Focusrite

LN: TUNE

£252.8m market cap

435p 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 has issued a reassuring trading update for H120. Sales growth is in line with expectations, against a tough comparative. With the majority of sourcing from Asia, there had been fears about its ability to continue sourcing product to satisfy consumer demand, which still looks ‘buoyant’, but deliveries have resumed quickly. Our underlying forecasts are unchanged, but we incorporate the acquisition of Martin Audio, leading to EPS upgrades of 1% for FY20 and 7% for FY21. The recent de-rating has brought multiples back towards historic averages: EV/EBITDA for FY20e of 12.2x (average of 11.1x) and P/E for FY20e of 19.5x (average of 17.8x).

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 24.4 16.5
2019A 84.7 17.2 13.8 21.4 20.3 18.1
2020E 111.6 20.4 14.4 21.9 19.9 17.6
2021E 123.7 22.2 15.6 23.5 18.5 12.5
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 26/03/2020
Sector
Consumer
Share price graph
Balance sheet
Forecast net debt (£m) 15.3
Forecast gearing ratio (%) 27
Price performance
%
1m
3m
12m
Actual (34.4) (30.5) (9.8)
Relative* (17.1) (5.1) 14.0
52-week high/low 740.0p/422.5p
*% relative to local index
Key management
Phil Dudderidge Chairman
Tim Carroll CEO
Jeremy Wilson CFO

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