Focusrite

LN: TUNE

£371.9m market cap

640p last close

Focusrite is a global music and audio products group supplying hardware and software used by professional and amateur musicians, which enables the high-quality production of music.

Investment summary

Focusrite’s revenue has been driven by acquisitions against a period of tough comparatives for the core brands. Current trading looks more encouraging for the majority of the brands, which is leading to gross margin improvements and a better outlook for EBITDA margin. We upgrade EBITDA forecasts for FY20e and FY21e by c 7%, but a higher tax rate in FY21 limits EPS upgrades in that year. For FY20e, an EV/EBITDA of 15.4x and a P/E of 24.9x are above long-term averages.

Y/E Aug
Revenue (£m)
EBITDA (£m)
PBT (£m)
EPS (fd) (p)
P/E (x)
P/CF (x)
2018A 75.1 15.5 11.3 17.8 36.0 24.3
2019A 84.7 17.2 13.8 21.4 29.9 26.6
2020E 114.5 21.8 15.4 23.3 27.5 20.2
2021E 126.7 23.8 17.1 23.6 27.1 17.3
Industry outlook

Focusrite’s products connect with a home-based leisure movement that is outpacing overall consumer expenditure. The global music instrument and pro audio wholesale market was £2.7bn in 2013 (source MTM) but is highly fragmented. Management estimates its addressable market at US$575–850m. Currently, it estimates a 55% share of the mass interface market, 12–14% of the semi-professional Thunderbolt market and 2% of the commercial market.

Last updated on 28/05/2020
Sector
Consumer
Share price graph
Balance sheet
Forecast net debt (£m) 12
Forecast gearing ratio (%) 21
Price performance
%
1m
3m
12m
Actual 19.6 14.3 21.7
Relative* 13.4 27.5 42.7
52-week high/low 740.0p/390.0p
*% relative to local index
Key management
Phil Dudderidge Chairman
Tim Carroll CEO
Jeremy Wilson CFO

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