- Sales and profit guidance 15% and 25% below consensus
- Continued weakness in Asia
- Market share gains amid challenging market
Global music and audio products group Focusrite (TUNE:AIM) has downgraded 2024 full year sales and profit expectations following a continuation of the ‘challenging’ market conditions highlighted at its annual general meeting in January.
Investors were in unforgiving mood, marking the shares down 32% to a new seven-year low of 260p.
The shares have now plunged 62% over the last year.
WHAT DID THE COMPANY SAY?
Sales guidance for the year to August 2024 has been lowered to not less than £155 million while EBITDA (earnings before interest, tax, depreciation, and amortisation) is forecast to be in the £27 million to £30 million range, some 27% below 2023.
Consensus analysts’ forecasts for 2024 sales sit at £182 million, implying downgrades of around 15% and forecast EBITDA sits at £38 million suggesting a 25% downgrade.
The company also flagged a second half weighting, placing further uncertainty on achieving the revised full year guidance.
Earnings per shares estimates been revised down by around 17% over the last year according to Refinitiv data.
WHAT HAS GONE WRONG?
Focusrite pinned the blame on ‘macroeconomic issues’ with notable weakness in Asia, continuing the trend seen over the last 18 months.
The largest impacts have been seen in Content Creation in China and Japan and management is assuming no improvement in these regions for the remainder of the year.
Industry wide overstocking and general retail weakness is causing some weakness and volatility in demand, which is affecting distributor and reseller reorders.
On top of this, the company warned it is experiencing ‘engineering resource constraints’ in relation to launching and shipping next generation Scarlett products which delays the associated revenue to later in 2024.
MARKET SHARE GAINS
Despite these setbacks, the company insists the Focusrite brands are seeing ‘solid’ underlying end user demand in line with prior years and ahead of pre-pandemic levels.
Overall, performance continues to be ahead of competitors in a challenging current market which indicates the firm is maintaining or improving market share.
Focusrite said gross margins remain ‘strong and stable’ and the group continues to leverage synergies to optimise costs, although these are not expected to offset a reduction in sales in 2024.
Net debt as of 29 February was around £26 million, up from £1.3 million on 31 August which is attributable to working capital movements, a one-off £5 million impact, and acquisitions.
By the end of the year the company expects the working capital movements to unwind and end the year close to a net cash position
