a bit of a short term hit but perhaps not as much as I first feared. The next few months could be an opportune time for installations some venues given that they are likely to be closed/under utilised. As such, works can be undertaken with less disruption.

One thing I've picked up from social media is that their customer service appears excellent. As you say, if these people who are making these new product registrations are well looked after then they are likely to be repeat purchasers.

The reduction of net debt by £4m in 2 months is impressive.

[alphabeta4] 13/5/2020 16:15

Hi RP

Thanks for your message. Interesting to see your workings. Some general thoughts - I can see you're working off the Edison figures from 26/3. Sharecast forward figures are pretty similar so feels a good starting point.



Research Tree has all the Edison notes and doesn't have any new ones so guess it's safe to assume there are at least no new Edison notes.

On the revenue figures my workings were If H1 was £50m, there was a £2m delayed order, Martin Audio completion 29/12 so 4 months extra revenue £8.13m so £60.13m start for £111m for the year. If the forecast is £111.6m and they are saying existing business growth is more than mitigating Martin Audio then that looks a beat as things stand and seeing as we're already 2.5 months in they would have to go backwards somewhat to subsequently fall short.

On eps that looks more complicated. On face of it needs £7.3m net profit to hit 21.9p Edison having done £5.4m H1. I estimate Martin Audio 4 months will add £780k of profit to get to £6.18m if it just does what it was doing prior to this year as opposed to H1 performance. Question then is what's the margin for the delayed £2m order, if the existing gross margin then £920k there but assumes admin costs are fixed. Then would just be the revenue growth of the existing business to add on.

I think the main difference in our revenue approaches is that I'm working off a lower level of Martin Audio revenue growth but adding in the £2m for the delayed order. FWIW cash generation is normally c£0.8m a month so when they comment on net debt at 30/4 being £16m from £19.9m this would imply the delayed order has now been completed which gives me more confidence that it was a genuine delay and has now worked through.

IMHO overall looks pretty solid with conservative guidance. As a final cherry on top I don't think the market is taking into account that all these additional registrations are likely to lead to further sales in future so the forward eps calculations may turn out to be somewhat conservative as we adjust to the new normal and the return of live music.

[tomps2] 13/5/2020 10:18

TUNE interim results presentation to analysts, 12th May 2020, by CEO Tim Carroll & CFO Jeremy Wilson.

[rp19] 12/5/2020 20:52

Hi Alphabeta4, not sure if there has been a new broker note or not but the last I saw (26/03/20) had the following estimates for 2020 [2019 in brackets]:
Rev £111.6m [84.7]; Profit before tax 14.4m [13.8]; EPS 21.9p [21.4].
At the halfway stage we have revenue of 49.9m (45% of FY estimate), adjusted profit of 6.4m (44% of FY estimate) and adjusted EPS of 9.3p (42% of FY estimate). EPS of 21.9p at current price of £5.75 puts it on a PE of 26.3. Not cheap but is a classy company with a track record.

It is hard to tell if they will meet the above estimates. As you point out, they cite post period end revenue growth acceleration. They also say that a plausible downside assumption is a 30% drop in revenues over 6 months. Do you have any thoughts on this? Some non-scientific musings below.

In the two months Martin has been with the Group, revenue has been up 22% year on year within the period and 11% ahead of budget. This is impressive but I am expecting revenue growth to slow here as if their main market is live music events then I think demand will be subdued for some time. They have done £4.5m revenue in 2 months. Another 6 months of this would add £13.5m and bring the full year to £18m. I am not sure if this is likely. No science to this but lets say it does £13.5m for the full year. For arguments sake lets double both focusrite HY performance (38.4 x 2 = 76.8m) and Adam Audio (7 x 2 = 14m). This gets to FY revenue of 104.3m (13.5 + 76.8 + 14) and a 6.5% shortfall in revenue. To counter that, both the Adam and Martin businesses are higher margin businesses than the traditional focusrite business.

As I say no particular science to the above and would be useful to hear other views.

[alphabeta4] 12/5/2020 09:36

The Group is currently experiencing record levels of consumer registrations and customer demand, partially as a result of the COVID-19 restrictions on people's movement, and therefore revenue growth has accelerated since the half year end. This is evidenced by improvements in the Group's net debt position which had reduced by GBP4 million to GBP16 million at 30 April 2020.

Nice. This is right near the bottom of today's statement tucked in the going concern section. By my calculations they only needed £1m of extra revenue H2 to hit target (post adjusting for 6 months of Martin Audio vs 2 months in H1). Looks that the home market is more than compensating (similar story seen at G4M) but they are too cautious to say ahead of expectations. Wonder how many have picked up on this?

[nex777] 14/2/2020 08:01

I've held a position for a while, good time to come in.. I'd guess. Obviously as a holder I wonder when this 'shake out' will stop.

[alphabeta4] 13/2/2020 15:50

Took a position today. RSI and chart suggests a turn likely to be imminent IMHO. Nice to get the acquisition for free.

[ramridge] 19/12/2019 11:29

I think it is a good deal, but as the blogger above said, they need to consolidate now.
A few stats.
With a net debt of 25m, debt/ EBITA = 1.5 . more than acceptable
They have paid a EBITDA multiple of around 10 (stripping away the cash). Again very good, considering TUNE's EBITDA multiple is closer to 20.

The share price is close to a 12 month high which might explain the muted market reaction.

Just my view. Took a small position this morning

[tomyumgoong] 19/12/2019 10:49

Last week I was wondering whether a deal was in the making or not judging by the content of last weeks RNS.....it would appear so! After this latest acquisition Focusrite would be £25m in debt but looking at the last couple of year's profitability I think this could be paid off in 2-3 years which doesn't look too bad to me! I would hope they just reign it in now for a while and see how these acquisitions play out! I once worked for a company that made acquisition after acquisition..... the went bust quickly ! I don't want to see the same thing here!

[trader2] 19/12/2019 07:32

£39m acquisition to be funded with a bank loan and not a market offering. Makes you question why - a tad expensive perhaps? The acquisition of £39m generates an EBIT of £3m - so (crude maths) 13 years to break even.

[trader2] 19/12/2019 07:32

£39m acquisition to be funded with a bank loan and not a market offering. Makes you question why - a tad expensive perhaps? The acquisition of £39m generates an EBIT of £3m - so (crude maths) 13 years to break even.

[dab26] 13/12/2019 16:28

Marketcap is currently c. £350m, according to SLH, so debt of £60m doesn't seem too obscene to me.

Acquisitions can be tricky, as we all know, but the management's approach to the ADAM purchase appeared rational to me and from their comments they seem happy with it since it was bought.

I'm happy to give them the benefit of the doubt.

Just my tuppence worth - of course, I might be overcharging.

Regards.

[tomyumgoong] 13/12/2019 16:11

Not sure what to make of this latest RNS. It would appear that Focusrite want to be able to borrow up to £60m for acquisitions, currently they can only borrow up to £15m which limits them a bit. Have they got their eye on something? Not sure I like the idea of potential debt in the company! I like the idea of them having money in their pockets so to speak! Anyone have any views? Good news or bad news? Any thoughts?

[effortless cool] 09/12/2019 16:35

Hi Washbear,

This share is quite volatile. I bought in at 440p in August this year. It's just question of keeping an eye on it and jumping in if an opportunity presents.

[tomyumgoong] 02/12/2019 17:56

Thanks for the reply.....much appreciated. Now I understand!

[effortless cool] 30/11/2019 16:42

No problem. I had 25,000. I sold 10,000 to reduce my exposure the day before the results. After the results, there was limited liquidity, so I sold the remaining 15,000 in three 5,000 blocks opportunistically over the week following the results.

[tomyumgoong] 30/11/2019 16:26

How many shares did you have and why did you have to sell them over a number of days? Don't wish to be nosy! Please forgive my nievety!

[effortless cool] 25/11/2019 20:34

I thought this had got a bit ahead of itself before the results, and was underwhelmed with the results and the outlook, so have sold my entire holding over the last eight days for a nice profit.

I normally run my winners but I'm not convinced there is any moat here so view it more as a share to trade.

I see fair value around 465p and will likely be back in if it falls below that level.

Good luck to continuing holders, in the meantime

[sf5] 19/11/2019 10:25

Agree - nice steady-as-she-goes update. Navigating headwinds well. Adam acquisition sounds positive.

[tomyumgoong] 19/11/2019 10:04

Good set of final results this morning I think! Figures beating Edison guidance in revenue and profit and basic eps of 20.4 up from 18.4 last year!