Project catch-up continues, so here is a late report from Monday.
Focusrite (LON:TUNE)
Share price: 174p
No. shares: 58.1m
Market cap: £ 101.1m
Focusrite is a new share to me. It describes itself as;
the global music and audio products company supplying hardware and software products used by professional and amateur musicians around the world
The company's website is here. It floated on AIM in Nov 2014, and looks a sensible, profitable company, with a good track record, net cash, and starting to pay divis, so it's worth having a look at;
Trading update - the company has a 31 Aug year end, so this update covers H1, to 29 Feb 2016. It says;
...in line with expectations, it will be reporting revenues for the half year of around £25.5 million, up from £23.8 million in the corresponding period in the previous financial year
That's fine, but what about what matters - profit? The company seems tight-lipped about that, talking some more about revenue, but no mention of profitability, which I find somewhat unnerving. The whole point of trading updates is to indicate how profits are shaping up, compared with market expectations, but that issue seems to be ducked in this update.
"Since the start of the financial year, new products, backed by positive industry and consumer acceptance, have continued to gain market share in our key geographies. Existing products also continue to perform well and, overall, we achieved double digit revenue growth in Q2. The Group's significant investment in R&D will ensure further new product launches and upgrades to existing products in the second half. This will underpin our consistent record of revenue growth."Shareholding structure - AIM is fundamentally flawed, in having no minimum free float. This can cause illiquidity, and worse (share price manipulation, if someone tries to corner the market in a particular share).
The share price chart of TUNE rang alarm bells with me - as the erratic price movements are very much the hallmark of a share with inadequate liquidity.
Sure enough, checking the shareholder list, from the company's investor relations website, the shareholdings are extremely concentrated, with the Executive Chairman holding a controlling stake of 52.09%.
The total below comes to 82.2%, which I think is much too high. When companies float, they need to think about liquidity, and ensuring that…
