Small Cap Value Report (3 May 2017) - TUNE, BOOM, TRAK

Wednesday, May 03 2017 by

Good afternoon! It's Paul here.

It's very quiet for small cap news, so I had a lie in. Today I'll be covering;

Focusrite (LON:TUNE) - Final results

Audioboom (LON:BOOM) - Interims to 28 Feb 2017

Webinar 1pm tomorrow

Ed is launching some terrific new features, with a webinar tomorrow (4 May 2017) at 1pm.

Here is the webinar sign-up page. I've had a preview, and I really like the new features - a new "stock classifications" system, to sit alongside the StockRanks.

As you would expect from the boffins at Stockopedia HQ, it's well thought through, and has been number-crunched to oblivion!

This is another great feature for our toolbox in trying to find great stocks, and avoid all the junk out there.

Focusrite (LON:TUNE)

Share price: 241.5p (up 8.5% today)
No. shares: 58.1m
Market cap: £140.3m

(at the time of writing, I hold a long position in this share)

Interim results - for the 6 months to 28 Feb 2017.

This company describes itself as a;

global music and audio products company supplying hardware and software products used by professional and amateur musicians

I've written positively about this company here 4 times in the last year - click here to see those previous reports, which have useful background. I usually re-read my previous notes, to refresh my memory about the company.

These interim figures look excellent to me.

Revenue up 23.7% to £32.0m

Adjusted operating profit is probably the best comparison number, and is up 23.8% to £4.6m

Note that the numbers below this line are flattered by a big reduction in the finance charge line - which was £725k in H1 last year, but only £24k this year. Therefore, don't get over-excited about the 89.1% increase in profit before tax, as that's benefited from the reduction in finance charge.

Note also that some of this year's headline numbers are also flattered by there being no "non-underlying" costs in H1 this year, whereas last year contained £537k in non-underlying costs.

Adjusted EPS is up 52.2% to 7.0p

Broker forecasts look too conservative now, so I am expecting to see forecasts raised. Maybe the company could be heading for 14-15p adj EPS for the full year? Consensus is currently 12.3p, so the company seems to be running ahead of that.

Research Tree has got 2 broker updates on it today. Panmure…

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Focusrite Plc is a music and audio products company supplying hardware and software products used by professional and amateur musicians. The Company is engaged in the development, manufacture and marketing of professional audio and electronic music products. It operates through three segments: Focusrite, Novation and Distribution. The Focusrite segment includes the sales of Focusrite branded products. The Novation segment includes the sales of Novation branded products. The Distribution segment includes distribution of third-party brands, including KRK speakers, Ableton, Stanton, Cakewalk and sE Electronics. The Company sells its products in approximately 160 territories and countries around the world. The Company offers Scarlett, which is an audio interface; Blocs Wave application, which is used by musicians to create their own sounds and songs on any iPhone Operating System (iOS) smartphone or tablet, and e-commerce Websites. more »

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Audioboom Group plc operates an audio platform for hosting, distributing and monetizing content. The Company works with approximately 2,400 active broadcasters, content creators and podcasters around the world, and hosts in over 7,400 content channels. The Company's hosting and distribution platform allows partners to embed, share through social channels and re-syndicate their content. The Company receives over 40 million listens per month. It also works with its partners to monetize their audio through live in-reads, the dynamic insertion of pre and post roll audio adverts and video advertisements. Its audio, cloud-based, software as a service (SaaS) platform enables the creation, broadcast and syndication of digital audio content across various devices, networks and geographies. Its subsidiaries include Audioboom Limited, Audioboom Inc, One Delta Limited and Audioboom Pty Limited. more »

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Trakm8 Holdings PLC is a Big Data company. The Company, through its subsidiaries, manufactures, distributes and sells telematics devices and services. The Company focusses on owning the intellectual property that it uses in its products and solutions. It supplies its customers in the fleet management and insurance sectors across the United Kingdom. In addition, the Company provides hardware devices that can be integrated into third party telematics or Internet of Things (loT) solutions. It offers Configuration Manager, Product Datasheets, Radio Frequency Identification, Telematics Devices, Vehicle Connectivity and Accessories, among others. Its portfolio of solutions includes Trakm8 ecoN, Trakm8 Tacho, Trakm8 Secure, Trakm8 Logistics and Trakm8 Insure. Its portfolio offers telematics solutions, including dashboard cameras that enable customers to record driving incidents and mitigate the risk from crash to cash accidents. It provides bespoke solutions and engineering support services. more »

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10 Comments on this Article show/hide all

JohnMM1969 3rd May '17 1 of 10

Completely off topic, but I vaguely remember you (it may have been Graham) mentioning a screen you had built that looked to highlight improving earnings forecasts a while back. If I'm not going mad, would it be possible to post a link to it? Thanks in advance

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Orangetree 3rd May '17 2 of 10

Nice analysis on Focusrite Paul.

Is it true a company like Focusrite benefitted from the exposure of TV shows like The X-Factor and The Voice?

Blog: Walbrock Research
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Howard Adams 3rd May '17 3 of 10


I really liked your analysis of Focusrite (LON:TUNE). After looking in details and getting a sense of the people running it I have taken up a position, many thanks for the write up and alerting me to the company.


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vik2001 3rd May '17 4 of 10

Richard Johnstone is a excellent sales manager who joined with Focusrite this year. I have a friend who has worked in his sales team previously at Yamaha, and says he is a excellent manager who knows how to drive sales forward and is always full of ideas...

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daveinthelakes 3rd May '17 5 of 10

Thanks Paul for Focusrite (LON:TUNE) update. I bought after your last review on 20thMarch and after further consideration doubled up two weeks later. This is as much a tech as a music company, it is all about the digitisation of music (I think, I am no musician, in fact tone deaf!).

I thought it was also interesting that Focusrite are now moving forward, albeit belatedly, with direct online marketing. Only 1% of revenue at present but they have realised the potential.


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ricky65 3rd May '17 6 of 10

Paul, I join others in thanks for the Focusrite (LON:TUNE) coverage. I note the technicals are great too.


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abtan 3rd May '17 7 of 10

For those Empresaria (LON:EMR) fans out there (I believe Paul interviewed the CEO + CFO relatively recently), there was a mini-Q1 update that almost slipped under the radar this afternoon. 

I'm not sure if the reference to Q1 only implies April was a bad month, or perhaps I'm just reading too much into it.

At the Annual General Meeting of Empresaria, the international specialist staffing group, held at 1 pm today, 3 May 2017, Tony Martin, Chairman of Empresaria, made the following statement:

"The Group has made a solid start to the year, delivering year on year growth in net fee income for the first quarter of 2017 across all four of its regions. The investments made in 2016 in Rishworth Aviation and ConSol Partners are performing well and we are pleased with their integration into the Group.

The Group remains on course to meet market expectations for the full year."

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insy09 4th May '17 8 of 10

Hi Paul, I was mad enough to buy some Audioboom after their most recent placing. Today's results are a horror show, but I'm not selling, for the following reasons;
1 - The position is very small as a % of my overall holdings
2 - I am expecting Audioboom to pivot from being this "website & smartphone app, delivering spoken-word audio content" into being the advertising platforms on which podcasts are monetized.

I actually don't feel that Audioboom should ever have been a listed company, it's certainly more of a VC play than a value investment and the CEOs credibility has been shot by continually under delivering and over promising. (I also don't like his spivvy interviews on podcasts after any RNS). However, should Audioboom manage this pivot Proctor knows the advertising space well and has experience of how Google became the premium advertising seller in digital.

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ridavies 4th May '17 9 of 10

Hi Paul. Re Trakm8 Holdings (LON:TRAK), when there was a recent mini reorganisation with the appointment of a deputy chairman, I pushed the company's PR people to ask what if anything that meant. The clear implication was that this was a real strengthening of the executive team so that there was more focus on the sales and the figures where perhaps the family members had become a bit slack in their approach to the business. I am pleased to see that they are on the way back after a very bad period. Unfortunately I didnt feel brave enough to invest even more when the shares were down in the 60s and so am less balanced than I could have been but then again I didnt risk even more money on a promise!

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DarwenLad 15th May '17 10 of 10

My concern is that Trak is a company run by engineers, who like to invent things, whilst Quartix (QTX), a similar sized company operating in the same insurance and fleet management markets, seems to be much more professionally run and focussed much more on shareholder returns. (QTX's market cap is roughly five times that of TRAK although both companies have roughly the same revenues.)

Not being a telematics expert I have no feel for the competitive edge of the technologies/IP of the two companies. But the board structure of both companies is very different and perhaps helps explain the vastly differing investment performance. QTX has a four man board which includes Andy Walters, QTX’s chief executive and 36% shareholder, the finance director, a non-executive chairman plus another non-exec. Trak, by contrast, has a 8 strong board led by John Watkins, the executive chairman and biggest shareholder. There are two non-execs but they are outnumbered by the rest of Trak’s executive directors including the chairman’s son who is chief operating officer. Trak could do a lot worse than copy QTX's example, slim down its executive heavy board and bring in a strong non-executive chairman to knock heads together. So far all it has done is appoint a non-executive deputy chairman leaving John Watkins as the executive chairman.

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About Paul Scott

Paul Scott

I trained as an accountant with a Top 5 firm, but that was so boring that I spent too much time in the 1990s being a disco bunny, and busting moves on the dancefloor, and chilling out with mates back at either my house or theirs, and having a lot of fun!Then spent 8 years as FD for a ladieswear retail chain called "Pilot", leaving on great terms in 2002 - having been a key player in growing the business 10 fold. If the truth be told, I partied pretty hard at the weekends too, so bank reconciliations on Monday mornings were more luck than judgement!! But they were always correct.I got bored with that and decided to become a professional small caps investor in 2002. I made millions, but got too cocky, and lost the lot in 2008, due to excessive gearing. A miserable, wilderness period occurred from 2008-2012.Since then, the sun has begun to shine again! I am now utterly briliant again, and immerse myself in small caps, and am a walking encyclopedia on the subject. I love writing a daily report for on most weekday mornings, constantly researching daily results & trading updates for small caps. Cheese! more »


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