Music and audio products company Focusrite (TUNE:AIM) reported better than expected revenue growth of 13% to £84.7m for the year ended 31 August accompanied by 16.3% growth in operating profits to £13.5m.
The shares traded down 6% to 555p, partly because they have rallied strongly into the numbers (the share price has jumped 30% in three months) and partly due to softer forward revenue guidance which are pitched against stiff comparisons.
Chief executive Tim Carroll said that the company ‘remained focused on executing our growth strategy whilst ensuring the group was taking the correct and necessary measures to mitigate any potential disruption from the numerous macro-economic issues at hand.’
The main factor driving growth was the introduction of 10 new products throughout the year including the third generation of the Scarlett audio interfaces, a segment where the company is market leader. This resulted in 21.5% growth in revenues for the Focusrite division where revenues reached £57.6m (£47.4m).
In addition, increased customer satisfaction led to better sales, led by enhanced websites and new technologies which simplify the ‘out of the box’ experience.
The company made its first major acquisition since coming to the market in 2014, Berlin-based ADAM audio for £16.2m, funded by internally generated cash. ADAM audio is a leading developer and global distributor of professional studio monitor loudspeaker equipment.
The business is a good strategic fit for Focusrite, and is profitable having generated €1m of operating profits in 2018 on €12.9m of revenues.
Novation is the second largest segment for the company, and produces physical interfaces for the control of electronic music.
This segment also includes Ampify, an innovative software division which has seen over 10.5m downloads for music on iPhones and iPads.
Due to the Launchpad product coming to the end of its lifecycle the Novation division saw an 11.7% decline in revenues to £17.7m (£20.1m).
Launchpad has since been replaced since the financial year end. New product launches included the SL Mark III 61 and 49, both of which have won awards and accolades from various media outlets, which bodes well for the return of growth.
Free cash flow excluding the acquisition represented 12% of revenues, giving the company scope to grow by segment and geography as well as select acquisitions where there is a good cultural fit. Focusrite ended the year with net cash of £14.9m (£22.8m).
The company will pay a final dividend of 2.9p, resulting in a total of 3.8p for the year, an increase of 15.3%. Adjusted earnings per shares were up 21.6% to 21.4p.