REG - Focusrite PLC - Interim Results
Tue 07:00
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RNS Number : 5082G Focusrite PLC 29 April 2025
Focusrite plc ("Focusrite" or "the Group")
Results for the six months ended 28 February 2025
Full year expectations unchanged despite volatile trading environment
Focusrite plc, the global music and audio products company supplying hardware
and software used by professional and amateur musicians and the entertainment
industry, today announces its interim results for the six months ended 28
February 2025 with the Group returning to revenue growth and confident of
meeting full year expectations.
Commenting on the results and outlook, Tim Carroll CEO said:
"After several years of volatility across our Content Creation sales channels,
we are now seeing a return to more normal inventory levels, accompanied by
sustained demand for our leading brands. The Group has returned to growth,
with a 9.9% increase in revenue from Content Creation. This has been driven by
more consistent and predictable channel orders, successful new product
launches across most of our brands, and some sales rephasing in the US to
mitigate the impact of tariffs. The refresh of our flagship Scarlett range in
Focusrite is now complete, with customer registrations remaining steady
compared to the prior year, outperforming a declining wider market and
signalling continued brand strength. Incremental new product introductions
in both ADAM and Sequential have further contributed to the overall revenue
growth.
As previously highlighted, Audio Reproduction has normalised following 18
months of unusually high post-lockdown demand, with H1 revenues down 5.8%
year-on-year. However, the pipeline for this division remains strong,
reflecting the success of our expanded portfolio and broader market reach.
Macroeconomic uncertainties persist-particularly in our key US market- and we
have responded swiftly to help mitigate these risks including inventory
phasing, selective price increases and relocating manufacturing for certain
product ranges. We remain vigilant with regard to any further challenges in
the US business environment. With new product launches planned for the next
six months, as previously indicated we expect a greater weighting of sales in
this period and will continue to focus on maximising gross margins. Given
the current 90 day pause and tariff exemption window for certain products, we
believe our expectations for the first 12 months of the current financial
period remain realistic."
Key financial metrics
HY25 HY24
Revenue (£ million) 80.9 76.9
Gross margin % 43.9% 45.8%
Adjusted(1) EBITDA(2) (£ million) 10.4 12.1
Operating profit (£ million) 3.1 4.7
Adjusted(1) operating profit (£ million) 5.8 7.5
Basic earnings per share (p) 3.1 4.2
Adjusted(1) diluted earnings per share (p) 6.6 7.7
Interim dividend per share (p) 2.1 2.1
Net debt(3) (£ million) (17.9) (27.3)
Financial and Operating Highlights
* Revenue up 5.2% to £80.9 million (HY24: £76.9 million), or 7.2% on an
organic constant currency(4) (OCC) basis, driven by strong growth in Content
Creation, partially offset by a decline in Audio Reproduction.
* Content Creation revenue increased 9.9% (12.8% OCC(4)) to £59.4 million
(HY24: £54.1 million), reflecting successful new product launches across key
brands. Adjusting for US tariff-related sales rephasing underlying OCC growth
was 6.5.
* Audio Reproduction revenue declined by 5.8% (5.9% OCC(4)) to £21.5 million
(HY24: £22.8 million), against a particularly strong prior year comparator
especially in APAC following post-COVID demand surges.
* Gross margin decreased to 43.9% (HY24: 45.8%), impacted by higher freight
costs and less favourable product and regional sales mix, including lower
royalty sales in China.
* Adjusted(1) EBITDA(2 )of £10.4 million, down from £12.1 million in HY24,
reflecting lower gross margin and increased costs, including normalised
variable remuneration and inflationary pressures.
* Operating profit reduced to £3.1 million (HY24: £4.7 million), in line with
EBITDA movements, with amortisation flat year-on-year.
* Interim dividend maintained at 2.1 pence, unchanged from HY24, reflecting
confidence in the Group's long-term outlook.
* US tariff risks mitigated in part through H1 inventory build in the US and
pricing action already in place. Further actions underway to take advantage of
the Group's manufacturing locations and partners based outside of China.
(1) Adjusted for amortisation of acquired intangible assets and other
adjusting items as detailed in note 4 to the Interim Statement.
(2) Comprising earnings adjusted for interest, taxation, depreciation and
amortisation.
(3) Net debt/cash defined as cash and cash equivalents, overdrafts and amounts
drawn against the RCF including the costs of arranging the RCF.
(4) Organic constant currency growth. This is calculated by comparing HY25
revenue to HY24 revenue adjusted for HY25 exchange rates and the impact of
acquisitions.
Enquiries:
Focusrite plc +44 (0) 1494 462246
Tim Carroll (CEO) / Sally McKone (CFO)
Investec Bank plc (Nominated Adviser and Broker) +44 (0) 20 7597 5970
David Flin / Nick Prowting / James Smith
Rosewood Communications (Financial PR) +44 (0) 20 7653 8702
John West / Llewellyn Angus / Lily Pearce
Notes to Editors
Focusrite plc is a global audio products group that develops and markets
proprietary hardware and software products. Used by audio professionals and
musicians, its solutions facilitate the high-quality production of recorded
and live sound. The Focusrite Group trades under thirteen established brands:
Focusrite, Focusrite Pro, Novation, Ampify, ADAM Audio, Martin Audio, Optimal
Audio, Linea Research, Sequential, Oberheim, Sonnox, OutBoard and TiMax.
With a high-quality reputation and a rich heritage spanning decades, its
brands are category leaders in the music-making and audio reproduction
industries. Focusrite and Focusrite Pro offer audio interfaces and other
products for recording musicians, producers and professional audio facilities.
Novation and Ampify products are used in the creation of electronic music,
from synthesizers and grooveboxes to industry-shaping controllers and
inspirational music-making apps. ADAM Audio studio monitors have earned a
worldwide reputation based on technological innovation in the field of studio
loudspeaker technology. Martin Audio designs and manufactures
performance-ready systems across the spectrum of sound reinforcement
applications. Linea Research designs, develops, manufactures and sells market
innovative professional audio equipment globally. Sequential designs and
manufactures high end analogue synthesizers under the Sequential and Oberheim
brands. Sonnox is a leading designer of innovative, high-quality,
award-winning audio processing software plug-ins for professional audio
engineers. TiMax specialises in innovative immersive audio and show control
technologies. OutBoard manufactures and sells industry standard rigging
control products for live events, together with enterprise-level safety test,
preparation and quality management for global rental companies and venues.
The Group has offices in four continents and a global customer base with a
distribution network covering approximately 240 territories.
Focusrite plc is traded on the AIM market, London Stock Exchange.
Business and operating review
Overview
We are pleased to report our financial results for the six months ended 28
February 2025. Overall, the Group's performance was in line with our
expectations, reflecting the strength of our brands and the resilience of our
strategy in the face of continued global economic uncertainty and
industry-wide headwinds.
Our Content Creation brands delivered a 9.9% increase in revenue over the
prior year, marking a return to growth after a prolonged period of channel
correction and softer market demand, achieving growth across all major brands
even after adjusting for the impact of earlier sales to mitigate tariff
impacts. Stocking levels across all major sales channels have now
normalised and we are encouraged by multiple data points(1), channel feedback,
and internal registration metrics -that show we have grown market share in
several key categories. This is a significant achievement in what remains a
highly competitive and price-sensitive environment.
As anticipated, the Audio Reproduction market has begun to normalise and as a
result our Audio Reproduction division saw a 5.8% decline in revenue when
compared to a very high prior year first half of post pandemic business.
However, the breadth of our enhanced portfolio across Martin, Optimal, Linea
and our more recent acquisitions of TiMax and Panlab continues to support a
strong pipeline of business.
Total Group revenue for HY25 increased by 5.2% compared to HY24. On an organic
constant currency (OCC) basis, the Content Creation division grew by 12.8%
(6.5% after adjusting for US tariff-related sales rephasing), while the Audio
Reproduction division saw a 5.9% decrease, resulting in a 7.2% increase on an
OCC basis overall for Group revenue. This is despite an increasingly
aggressive promotional market backdrop by competitors and rising input costs
across both divisions. This demonstrates the strength of our brand to attract
customers despite both inflation and aggressive competition.
Group gross margin for the period was 43.9% (HY25: 45.8%), as a consequence of
elevated freight rates and a shift in product mix, particularly in Audio
Reproduction.
Since the period end the international trading landscape has been severely
impacted by fluctuating US tariffs on goods sold into the US. Approximately
12% of the Group's revenue is from products made in China and sold into the
US. Of these products, one fifth fall into the announced potentially
temporary tariff exemption for computers and accessories. Remaining products
for the US market are sourced from Malaysia, Germany, UK and the US.
Anticipating the risk of additional tariffs, the Group took action in the
first six months of the period to build stock in our US channel for Content
Creation and to hold more stock in our own US warehouse for Audio
Reproduction. In addition, we have moved swiftly to increase prices in
Content Creation from 1 May, and are closely monitoring the situation within
the Audio Reproduction market. The majority of our products for the US
market are manufactured outside of China and we are relocating further product
ranges where appropriate. Whilst we believe we are well positioned for the
next six months to mitigate current risks, we have contingency plans in place
to address potential further escalation. Nonetheless the situation remains
dynamic and uncertain.
(1 ) See Music Trades Annual Census 2024 and sales rankings on key reseller
websites (Thomann and Sweetwater)
Operating review
Our Group's portfolio has grown substantially in recent years and now consists
of thirteen leading brands, which are categorised into two divisions, Content
Creation and Audio Reproduction.
Content Creation consists of:
o Focusrite Novation: Focusrite, Focusrite Pro, Novation and Ampify
o ADAM Audio
o Sequential: Sequential and Oberheim
o Sonnox
Audio Reproduction consists of:
o Martin Audio: Martin Audio, Optimal Audio and Panlab
o Linea Research: Linea Power amplification
o Sheriff Technologies: OutBoard and TiMax brands
Six months to 28 February 2025 Six months to 29 February 2024 Reported Growth OCC Growth(1) Year to
31 August
2024
Revenue from external customers £'000 £'000 % % £'000
Focusrite 30,872 29,360 5.2% 8.0% 60,278
Novation 8,672 7,859 10.4% 13.2% 16,257
Focusrite Novation 39,544 37,219 6.2% 9.1% 76,535
ADAM Audio 13,658 11,296 20.9% 24.2% 22,610
Sequential 5,252 4,539 15.7% 18.9% 9,705
Sonnox 996 1,047 -4.9% -2.4% 1,968
Content Creation 59,450 54,101 9.9% 12.8% 110,818
Audio Reproduction 21,457 22,783 -5.8% -5.9% 47,706
Total 80,907 76,884 5.2% 7.2% 158,524
Content Creation: Revenue by region
Six months to 28 February 2025 Six months to 29 February 2024 Reported Growth OCC Growth(2) Year to
31 August
2024
Content Creation £'000 £'000 £'000 £'000 £'000
Americas(1 ) 24,483 25,144 -2.6% 0.0% 51,608
EMEA 28,694 24,014 19.5% 22.8% 48,812
APAC(1 ) 6,273 4,943 26.9% 30.0% 10,398
Total 59,450 54,101 9.9% 12.8% 110,818
(1) (Regions restated to reflect revised Group operating model with LATAM now
part of Americas and APAC replacing Rest of World)
(2 Organic constant currency (OCC) growth rate is calculated by comparing HY25
revenue to HY24 revenue adjusted for HY25 exchange rates and the impact of
acquisitions)
Our Content Creation brands offer best in class audio recording hardware
technology, software, electronic music instruments and controllers, and studio
reference monitors to content creators at all levels and price points.
Our products are showcased in the finest recording and post-production studios
in the world, as well as in the homes of millions of hobbyists and aspiring
professionals. Over the past four years, this segment has faced
unprecedented challenges, providing us with both opportunities and
obstacles. During the pandemic, the Group experienced unparalleled growth in
demand for our Focusrite, Novation, and ADAM brands as individuals sought
advanced home content creation and streaming solutions. However, the
subsequent period presented numerous hurdles, such as component shortages and
price increases, elevated shipping costs, worldwide inflation and geopolitical
tensions, all of which impacted the music creation industry.
Despite a stabilisation in prices and availability, these challenges, coupled
with a softer macroeconomic landscape in the post pandemic period, led to
excessive inventory levels across many product segments in our industry
channels throughout FY24. The Group responded proactively, focusing on
reducing channel stock, managing expenses tightly and continuing to release
award-winning products into the channel to spur renewed interest and drive
recovery. As a result of these efforts, the first half of this year delivered
encouraging results, with Focusrite Novation, Sequential and ADAM all
reporting revenue growth.
Regionally, both EMEA and APAC delivered year on year growth while the
Americas reported a slight decline versus the prior period. In the Americas,
which now includes LATAM, the Group focused on reducing excess channel
inventory during the first half, partially offset by a strategic increase in
stock of targeted products into the US ahead of recently raised tariffs. Our
direct to customer E-commerce business, covering all Content Creation brands
has continued to grow year over year and now represents almost 9% of Content
Creation turnover. As it continues to grow, the Group will invest more into
this channel and we believe it will become an increasingly important route to
market for our business.
Focusrite audio interfaces, comprising our Scarlett, Clarett and Vocaster
ranges, are a suite of audio interfaces designed to allow both beginners and
professionals alike to create the best quality audio possible. These products
are core to home recording and audio streaming, across a wide range of price
points.
At the start of FY24, the Group debuted the 4(th) generation of the lower
input/output (I/O) Scarletts, those with 1, 2 or 4 inputs (Scarlett Solo, 2i2
and 4i4). These new interfaces represent a completely re-engineered product
line, with many new features designed to deliver unprecedented ease of use
while offering professional-grade technical specifications. Following this,
we introduced the higher channel count Scarlett interfaces at the beginning of
this fiscal year. These models build upon the innovations of the lower I/O
models, adding extra features and functionality tailored to more advanced
users. These additions have once again been well received, earning widespread
acclaim from industry press and our global channel partners.
We track sales to our end user customers through our registration data, with
the vast majority of purchases being registered in order to utilise our easy
start process and bundle of free software tools. This data reveals that the
overall registrations of Scarlett interfaces have closely mirrored those of
the previous year over the first six months. This is in contrast to industry
data which shows an overall decline of approximately 2% across this product
category compared to 2024.
Clarett, our mid-range interface offering, performed in line with expectations
during the first six months and continues to be a highly regarded solution
among more experienced musicians and recording engineers.
Focusrite Pro offers a suite of solutions for professionals that employ "audio
over internet protocol" (AOIP) technology for scale in enterprise solutions,
both in live events and in permanent installations such as recording and
post-production studios. Some of the most prestigious events across the world,
including the US Superbowl and the Grammys utilise our Pro products as the
backbone of the audio systems deployed. Additionally, many recording and
post-production studios have adopted our products to produce and deliver
content in enhanced formats, such as Dolby ATMOS.
Our Novation brand is an integral part of the Focusrite business unit,
dedicated to empowering electronic musicians. It offers a range of solutions
including groove boxes, controllers, synthesizers and desktop and iOS creation
apps. During the first six months, we introduced an update to the popular
Launchkey family (version MK4). These products set a new benchmark for
keyboard controllers owing to their ability to integrate with a multitude of
software platforms for creating music. The new Launchkey range has performed
strongly in HY25, with end-user registrations showing significant growth
versus HY24.
ADAM Audio, based in Berlin and acquired in July 2019, is a globally
recognised brand with a passionate team dedicated to delivering exceptional
monitor speakers and headphones for audio content creators. ADAM Audio's
portfolio of reference monitors encompasses the T-Series, A-Series, S-Series
and recently introduced D-series. The T-Series speakers are award winning
reference monitors designed for the home studio market. The A-Series are used
in both high-end home studios and professional facilities, while the
enterprise level S-Series are installed in some of the most prestigious audio
production facilities in the world. Both the A-series and S-Series speakers
are seeing growing adoption in upgraded facilities to integrate mixing in an
immersive sound environment.
ADAM launched their first desktop monitors, the D3Vs, at the start of this
financial year. These speakers have received numerous awards and accolades
across the industry, setting a new performance mark for a 3 inch, compact
solution for the desktop. We are also seeing the D3Vs gain traction with a
number of Hi-Fi companies who sell into the more mainstream consumer audio
market.
ADAM's new headphones, the H200, was also launched in the first six months.
Initial response has been very positive and we expect this segment to grow as
we expand the product line to offer a full headphone portfolio.
Overall, ADAM delivered a strong first period, with continued robust sales of
the T-Series, renewed momentum in the high-end S-Series, and strong demand for
the new desktop D3Vs.
Sequential, based in San Francisco and acquired in April 2021, is a legendary
brand in the industry - synonymous with iconic analogue synthesizers. It has
been at the forefront of electronic music innovation for over 40 years. In
May 2023, the Group acquired the exclusive rights to another prestigious
synthesizer brand, Oberheim, which now operates under the Sequential entity as
a separate brand.
The majority of Sequential and Oberheim products are positioned at the
US$3,000 and upwards price points, catering primarily to professional and
aspiring musicians and composers. This segment has faced significant
challenges over the past year, on account of the overall industry softness
exacerbated by global cost-of-living pressures. To that end, Oberheim
launched a new, low cost synth, the TEO-5, which began shipping at the start
the first half, adding to the more affordably priced Sequential products
successfully launched in FY24. Sales have been strong, with continued demand
beyond the initial channel fulfilment.
Sonnox, based outside of Oxford and acquired in December 2022, develops
industry leading software plug-ins for audio production. These plug-ins,
normally residing inside a DAW (Digital Audio Workstation) enable users to
refine their audio and produce professional quality recordings.
Sonnox revenue declined by 4.9% in the first half, primarily due to lower
royalties from a third-party hardware partner experiencing softness in its
market. Beyond that, Sonnox's core plug-ins continue to sell well and
several new releases are planned, which are expected to be well received by
its dedicated customer base. In addition, the Sonnox team's exceptional
engineering skills have contributed to the further development of new products
across the Focusrite and ADAM brands, forming an integral part of the Group's
overall Research and Development talent base.
Audio Reproduction: Revenue by region
Six months to 28 February 2025 Six months to 29 February 2024 Reported Growth OCC Growth(2) Year to
31 August
2024
Audio Reproduction £'000 £'000 £'000 £'000 £'000
Americas(1) 5,873 5,944 -1.2% 1.4% 13,554
EMEA 8,577 8,848 -3.1% -5.6% 19,062
APAC(1) 7,007 7,991 -12.3% -11.7% 15,089
Total 21,457 22,783 -5.8% -5.9% 47,706
( )
(1) (Regions restated to reflect revised Group operating model with LATAM now
part of Americas and APAC replacing "Rest of World")
(2 Organic constant currency (OCC) growth rate is calculated by comparing HY25
revenue to HY24 revenue adjusted for HY25 exchange rates and the impact of
acquisitions)
The Audio Reproduction brands provide high quality, professional grade
solutions for both permanent installations and live sound events. The Group
first invested in this segment with the acquisition of Martin Audio in
December 2019. Since then, the portfolio has grown significantly, both
organically and through strategic acquisitions, resulting in a strong lineup
of solutions tailored for the touring, theatre, and installation markets.
With the additions of amplifiers, through the acquisition of Linea Research in
March 2022, and further immersive sound capabilities and with the acquisitions
of Sheriff Technology in December 2023 and then Innovate in April 2024, the
division can now provide a complete offering across the dynamic field of Audio
Reproduction and immersive sound.
The first six months of the year have seen the teams further integrate the
different products and brands resulting in a strong project pipeline that is
expected to grow throughout the year.
Martin Audio was founded in 1972 to deliver world class touring systems for
the supergroups of the day. The ethos of "Uniting the Audience" has remained
core to the company's mission and success. Martin's market stature is built
on the meticulous detail of its loudspeakers sonic performance, further
enhanced through software and digital signal processing (DSP) which allows
precise shaping and control of overall sound performance.
Martin's product portfolio is best understood in terms of "throw" (the
distance sound must travel to create the ideal listening experience). Martin
offers solutions across its Flexpoint, TORUS, Wavefront Precision, Blackline X
and CDD Live ranges to address any size requirement for either a permanent
installation or live event.
Optimal Audio, the commercial audio brand which has been organically developed
over the last four years has benefitted from increased product availability
and continues to grow steadily in a large and competitive market.
Linea Research has established itself as a trusted and innovative industry
leader in high quality power amplification. Linea Research's portfolio
includes integrated digital signal processing, a unique combination of
high-quality sound and power that professional installations and events
require.
Linea Research has integrated well into the wider Group since being acquired
in March 2022 providing a reliable source of amplification technology for
Martin Audio's products, whilst also continuing to serve a broad base of third
party customers through its own product lines. Linea Research was honoured
with a King's Award for Innovation in 2024, reflecting its ongoing commitment
to excellence in engineering.
Sheriff Technologies, comprises two brands serving the Audio Reproduction
market: TiMax and OutBoard.
TiMax is a pioneer in the rapidly growing field of immersive audio
experiences, specialising in innovative sound and show control solutions
through their SoundHub and TrackerD4 products. These technologies support a
wide range of applications including entertainment, events, branding, themed
environments and exhibition spaces
OutBoard, built on extensive experience from the touring and rigging
industries, offers a comprehensive suite of compact, robust chain-hoist motor
controllers, as well as systems for safety testing, preparation, and quality
management, all designed for use by global rental companies and large-scale
venues.
As previously reported, the Audio Reproduction segment experienced exceptional
growth across 2023 and 2024, following a period of very low demand during the
pandemic and a subsequent reinvestment of capital into the industry during the
return of live events. As expected, market demand is now normalising toward
pre-pandemic levels. For Martin Audio, this trend was especially evident in
China, which delivered a notably strong first half in the prior as the region
emerged from a prolonged lockdown. This has contributed to a 5.8% year on year
decline. However, with a significantly broader product offering and
increased market presence, the Group's pipeline supports our expectation of a
stronger second six months for the Audio Reproduction division, in line with
the typical seasonality of its market.
Research and development
R&D remains a cornerstone of our Group's strategy. During the period,
the Group successfully launched three new products to market, alongside 56
software upgrades (FY24: 57 upgrades). Our R&D teams are based in each of
the business units, working across the technical, design and manufacturing
disciplines of all our products. The Group holds three Queen's and King's
Awards for innovation, and this focus on innovation has resulted in cashflow
benefits of over £1 million per year from tax credits due to the RDEC
scheme and patent box benefits.
All our development projects follow a rigorous product lifecycle analysis,
assessing market competition and technical challenges as well as their
anticipated economic return, to deliver either range refreshes or incremental
new products. Looking ahead, product introductions are planned across many
of our brands in the second six months of the financial period and beyond,
comprising a mix of product refreshes and entirely new innovations.
Financial Review
Overview
The Group reported revenues of £80.9 million, representing a 5.2% increase
compared to the six months ended 29 February 2024. On an organic constant
currency ("OCC") basis, the underlying increase was 7.2%.
Adjusted EBITDA(2) of £10.4 million was 14.0% lower than the prior year,
reflecting the impact of a lower gross margin and an anticipated increases in
costs including normalised variable remuneration and inflationary pressures.
Reported operating profit declined to £3.1 million (HY24: £4.7 million),
driven by the same factors impacting overall financial performance. Adjusted
diluted EPS¹ was also lower than the prior year's 7.7 pence, at 6.6 pence.
Income statement
HY25 HY25 HY25 HY24 HY24 HY24
£m £m £m £m £m £m
Adjusted Adjusting items(1) Reported Adjusted Adjusting items(1) Reported
Revenue 80.9 - 80.9 76.9 - 76.9
Cost of sales (45.4) - (45.4) (41.7) - (41.7)
Gross profit 35.5 - 35.5 35.2 - 35.2
Administrative overheads (25.1) - (25.1) (23.1) (0.1) (23.2)
EBITDA(2) 10.4 - 10.4 12.1 (0.1) 12.0
Amortisation of intangible assets (3.2) (2.7) (5.9) (3.1) (2.7) (5.8)
Depreciation of tangible assets (1.4) - (1.4) (1.5) - (1.5)
Operating profit 5.8 (2.7) 3.1 7.5 (2.8) 4.7
Net finance expense (1.0) - (1.0) (1.3) - (1.3)
Profit before tax 4.8 (2.7) 2.1 6.2 (2.8) 3.4
Income tax expense (0.9) 0.6 (0.3) (1.6) 0.7 (0.9)
Profit for the period 3.9 (2.1) 1.8 4.6 2.1 2.5
Memo: Total administrative expenses (29.7) (2.7) (32.4) (27.7) (2.8) (30.5)
1 Adjusted for amortisation of acquired intangible assets and other adjusting
items detailed in note 4 to the Interim Financial Statements.
2 Earnings (Profit after tax) before Interest, Tax, Depreciation and
Amortisation
Revenue analysis
HY25 Reported Acquisition Adjustment HY25 Adjusted HY24 Reported HY24 Currency HY24 adjusted Reported Growth OCC Growth(1)
Focusrite 30.9 - 30.9 29.4 (0.8) 28.6 5.2% 8.0%
Novation 8.7 - 8.7 7.9 (0.2) 7.7 10.4% 13.2%
Focusrite Novation(2) 39.6 - 39.6 37.3 (1.0) 36.3 6.2% 9.1%
ADAM 13.6 - 13.6 11.3 (0.3) 11.0 20.9% 24.2%
Sequential 5.2 - 5.2 4.5 (0.1) 4.4 15.7% 18.9%
Sonnox 1.0 - 1.0 1.0 - 1.0 -4.9% -2.4%
Content Creation 59.4 - 59.4 54.1 (1.4) 52.7 9.9% 12.8%
Audio Reproduction 21.5 (0.4) 21.1 22.8 (0.4) 22.4 -5.8% -5.9%
Total 80.9 (0.4) 80.5 76.9 (1.8) 75.1 5.2% 7.2%
1 Organic constant currency (OCC) growth rate is calculated by comparing
FY25 revenue to FY24 revenue adjusted for FY25 exchange rates and the impact
of acquisitions
2 This period Focusrite and Novation brands have been merged into one
operating segment within the financial statements following the reorganisation
of the relevant R&D teams, resulting in Novation no longer meeting
the criteria for separate disclosure as a cash generating unit. The brands
are shown here separately for reference and to provide added clarity in the
comments below.
Group revenue increased by 5.2% to £80.9 million (HY24: £76.9 million). When
adjusted for acquisitions and constant currency effects, this equates to an
organic constant currency (OCC) growth of 7.2%. Sheriff Technology, acquired
in December 2023, contributed two months of revenue in the prior half year.
Currency movements resulted in headwinds, reducing reported revenue by
approximately £1.8 million, primarily due to the weakening of the US dollar.
After a turbulent four years across our Content Creation sales channels, stock
levels have now largely normalised across our partner network, with the
division returning to growth at 9.9% (OCC: 12.8%). This was helped in part
by stock build in the US ahead of anticipated tariff increases. After
adjusting for this phasing effect underlying OCC growth for the division would
have been approximately 6.5% for the period.
The Audio Reproduction division has benefitted from strong market demand over
the last two years, since the lifting of COVID restrictions. As expected,
the market has now begun to stabilise, resulting in a decline of 5.8% (OCC:
-5.9%) compared to an exceptionally strong first half last year.
Focusrite Novation achieved revenue of £39.6 million an increase of 6.2%
(OCC: 9.1%) compared to the prior year. Both brands reported growth in the
period, with Novation performing particularly well, up 10.4%, and Focusrite up
5.2% year on year.
Adjusting for US tariff related sales rephasing, Novation, where the majority
of products are manufactured in China, would have been slightly positive and
Focusrite would have reported underlying growth of approximately 5.0%.
As highlighted at the end of FY24, some destocking was anticipated in the US
for several high volume Focusrite products and this has progressed as
expected. Focusrite revenue was supported by the launch of the high
input/output range of Scarlett products at the end of FY24, which have
continued to sell well and now lead their category rankings with many
resellers.
Novation also benefitted from new products, including the fourth iteration of
the Group's successful Launchkey controller range supported by seeded launches
with selected influencers on social media.
ADAM Audio continues to grow with an expanded range now including desktop
speakers and headphones. Revenue grew by 20.9% (OCC: 24.2%) to £13.6
million, with a tailwind from the phasing of sales due to inventory build to
mitigate tariffs in the US. After adjusting for this effect, underlying
growth was approximately 10.6%, despite a particularly strong comparator in
the first half of FY24.
After two difficult years Sequential has returned to growth with revenue of
£5.2 million, up 15.7% year on year (OCC: 18.9%). The introduction of a new
lower price point synthesizer, the TEO-5, drove much of this growth and
continues to sell well in all regions. As Sequential is almost entirely
manufactured in the US there was no impact from tariff rephasing in the half
year.
Audio Reproduction had a particularly strong result in the first half of last
year, driven by high demand in APAC, particularly China, following the delayed
removal of COVID restrictions. As expected, the market has now started to
normalise, and as a result revenue for this division reduced to £21.5 million
from £22.8 million in HY24 a decline of 5.8% (OCC: 5.9%). There was no
tariff rephasing impact on revenue, as the Group holds stock in the US for
Audio Reproduction and so the rephasing is reflected in higher inventory
levels at the period end rather than higher sales levels during the first
half.
The strength of the Group's expanded Audio Reproduction portfolio is evident
in the robustness of the sales pipeline of orders, which remains at levels
consistent with the prior year and indicates that the second six months period
should be stronger than the first six months.
Currency impact
The US Dollar weakened during the period (with detailed exchange rate
movements provided below), resulting in the majority of the £1.8 million
negative translation impact on Group revenue for HY25 relative to HY24.
However, the impact at the profit level was minimal as purchases of inventory
from manufacturers in China and Malaysia are also denominated in USD, creating
a natural hedge that offsets much of the currency fluctuation.
Segment Profit
Segment profit is disclosed in more detail in note 3 to the Interim Financial
Statements named, 'Operating Segments'. These segments compare the revenue
of the products of the relevant brands with the directly attributable costs to
create segment profit.
Gross Profit analysis
The Group's gross margin percentage for the first six months was 43.9%,
broadly consistent with the underlying margin reported in the second half of
the prior year, but down from 45.8% in HY24. This decline was primarily driven
by changes in product and regional sales mix across our brands.
The most significant impact on Group's gross margin came from the Audio
Reproduction division. This division, which delivered particularly strong
gross margins of 49.7% in the prior year, reported a gross margin of 44.0% in
HY25, which reflects a return to a level in line with the three year average
of 43.5%. The key driver was a sharp reduction in sales to the Chinese
market, where a portion of sales are recognised on a royalty basis via our
contract manufacturers. This market weakness in China significantly impacted
both revenue and gross profit in the division.
In the Content Creation division, reported gross margin declined slightly by
0.2 percentage points from 44.1% to 43.9% in the first six months compared to
the prior first half. However, HY24 included a £1 million provision for
Vocaster stock, which impacted gross margins by 1.3 percentage points,
therefore the underlying decline for the division was 1.5 percentage points.
Stronger sales of lower margin Novation products, alongside a reduction in
sales of higher margin Pro range products, contributed to this decline.
Additionally, pricing adjustments made in EMEA to align pricing across ADAM
sales channels resulted in a 2.6 percentage point decrease in gross margin for
this brand. This strategy has helped drive incremental volume and revenue,
resulting in a £0.8 million increase in gross profit.
Sequential's gross margins improved by 5.3 percentage points to 43.3%,
reflecting reduced pricing pressure and stabilisation of promotional activity.
Freight rates remained elevated across both divisions relative to the first
half of the prior year, and some one-off rework costs relating to new product
launches had a further 0.6 percentage point negative impact on Group gross
margin.
Looking ahead, the outlook remains uncertain due to the constantly evolving
tariff regulations. However we expect an ongoing improvement in margins in
regions outside the US. For the US we will continue to focus on maximising
gross profits. We have taken swift action in the US to increase prices from
May 1 to offset tariff increases and have increased inventory to provide some
level of protection before these tariff increases take effect.
Administrative expenses
Administrative expenses include sales, marketing, operations, the
uncapitalised element of R&D (partially offset by the Research and
Development Expenditure Credit regime ('RDEC') tax credit of £0.2 million),
as well as central functions such as legal, finance and the Group Board.
Total expenses were £25.1 million, up from £23.2 million in the prior year.
There were no adjusting costs in the period (HY24: £0.1 million).
The £2.0 million increase in adjusted administrative expenses was primarily
driven by the normalisation of variable remuneration totalling £1.0 million,
and £0.7 million of labour cost inflation. The remaining increase relates to
the annualisation of costs associated with the acquisition of Sheriff
Technology in the prior year.
Adjusted EBITDA
Adjusted EBITDA is an alternative performance measure widely used by
securities analysts, investors and other stakeholders to assess a company's
underlying profitability. Within the Group, it also forms the basis for
elements of senior management incentivisation, both at the operating company
and Group level.
Adjusted EBITDA decreased from £12.1 million in HY24 to £10.4 million in
HY25, a decrease of 14.0%. The reduction was primarily due to the lower
gross margin and higher operating costs, as discussed above.
A reconciliation of adjusted EBITDA to operating profit can be found in Note
1.9 to the Interim Financial Statements.
Depreciation and amortisation
Depreciation is charged on tangible fixed assets using the straight-line
method over the assets' estimated useful lives, typically ranging between two
and five years.
Amortisation is primarily applied to capitalised development costs, with
charges spread over the expected lifecycle of the related product. Product
lifespans vary across the Group's brands, from approximately three years for
Focusrite and Novation, up to 11 years for Martin Audio and 15 years for
Sequential.
During the period, £4.8 million of development costs were capitalised (HY24:
£4.5 million), while £3.2 million of previously capitalised development
costs were amortised (HY24: £3.1 million). Further details are provided
in Note 8.
The amortisation of the acquired intangible assets totalled £2.7 million
during the period (HY24: £2.7 million) and has been disclosed within
adjusting items.
Adjusting items
In HY25 there were no adjusting items. In HY24 adjusting items totalled
£0.1 million which related to the due diligence costs for the acquisition of
Sheriff Technology that was completed on 19 December 2023. £2.7 million
relating to amortisation of acquired intangible assets is also shown as an
adjusting item in both reporting periods.
Foreign exchange and hedging
The exchange rates were as follows:
Exchange rates HY25 HY24 FY24
Average
USD:GBP 1.28 1.25 1.26
EUR:GBP 1.19 1.16 1.17
Period end
USD:GBP 1.26 1.26 1.31
EUR:GBP 1.21 1.17 1.19
The average USD rate has weakened to $1.28 for HY25 (HY24: $1.25). The USD
accounts for over half of Group revenue but nearly all of the cost of sales,
so there is a useful natural hedge against currency fluctuations.
The Group enters into forward contracts to convert Euro to GBP. The policy
adopted by the Group is to hedge approximately 75% of the Euro flows for the
current financial period (ending February 2026) and approximately 50% of the
Euro flows for the following financial year (year ending February 2027).
Corporation tax
The effective tax rate for the period has decreased to 13.0% (HY24: 27.7%).
This is largely due to the benefit attributable to Patent Box claims,
including in respect of a new patent granted in January 2025. The underlying
effective rate excluding the impact of the catch up for attributable profits
prior to the grant date of the new patent is 23.0%. The headline effective tax
rate is expected to remain around the UK corporate tax rate in future years
due to the ongoing permitted deductions under the Patent Box scheme offsetting
the impact of higher tax rates on profits from non-UK entities.
Earnings per share ('EPS')
The basic EPS for the half year was 3.1 pence, down 26.2% from 4.2 pence in
HY24. This decrease has largely resulted from the change in reported profit
after tax, which was impacted by a lower gross margin and an anticipated
increase in administrative costs. The weighted average number of shares used
for the calculation has decreased marginally compared to the prior year at
58,628,000 shares (HY24: 58,872,000 shares). The more comparable measure,
excluding adjusting items and including the dilutive effect of share options,
is the adjusted diluted EPS. This decreased to 6.6 pence, from 7.7 pence in
HY24, a decrease of 14.3%.
HY25 HY24 FY24
Pence Pence Pence
Basic 3.1 4.2 4.5
Diluted 3.1 4.1 4.4
Adjusted basic 6.7 7.8 18.3
Adjusted diluted 6.6 7.7 18.0
Balance sheet
HY25 HY24 FY24
£m £m £m
Non-current assets 93.6 98.9 94.0
Current assets
Inventories 48.6 55.3 49.3
Trade and other receivables 38.8 37.5 37.6
Cash 15.6 8.9 22.0
Current liabilities
Trade, other payables and provisions (31.7) (30.2) (34.8)
Non-current liabilities
Bank loan (33.5) (36.2) (34.5)
Deferred tax (10.2) (10.3) (10.8)
Other non-current liabilities (6.3) (5.6) (6.8)
Net assets 114.9 118.3 116.0
Working capital(1) 55.7 62.6 52.1
(1) Working capital is defined as inventories plus trade and other receivables
less trade and other payables and provisions
Non-current assets
The non-current assets comprise: goodwill, brands, patents and capitalised
development costs; property, plant and equipment; and software.
The goodwill totals £14.1 million (HY24: £16.9 million). The decrease is
largely due to the impairment of goodwill of £2.6 million made at the end of
FY24 relating to the Sequential with the remaining movement due to foreign
exchange.
The total cost of the brands is £25.5 million (HY24: £25.7 million). The
majority of brands are being amortised over 10 and 15 years with Martin over a
20 year period. As at 28 February 2025 the brands had carrying value, net of
amortisation, of £15.8 million compared to £19.2 million as at 29 February
2024, with £2.1 million of the reduction resulting from the prior year
Sequential impairment.
Acquired technology and patent costs comprise developments now in use and
brought into the Group as part of an acquisition. These are amortised over
similar periods to internally generated assets and as at 28 February 2025
comprised £37.8 million at cost (HY24: £37.3 million). The net book value
of these assets at the period end was £21.0 million (HY24: £24.9 million),
with £0.7 million of the reduction resulting from the Sequential impairment.
The internally generated technology and patent costs comprise capitalised
research and development costs for products currently in use. The
amortisation periods range from three years to fifteen years depending on the
expected life of the products. The shorter amortisation periods are more
usual for Focusrite and Novation products and the longer periods for the ADAM
Audio monitors, Martin Audio live speakers and Sequential synthesisers. The
capitalised technology and patent costs as at 28 February 2025 had a carrying
value, net of amortisation, of £14.8 million (HY24: £10.7 million).
Capitalised technology and patent costs still under development comprise
acquired and internally generated technology and patent costs for products
currently still in development. The cost of these items has increased from
£7.1 million at 1 September 2024 to £8.4 million as at 28 February 2025
(HY24: £9.4 million), as a result of our £3.9 million ongoing investment in
new products, net of the transfer of £2.6 million of costs to products now in
use.
Overall, amortisation of the intangible assets totals £5.9 million (HY24:
£5.8 million). This is split between amortisation of intangible assets
acquired as part of the acquisitions of £2.7 million (HY24: £2.7 million),
and other amortisation of £3.2 million (HY24: £3.1 million). The
amortisation of acquired intangible assets has been treated as an adjusting
item.
Based on current trading and management forecasts, we have conducted
impairment reviews for those subsidiaries impacted by difficult markets with
no impairments to the carrying value of the intangible assets being deemed
necessary. This will be reassessed at the next reporting period for any
evidence of any permanent diminution in value.
The remaining £6.4 million net book value of intangible assets (HY24: £6.0
million) is in respect of purchased licences, software and trademarks.
Tangible non-current assets consist mainly of right of use assets relating to
the Group's leased offices and warehouses, and tooling equipment for the
manufacture of products. This has increased since February 2024 due the
addition of tooling for manufacture and a new lease for the Group's office in
Hong Kong.
Working Capital Analysis
As of 28 February 2025, working capital represented 34.2% of the last 12
months' revenue, a decrease from 37.0% in the comparable period of the
previous year (HY24), although still above the Group's historic average of
around 25%.
Working capital has decreased from the same point in the prior year, but, as
planned, has increased slightly since year end. Inventory has reduced
significantly over the last 12 months due to the reduction in Scarlett stocks,
particularly of the Gen 3 products, and is lower than at the end of the last
financial year, despite a £2 million increase for our Audio Reproduction
stock in the US to mitigate the impact of tariffs. Trade debtors and creditors
are both higher than at the year end, reflecting the high sales towards the
end of the period into the US to manage tariff impacts.
We expect working capital to improve in the second six months resulting in a
small cash inflow in the period.
Cash Flow Analysis
HY25 HY24 FY24
£m £m £m
Cash and cash equivalents at the beginning of the year 22.0 26.8 26.8
Foreign exchange movements 0.2 (0.2) (0.4)
Cash and cash equivalents at the end of the year 15.6 8.9 22.0
Net decrease in cash and cash equivalents (per Cash Flow Statement) (6.6) (17.7) (4.4)
Change in bank loan 1.7 (8.1) (6.6)
Increase in net debt (4.9) (25.8) (11.0)
Add back equity dividend paid 2.6 2.6 3.9
Add back acquisition of subsidiary (net of cash acquired) - 2.3 2.5
Free cash outflow (2.3) (20.9) (4.6)
Add back non underlying items (cash outflow) - 0.1 0.1
Underlying free cash outflow (1) (2.3) (20.8) (4.5)
( )
(1)Defined as cashflow before equity dividends, acquisition of subsidiary (net
of cash acquired) and adjusting items.
The underlying free cash outflow in HY25 was £2.3 million, compared to a cash
outflow of £20.8 million in HY24. We expect underlying free cashflow for
the six month period to 31 August 2025 to be a small inflow, with the
rephasing of inventory due to tariffs to reverse. The Group remains
inherently cash generative, and the aim is to return to the historic norm of
consistent free cashflow generation in future years.
The net debt balance at the period end was £17.9 million (HY24: net debt of
£27.3 million and FY24: net debt of £12.5 million). The net debt includes
the arrangement fee for the revolving credit facility (RCF) of £0.6 million
which is being amortised across the period of the facility.
Following an update to IAS 1: Presentation of Financial Statements the Group
has reclassified the outstanding bank loan of £34.1 million to creditors due
in more than one year, and restated prior periods to reflect this
classification. This is based on the right to defer payment of the loans for
longer than 12 months from the Balance Sheet date.
The Group has a £50 million RCF facility split evenly between HSBC and
NatWest which was renewed in September 2023 and is due to expire in September
2028, together with an uncommitted facility for a further £50 million. As
at the balance sheet date £34.1 million was drawn down from the facility
(HY24: £36.9 million, FY24: £35.1 million).
Dividend
The Board has approved an interim dividend of 2.1p (HY24: 2.1p) which is in
line with the previous year, despite the reduction in profits and reflects the
Board's confidence in the future profit and cash generation prospects of the
Group.
Change in year end
As announced on 29 October 2024, the Group's year end has been changed from 31
August to 28 February. As a result, the Group will next be reporting
unaudited interim results for the 12 month period to 31 August 2025 to be
followed by audited full period results for the 18 month period to 28 February
2026.
Summary and Outlook
After several years of volatility across our Content Creation sales channels,
we are now seeing a return to more normal inventory levels, accompanied by
sustained demand for our leading brands. The Group has returned to growth,
with a 9.9% increase in revenue from Content Creation. This has been driven by
more consistent and predictable channel orders, successful new product
launches across most of our brands, and some sales rephasing in the US to
mitigate the impact of tariffs. The refresh of our flagship Scarlett range in
Focusrite is now complete, with customer registrations remaining steady
compared to the prior year, outperforming a declining wider market and
signalling continued brand strength. Incremental new product introductions
in both ADAM and Sequential have further contributed to the overall revenue
growth.
As previously highlighted, Audio Reproduction has normalised following 18
months of unusually high post-lockdown demand, with H1 revenues down 5.8%
year-on-year. However, the pipeline for this division remains strong,
reflecting the success of our expanded portfolio and broader market reach.
Macroeconomic uncertainties persist-particularly in our key US market- and we
have responded swiftly to help mitigate these risks including inventory
phasing, selective price increases and relocating manufacturing for certain
product ranges. We remain vigilant with regard to any further challenges in
the US business environment. With new product launches planned for the next
six months, as previously indicated we expect a greater weighting of sales in
this period and will continue to focus on maximising gross margins. Given
the current 90 day pause and tariff exemption window for certain products, we
believe our expectations for the first 12 months of the current financial
period remain realistic.
Tim Carroll Sally McKone
Chief Executive Officer Chief Financial Officer
28 April 2025
Risks and Uncertainties
The principal risks affecting the Group are described on pages 34 to 39 of the
Group's Annual Report for the year ended 31 August 2024 (a copy of which is
available on the Group's website at
https://focusriteplc.com/investors/reports-and-presentations/
(https://focusriteplc.com/investors/reports-and-presentations/) ) The Board
has considered the principal risks and uncertainties as presented in that
Annual Report and has determined that they broadly remain relevant to the rest
of this financial year, with the updates as set out below.
Adverse changes in macroeconomic conditions
Tariffs introduced by the USA government on goods imported from China and at a
lower level on goods produced in other countries will ultimately result in
higher prices for US consumers. The situation remains volatile and
uncertain. The Group is monitoring the situation closely and has taken
action to mitigate the impact through increasing inventory in the US and
taking swift action to increase prices where relevant, whilst remaining
mindful of our competitive position.
We continue to explore options regarding the sourcing location of our products
across all our brands. We have existing manufacturing locations in Germany
and the UK, work with our long-term contract manufacturers in the UK, US and
Malaysia, and in addition several of our Chinese based partners have factories
outside of China. We constantly review options to ensure that we can provide
products which meet our high levels of quality at the most cost-effective
price for our customers.
In addition, the Group's business is subject to the political, economic and
other risks that are currently at play in the changing global environment,
with sales to certain markets continuing to be impacted by ongoing conflicts.
Cyber threat
As a Group we monitor attempts to infiltrate our information systems and since
our Annual Report 2024 was published, we have seen increasingly sophisticated
and more personalised attacks using generative AI which makes it more
difficult to spot threats. The Group has invested in AI driven tools in order
to block these threats as they evolve and we continue to explore further
options to strengthen our 24/7 monitoring of our systems.
Forward looking statements
The risks and uncertainties facing the Group were reported in detail in the
2024 Annual Report and are monitored closely by the Group. The forward-looking
statements in this Interim Report cannot be relied upon as a guarantee or
prediction of future performance. We, like all businesses, continue to face
known and unknown risks, uncertainties and other factors, many of which are
beyond our control, which may mean our actual results differ from those
expressed in this first half year report.
Condensed Consolidated Income Statement
For the six months ended 28 February 2025
Note Six months to Six months to Year to
28 February 2025
29 February 2024
31 August 2024
£'000 £'000 £'000
Revenue 2 80,907 76,884 158,254
Cost of sales (45,374) (41,683) (88,031)
Gross profit 35,533 35,201 70,493
Administrative expenses (32,450) (30,544) (64,797)
Adjusted EBITDA (non-GAAP measure) 10,431 12,098 25,219
Depreciation and amortisation (4,666) (4,609) (8,574)
Adjusting items for Adjusted EBITDA:
Amortisation of acquired intangible assets 8 (2,682) (2,734) (5,510)
Impairment of acquired intangible assets - - (5,355)
Adjusting items 4 - (98) (84)
Operating profit 3,083 4,657 5,696
Finance income 98 83 100
Finance costs (1,064) (1,318) (3,292)
Profit before tax 2,117 3,422 2,504
Income tax (expense)/income 5 (275) (949) 104
Profit for the period from continuing operations 1,842 2,473 2,608
Earnings per share
From continuing operations
Basic (pence per share) 7 3.1 4.2 4.5
Diluted (pence per share) 7 3.1 4.1 4.4
Condensed Consolidated Statement of Other Comprehensive Income
Six months to Six months to Year to
28 February 2025
29 February 2024
31 August 2024
£'000 £'000 £'000
Profit for the period 1,842 2,473 2,608
Items that may be reclassified subsequently to the income statement
Exchange differences on translation of foreign operations (458) (77) (856)
Loss on forward foreign exchange contracts designated and effective as a (16) (190) (491)
hedging instrument
Tax on hedging instrument - 47 123
Total comprehensive income for the period 1,368 2,253 1,384
Profit attributable to:
Equity holders of the Company 1,368 2,253 1,384
Condensed Consolidated Statement of Financial Position
Note 28 February 2025 Restated Restated
29 February 2024 1 (#_ftn1) 31 August 20241
£'000 £'000 £'000
Assets
Non-current assets
Goodwill 14,113 16,888 14,194
Other intangible assets 8 66,387 70,169 66,065
Property, plant and equipment 10,325 11,375 11,096
Deferred tax assets 2,729 452 2,666
Total non-current assets 3 93,554 98,884 94,021
Current assets
Inventories 48,635 55,298 49,267
Trade and other receivables 9 38,766 37,186 37,391
Current tax assets - - 226
Derivative financial instruments 9 - 301 -
Cash and cash equivalents 9 15,637 8,924 22,040
Total current assets 103,038 101,709 108,924
Current liabilities
Trade and other payables (27,299) (25,299) (30,745)
Other liabilities (1,821) (956) (1,527)
Current tax liabilities (1,705) (2,681) (2,022)
Provisions (561) (1,270) (522)
Derivative financial instruments 9 (267) - -
Total current liabilities (31,653) (30,206) (34,816)
Net current assets 71,385 71,503 74,108
Total assets less current liabilities 164,939 170,387 168,129
Non-current liabilities
Bank loans and arrangement fee 1 9 (33,497) (36,228) (34,565)
Deferred tax (10,185) (10,213) (10,815)
Other liabilities (6,290) (5,639) (6,793)
Total non-current liabilities (49,972) (52,080) (52,173)
Total liabilities (81,625) (82,286) (86,989)
Net assets 114,967 118,307 115,956
Capital and reserves 59
Share capital
59 59
Share premium 115 115 115
Merger reserve 14,595 14,595 14,595
Merger difference reserve (13,147) (13,147) (13,147)
Translation reserve (4,138) (2,834) (3,680)
Hedging reserve (16) 301 -
EBT reserve (1) (1) (1)
Retained earnings 117,500 119,219 118,015
Equity attributable to owners of the Company 114,967 118,307 115,956
Total equity 114,967 118,307 115,956
1 Restated for the reclassification of outstanding bank loans as
non-current liabilities from current liabilities. See note 1.10 for more
details.
Condensed Consolidated Statements of Changes in Equity
For the six months ended 28 February 2025 Share capital Share premium Merger reserve Merger difference reserve Translation reserve Hedging reserve EBT reserve Retained earnings Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 September 2024 59 115 14,595 (13,147) (3,680) - (1) 118,015 115,956
Profit for the period - - - - - - - 1,842 1,842
Other comprehensive income/(expense) for the period - - - - (458) (16) - - (474)
Total comprehensive income/(expense) for the period - - - - (458) (16) - 1,842 1,368
Transactions with owners of the Company:
Share-based payment deferred tax deduction in excess of remuneration expense - - - - - - - (1) (1)
Share-based payments - - - - - - - 252 252
Shares withheld to settle employees' tax obligations associated with - - - - - - - (52) (52)
share-based payments
Share-based payments in lieu of bonuses - - - - - - - 83 83
Dividends paid - - - - - - - (2,639) (2,639)
Balance at 28 February 2025 59 115 14,595 (13,147) (4,138) (16) (1) 117,500 114,967
Condensed Consolidated Statements of Changes in Equity (Continued)
For the six months ended 29 February 2024 Share capital Share premium Merger reserve Merger difference reserve Translation reserve Hedging reserve EBT reserve Retained earnings Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 September 2023 59 115 14,595 (13,147) (2,757) 491 (1) 119,097 118,452
Profit for the period 2,473 2,473
Other comprehensive income/(expense) for the period (77) (190) 47 (220)
Total comprehensive income/(expense) for the period - - - - (77) (190) - 2,520 2,253
Transactions with owners of the Company:
Share-based payment deferred tax deduction in excess of remuneration expense - - - - - - - (81) (81)
Shares from EBT exercised - - - - - - - 22 22
Share-based payments - - - - - - - 192 192
Shares withheld to settle employees' tax obligations associated with - - - - - - - (105) (105)
share-based payments
Premium on shares awarded in lieu of bonuses - - - - - - - 212 212
Dividends paid - - - - - - - (2,638) (2,638)
Balance at 29 February 2024 59 115 14,595 (13,147) (2,834) 301 (1) 119,219 118,307
Condensed Consolidated Statements of Changes in Equity (Continued)
For the year ended 31 August 2024 Share capital Share premium Merger reserve Merger difference reserve Translation reserve Hedging reserve EBT reserve Retained earnings Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 September 2023 59 115 14,595 (13,147) (2,757) (491) (1) 119,097 118,452
Profit for the period - - - - - - - 2,608 2,608
Other comprehensive (expense)/ income for the period - - - - (923) (491) - 190 (1,224)
Total comprehensive (expense)/ income for the period - - - - (923) (491) - 2,798 1,384
Share-based payment deferred tax deduction in excess of remuneration expense - - - - - - - (84) (84)
EBT shares issued - - - - - - - 22 22
Share-based payments - - - - - - - 158 158
Shares withheld to settle employees' tax obligations associated with - - - - - - - (106) (106)
share-based payments
Dividends paid - - - - - - - (3,870) (3,870)
Balance at 31 August 2024 59 115 14,595 (13,147) (3,680) - (1) 118,015 115,956
Consolidated Statement of Cash Flow
For the six months ended 28 February 2025
Note Six months to Six months to Year to
28 February 2025 29 February 2024
31 August 2024
£'000 £'000 £'000
Cash flows from operating activities
Profit for the period 1,842 2,473 2,608
Adjustments for:
Income tax expense/(credit) 275 949 (104)
Net interest charge 966 1,235 3,192
Loss on disposal of property, plant and equipment 6 - 13
Loss on disposal of intangible assets - - 75
Amortisation of intangibles 8 5,943 5,824 11,198
Impairment of goodwill and acquired intangibles - - 5,355
Depreciation of property, plant and equipment 1,405 1,516 2,887
Other non-cash items (183) (43) (625)
Share-based payments charge 252 192 158
Operating cash flow before movements in working capital 10,506 12,146 24,757
Increase in trade and other receivables (1,375) (4,703) (4,909)
Decrease in inventories 633 331 6,362
Decrease in trade and other payables (3,141) (17,362) (10,367)
Operating cash flow before interest and tax 6,623 (9,588) 15,843
Net interest paid (735) (1,250) (2,403)
Income tax paid (273) (1,368) (1,781)
Cash flow generated by/(utilised in) operations 5,615 (12,206) 11,659
Net foreign exchange movements (337) (95) (563)
Net cash inflow/(outflow) from operating activities 5,278 (12,301) 11,096
Cash flows from investing activities
Purchases of property, plant and equipment (607) (398) (1,540)
Purchases of intangible assets 8 (902) (2,524) (3,040)
Capitalised R&D costs (5,343) (5,094) (9,660)
Acquisition of subsidiary, net of cash acquired 10 - (2,276) (2,494)
Net cash used in investing activities (6,852) (10,292) (16,734)
Cash flows from financing activities
Proceeds from loans and borrowings - 8,831 10,050
Repayments of loans and borrowings (1,672) (695) (3,445)
Payment of right of use liabilities (682) (616) (1,423)
Equity dividends paid (2,639) (2,638) (3,870)
Net cash (utilised in)/generated from financing activities (4,993) 4,882 1,312
Net decrease in cash and cash equivalents (6,567) (17,711) (4,326)
Cash and cash equivalents at beginning of the period 22,040 26,787 26,787
Net foreign exchange movement 164 (152) (421)
Cash and cash equivalents at end of the period 15,637 8,924 22,040
Notes to the Condensed Consolidated Interim Financial Statements
1. Basis of preparation and significant accounting policies
Focusrite plc (the 'Company') is a company incorporated in the UK. The
condensed consolidated interim financial statements ('interim financial
statements') as at and for the six months ended 28 February 2025 comprised the
Company and its subsidiaries (together referred to as the 'Group').
The Group is a business engaged in the development, manufacture and marketing
of professional audio and electronic music products.
Statement of compliance
The condensed set of financial statements are for the six months ended 28
February 2025 and are presented in Pounds ('GBP' thousands; £'000). This is
the functional currency of the Group.
The condensed set of financial statements has been prepared in accordance with
the recognition and measurement requirements of UK-adopted international
accounting standards and the AIM rules.
The financial statements of the Group for the 18 month period ending 28
February 2026 will be prepared in accordance with UK-adopted international
accounting standards. The condensed set of financial statements has been
prepared applying the accounting policies and presentation that were applied
in the preparation of the company's published consolidated financial
statements for the year ended 31 August 2024 which were prepared in accordance
with UK-adopted international accounting standards in conformity with the
requirements of the Companies Act 2006.
AIM listed companies are not required to comply with IAS 34 'Interim Financial
Reporting' and accordingly the Company has taken advantage of this exemption.
The condensed financial statements do not include all the information required
for a complete set of IFRS financial statements. However, selected explanatory
notes are included to explain events and transactions that are significant to
an understanding of the changes in the Group's financial position and
performance since the last annual consolidated financial statements as at and
for the year ended 31 August 2024.
These interim financial statements were authorised for issue by the Company's
Board of Directors on 28 April 2025.
The comparative figures for the financial year ended 31 August 2024 are the
Company's statutory accounts for that financial year. Those accounts have been
reported on by the Company's auditor and delivered to the registrar of
companies. The report of the auditor was (i) unqualified, (ii) did not include
a reference to any matters to which the auditor drew attention by way of
emphasis without qualifying their report, and (iii) did not contain a
statement under section 498 (2) or (3) of the Companies Act 2006.
Material accounting policies
1.1 Basis of consolidation
The consolidated financial statements comprise the financial statements of the
Company and subsidiaries controlled by the Company drawn up to 28 February
2025.
1.2 Subsidiaries
Subsidiaries are entities controlled by the Group. Control exists when the
Group has the power to govern the financial and operating policies of an
entity so as to obtain benefits from its activities. In assessing control, the
Group takes into consideration potential voting rights that are currently
exercisable. The acquisition date is the date on which control is transferred
to the acquirer. The financial statements of subsidiaries are included in the
consolidated financial statements from the date that control commences until
the date control ceases.
1.3 Going concern
The Board of Directors have a reasonable expectation that the Company and the
Group have adequate resources to continue in operational existence and meet
their liabilities as they fall due for a period of at least 12 months from the
date of approval of these interim financial statements ("the going concern
period"). Accordingly, the interim statements have been prepared on a going
concern basis.
The Group meets its day-to-day working capital requirements from cash balances
and a revolving credit facility of £50.0 million which was renewed in
September 2023. In September 2024 the revolving credit facility was extended
for a further year to a maturity date of September 2028. The availability of
the revolving credit facility is subject to continued compliance with certain
covenants.
The Directors have prepared projected cash flow forecasts for the period
ending 12 months from the date of their approval of these financial
statements. These forecasts include a severe but plausible downside scenarios,
including the impact of a recession, a reduction in gross margins, loss of a
major distributor and an inability to ship from China for a period of time.
This last scenario effectively outlines a similar risk and impact to a
scenario where goods cannot be shipped from China to the US across several
brands due to either tariffs or other trading issues.
The base case covers the period to April 2026 and includes demanding but
achievable forecast growth. The forecast has been extracted from the Group's
forecast for the next 12 months. Key assumptions include:
· Future growth assumptions in line with market growth assumptions
and new product introductions
· Continued investments in research and development in all areas of
the Group.
· No further acquisitions
Throughout the period the forecast cash flow information indicates that the
Group will have sufficient liquidity and comply with the leverage and interest
cover covenants contained within the facility.
The Directors have modelled severe but plausible downside scenarios of the
risks identified above. This model assumes that purchases of stock would, in
time, reduce to reflect reduced sales, if they occurred. The Group would also
respond to a revenue shortfall by taking reasonable steps to reduce overheads
within its control. In these scenarios, the Group would be expected to remain
well within the terms of its loan facility with the leverage covenant (net
debt to adjusted EBITDA) in the period not exceeding the maximum of 2.5x.
Separately, as a reverse stress test, the Directors estimate that if the Group
were to experience a shortfall in revenue of greater than 25% than the
current expectations permanently from the start of the forecast period,
leverage could rise to the upper limits allowed by the banking covenants by
April 2026. This scenario includes consequential reductions in the purchases
of stock and dividends. However, the Directors' view is that any scenario of a
revenue shortfall of greater than the severe yet plausible scenario above
is not realistic. In practice, the Group's revenue levels are higher than
the prior period and should be further bolstered by plans for more product
introductions in the next six months.
During the second half of the year the Group expects to see cashflows improve,
as debtor phasing normalises and stock continues to reduce. As at 25 April
net debt had increased slightly to £19.2 million from £17.9 million at the
28 February, following payments of corporate tax.
Consequently, the Directors are confident that the Group will have sufficient
funds to continue to meet their liabilities as they fall due for at least 12
months from the date of approval of the financial statements and therefore
have prepared the financial statements on a going concern basis.
1.4 Earnings per share
The Group presents basic and diluted earnings per share ('EPS') data for its
ordinary shares. Basic EPS is calculated by dividing the profit attributable
to ordinary shareholders by the weighted average number of ordinary shares
outstanding during the period. For diluted EPS, the weighted average number of
ordinary shares is adjusted for the dilutive effect of potential ordinary
shares arising from the exercise of granted share options.
1.5 Accounting estimates and judgements
In application of the Group's accounting policies, the Directors are required
to make judgements, estimates and assumptions about the carrying amounts of
assets and liabilities that are not readily apparent from other sources. The
estimates and associated assumptions are based on historical experience and
other factors that are considered to be relevant. Actual results may differ
from these estimates.
In preparing these condensed consolidated interim financial statements, the
significant judgements made by the Directors in applying the Group's
accounting policies and key sources of estimation uncertainty were the same as
those applied to the Group's financial statements for the year ended 31 August
2024.
1.6 Revenue Recognition
The core principle of IFRS 15 is that an entity recognises revenue to depict
the transfer of promised goods or services to customers in an amount that
reflects the consideration to which the entity expects to be entitled in
exchange for those goods or services. Having identified the customer, the
performance obligations and the transaction price, the revenue is recognised
when the Group satisfies the performance obligations.
The value of revenue comprises the fair value of the consideration received or
receivable for the sale of goods and services in the ordinary course of the
Group's activities. Revenue is shown net of sales taxes and discounts. If a
contract includes variable consideration, Focusrite will estimate the amount
of consideration to which it will be entitled and present this as a contract
liability within Trade and other payables. Variable consideration will take
into account discounts, incentives and penalties expected due based on
expected value calculated from historic experience and planned future
marketing campaigns. We have constrained the revenue recognised to an amount
that it is highly probable that a significant reversal will not occur. Due to
the fact that the vast majority of sales by Focusrite involve sale of goods,
the timing of the revenue recognition is considered in relation to
'Performance obligations satisfied at a point in time' (IFRS 15; 38)
considering the following factors:
1) The entity has a present right to payment for the asset.
2) The customer has legal title to the asset.
3) The entity has transferred physical possession of the asset.
4) The customer has the significant risks and rewards of ownership of
the asset.
5) The customer has accepted the asset.
Sale of goods
The Group has three routes to market for the sale of goods: distributors,
resellers and direct to end users. These cover all segments and geographical
markets. Revenue from sales to distributors, resellers and direct to end users
are recognised in line with the terms defined within the contract of sales, as
this will define when control is passed to the customer. This is deemed to be
in line with the Incoterms of the shipment, which clarify when the customer
has accepted the asset and legal title and therefore risk of ownership has
passed. For the majority of shipments this occurs on despatch of goods, but
may differ depending on the specific shipment terms agreed with the customer.
Payment is also due to the Group in line with agreed credit terms at this
point.
Sale of software
Revenue from the download of apps and paid feature upgrades is recognised upon
confirmation of the sale from the app store provider. Perpetual licences are
recognised in entirety at the point of sale, monthly subscriptions on a
recurring basis when the subscription is due.
1.7 Foreign currencies
The individual financial statements of each subsidiary are presented in the
currency of the primary economic environment in which it operates (its
functional currency). Sterling is the predominant functional currency of the
Group and presentation currency for the consolidated financial information.
In preparing the financial statements of the individual companies,
transactions in currencies other than the entity's functional currency
(foreign currencies) are recognised at the rates of exchange prevailing on the
dates of the transactions. At each balance sheet date, monetary assets and
liabilities that are denominated in foreign currencies are retranslated at the
rates prevailing at that date. Non-monetary items carried at fair value that
are denominated in foreign currencies are translated at the rates prevailing
at the date when the fair value was determined. Non-monetary items that are
measured in terms of historical cost in a foreign currency are not
retranslated.
Exchange differences are recognised in profit or loss in the period in which
they arise. Exchange differences on revenue are recognised within revenue. The
exception to this is exchange differences on transactions entered into to
hedge certain foreign currency risks (see below under cash flow
hedges/financial instruments).
For the purpose of presenting consolidated financial information, the assets
and liabilities of the Group's foreign operations are translated at exchange
rates prevailing on the balance sheet date. Income and expense items are
translated at the average exchange rates for the period, unless exchange rates
fluctuate significantly during that period, in which case the exchange rates
at the date of the transactions are used. Exchange differences arising, if
any, are recognised in the income statement.
1.8 Hedge accounting
The Group has adopted hedge accounting for qualifying transactions.
Derivatives are initially recognised at fair value at the date a derivative
contract is entered into and are subsequently remeasured to their fair value
at each balance sheet date. The resulting gain or loss is recognised in profit
or loss immediately unless the derivative is designated and effective as a
hedging instrument, in which event the timing of the recognition in profit or
loss depends on the nature of the hedge relationship. The Group designates
certain derivatives as either hedges of the fair value of recognised assets or
liabilities of firm commitments (fair value hedges), hedges of highly probable
forecast transactions or hedges of foreign currency risk of firm commitments
(cash flow hedges), or hedges of net investments in foreign operations.
Cash flow hedges
Where a derivative financial instrument is designated as a hedge of the
variability in cash flows of a recognised asset or liability, or a highly
probable forecast transaction, the effective part of any gain or loss on the
derivative financial instrument is recognised directly in the hedging
reserve. Any ineffective portion of the hedge is recognised immediately in
the income statement.
When the forecast transaction subsequently results in the recognition of a
non-financial item, the associated cumulative gain or loss is removed from the
hedging reserve and is included in the initial carrying amount of the
non-financial asset or liability. For all other hedged forecast
transactions, the associated cumulative gain or loss is removed from equity
and recognised in the income statement in the same period during which the
hedged expected future cash flows affects profit or loss.
When the hedging instrument is sold, expires, is terminated or exercised, or
the entity revokes designation of the hedge relationship but the hedged
forecast transaction is still expected to occur, the cumulative gain or loss
at that point remains in equity and is recognised in accordance with the above
policy when the transaction occurs. If the hedged transaction is no longer
expected to take place, the cumulative unrealised gain or loss recognised in
equity is recognised in the income statement immediately.
1.9 Alternative Performance Measures (APMs) and Adjusting items
The Group has disclosed certain alternative performance measures ('APMs')
within these interim results. The APMs presented are used in discussions with
the Board, management and investors to aid the understanding of the
performance of the Group. The Group considers that the presentation of APMs
allows for improved insight to the trading performance of the Group. The Group
considers that the term 'Adjusted' together with an adjusting items category,
provides a helpful view of the ongoing trading performance of the Group.
Adjusted results will therefore exclude certain significant costs such as
amortisation on acquired intangibles, together with some non-recurring costs
and benefits and so should not be regarded as a complete picture of the
Group's financial performance.
Adjusting items are those items that are unusual because of their size, nature
or incidence, and are applied consistently year on year. The Directors
consider that these items should be separately identified within their
relevant income statement category to enable full understanding of the Group's
results. Items included are acquisition costs, earnout payable to employees
of acquired businesses, and restructuring costs, together with amortisation of
acquired intangible assets.
The following APMs have been used in these financial results:
· Organic constant currency growth - this is calculated by
comparing current period revenue to prior period revenue adjusted for current
period exchange rates and the impact of acquisitions, shown within the
Financial Review.
· Adjusted EBITDA - comprising earnings (operating profit) adjusted
for interest, taxation, depreciation, amortisation and adjusting items. This
is shown on the face of the income statement.
· Adjusted operating profit - operating profit adjusted for
adjusting items. See reconciliation following
· Adjusted earnings per share ('EPS') - earnings per share
excluding adjusting items. See reconciliation following
· Free cash flow - net increase/(decrease) in cash and cash
equivalents excluding net cash used acquisitions, movements on the bank loan
and dividends paid. See reconciliation following
· Underlying free cash flow - as free cash flow but adding back
adjusting items. See reconciliation following
· Net debt - comprised of cash and cash equivalents, overdrafts and
amounts drawn against the RCF including the costs of arranging the RCF. See
reconciliation following
Reconciliation of Alternative Performance Measures to Statutory Reported
Measures
Six months ended Six months ended
28 February 2025
29 February 2024
Adjusted EBITDA Adjusted Operating Profit Adjusted Diluted EPS Adjusted EBITDA Adjusted Operating Profit Adjusted Diluted EPS
£'000 £'000 £'000 £'000 £'000 £'000
Reported Operating Profit 3,083 3,083 4,657 4,657
Reported Profit after tax 1,842 2,473
Add back/(deduct):
Underlying depreciation and amortisation 4,666 4,609
Amortisation on acquired intangibles 2,682 2,682 2,682 2,734 2,734 2,734
Acquisition costs - - - 98 98 98
Tax on adjusting items (573) (708)
Adjusted 10,431 5,765 3,951 12,098 7,489 4,597
Weighted average number of total ordinary shares including dilutive impact 59,680 59,749
Adjusted diluted EPS (p) 6.6 7.7
Year ended
31 August 2024
Adjusted Adjusted
EBITDA Operating Profit Adjusted
£'000 £'000 Diluted EPS
£'000
Reported Operating Profit 5,696 5,696
Reported Profit after tax 2,608
Add back (deduct):
Underlying depreciation and amortisation 8,574
Amortisation on acquired intangibles 5,510 5,510 5,510
Acquisition costs 98 98 98
Impairment of goodwill and acquired intangibles 5,355 5,355 5,355
Restructuring (14) (14) (14)
Tax on adjusting items - - (2,842)
Adjusted 25,219 16,645 10,715
59,400
Weighted average number of total ordinary shares including dilutive impact
Adjusted diluted EPS (p) 18.0
Six months ended Six months ended Year ended
28 February 2025
29 February 2024
31 August 2024
Free cash flow Adjusted free cash flow Free cash flow Adjusted free cash flow Free cash flow Adjusted free cash flow
£'000 £'000 £'000 £'000 £'000 £'000
Net decrease in cash and cash equivalents during the year (6,567) (6,567) (17,711) (17,711) (4,326) (4,326)
Add back: dividends paid 2,639 2,639 2,638 2,638 3,870 3,870
Add back: cash outflow in relation to acquisition of business - - 2,276 2,276 2,494 2,494
Change in bank loan 1,672 1,672 (8,136) (8,136) (6,605) (6,605)
Add back: adjusting items - - - 98 - 84
Free cashflow/Adjusted Free cashflow 2,257 2,257 (20,933) (20,835) (4,567) (4,483)
Definition of net debt 28 February 2025 29 February 2024 31 August 2024
Net debt Net debt Net debt
Cash and cash equivalents 15,637 8,924 22,040
Bank loan (34,057) (36,851) (35,101)
RCF arrangement fee 560 623 536
Net debt (17,860) (27,304) (12,525)
1.10 Prior year restatement
During the period, an update to IAS 1: Presentation of Financial Statements
requiring entities to consider the substance of liabilities and their
classification as either current or non-current and the conditions applicable
to any renewal of the loan. The directors have the right to defer payment of
the loans for longer than 12 months from the Balance Sheet date and as a
result, the bank loans held by the Group have been reclassified as non-current
with the change being applied retrospectively. As at 31 August 2024 and 29
February 2024 a total of £34.6m and £36.2m respectively have been
reclassified as non-current liabilities from current liabilities.
2. Revenue
An analysis of the Group's revenue is as follows:
Six months to 28 February 2025 Six months to 29 February 2024
Americas EMEA APAC Total Americas EMEA APAC Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Focusrite Novation 16,689 18,567 4,288 39,544 17,655 15,634 3,930 37,219
ADAM Audio 4,669 7,321 1,668 13,658 4,984 5,762 550 11,296
Sequential 2,915 2,066 271 5,252 2,058 2,153 328 4,539
Sonnox 210 740 46 996 447 465 135 1,047
Content Creation 24,483 28,694 6,273 59,450 25,144 24,014 4,943 54,101
Audio Reproduction 5,873 8,577 7,007 21,457 5,944 8,848 7,991 22,783
Total 30,356 37,271 13,280 80,907 31,088 32,862 12,934 76,884
Year to 31 August 2024
Americas EMEA APAC Total
£'000 £'000 £'000 £'000
Focusrite Novation 37,809 31,476 7,250 76,535
ADAM Audio 8,565 12,040 2,005 22,610
Sequential 4,796 4,172 737 9,705
Sonnox 788 774 406 1,968
Content Creation 51,958 48,462 10,398 110,818
Audio Reproduction 13,554 19,062 15,090 47,706
Total 65,512 67,524 25,488 158,524
3. Operating segments
Products and services from which reportable segments derive their revenue
Information reported to the Group's Chief Executive Officer (who has been
determined to be the Group's Chief Operating Decision Maker) for the purposes
of resource allocation and assessment of segment performance is focused on the
main product groups which the Group sells. While the results of Novation and
Ampify are reported separately to the Board, they meet the aggregation
criteria set out in IFRS 8 'Operating Segments'. The Group's reportable
segments under IFRS 8 are therefore as follows:
Focusrite Novation
- Sales of Focusrite and Focusrite Pro, Novation
and Ampify branded products
ADAM
Audio
- Sale of ADAM Audio products
Sequential
- Sale of Sequential products.
Sonnox
- Sale of Sonnox software plug ins
Martin
Audio
- Sale of Martin Audio, Optimal Audio, Linea
Research and Sheriff Technology trading brands TiMax and OutBoard (acquired 19
December 2023) products.
The revenue and profit generated by each of the Group's operating segments are
summarised as follows:
Six months to Six months to Year to
28 February 2025
29 February 2024
31 August
2024
£'000 £'000 £'000
Revenue from external customers
Focusrite Novation 39,544 37,219 76,535
ADAM Audio 13,658 11,296 22,610
Sequential 5,252 4,539 9,705
Sonnox 996 1,047 1,968
Content Creation 59,450 54,101 110,818
Audio Reproduction 21,457 22,783 47,706
Total revenue from external customers 80,907 76,884 158,524
Segment profit
Focusrite Novation 16,617 15,660 30,135
ADAM Audio 6,262 5,505 11,217
Sequential 2,275 1,719 4,044
Sonnox 927 994 1,899
Audio Reproduction 9,452 11,323 23,198
Total segment profit 35,533 35,201 70,493
Central sales and administrative expenses (32,450) (30,446) (59,358)
Adjusting items - (98) (5,439)
Operating profit 3,083 4,657 5,696
Finance income 98 83 100
Finance costs (1,064) (1,318) (3,292)
Profit before tax 2,117 3,422 2,504
Tax (275) (949) 104
Profit after tax 1,842 2,473 2,608
Segment profit represents the profit earned by each segment without allocation
of the share of central administration costs, other income, finance income and
finance costs, and income tax expense. This is the measure reported to the
Group's Chief Executive Officer for the purpose of resource allocation and
assessment of segment performance.
Central administration costs comprise principally the employment-related costs
and other overheads incurred by the Group. Also included within central
administration costs is a charge relating to the share option scheme of
£252,000 for the six-month period to 28 February 2025 (six months to 29
February 2024: credit of £192,000; year to 31 August 2024: charge of
£158,000).
Segment net assets and other segment information
Management does not make use of segmental data relating to net assets and
other balance sheet information for the purposes of monitoring segment
performance and allocating resources between segments. Accordingly, other
than the analysis of the Group's non-current assets by region shown below,
this information is not available for disclosure in the condensed consolidated
financial information.
The Group's non-current assets, analysed by region, were as follows:
28 February 29 February 31 August
2025 2024 2024
£'000 £'000 £'000
Non-current assets
North America 11,816 10,242 8,014
Europe, Middle East and Africa 81,648 88,584 85,981
Rest of World 90 58 26
Total non-current assets 93,554 98,884 94,021
UK 62,916 69,759 67,400
4. Adjusting items
The following adjusting items have been charged/(credited) to the income
statement in the period
Six months to Six months to Year to
28 February 29 February 31 August
2025 2024 2024
£'000 £'000 £'000
Adjusting costs
Acquisition and due diligence costs - 98 98
Restructuring - - (14)
Total adjusting items for adjusted EBITDA - 98 84
Impairment of goodwill and acquired intangibles assets - - 5,355
Amortisation of acquired intangible assets 2,682 2,734 5,510
Total adjusting items for adjusted operating profit 2,682 2,832 10,949
Tax on adjusting items (573) (708) (2,842)
Total adjusting items for adjusted profit after tax 2,109 2,124 8,107
5. Taxation
The tax charge for the six months to 28 February 2025 is based on the
estimated tax rate for the full year in each jurisdiction. In the current year
patent box claims have reduced the underlying UK tax rate and include prior
year adjustments for these claims.
6. Dividends
The following equity dividends have been declared:
Six months to Six months to Year to
28 February 2025
29 February 2024
31 August 2024
Dividend per qualifying ordinary share 2.1p 2.1p 6.6p
During the period, the Company paid a final dividend in respect of the year
ended 31 August 2024 of 4.5 pence per share. The Board has approved an
interim dividend of 2.1 pence per ordinary share (HY24: 2.1 pence) on 28 April
2025. This will be payable on 10 June 2025 to ordinary shareholders on the
register on 10 May 2025. The ex-dividend date will be 9th May 2025.
7. Earnings per share
Reported EPS
The calculation of the basic and diluted EPS is based on the following data: Six months to Six months to Year to
28 February
29 February
31 August
2025 2024 2024
£'000 £'000 £'000
Earnings for the purposes of basic and diluted EPS being net profit for the 1,842 2,473 2,608
period
Adjusting items (see note 4) 2,682 2,832 10,949
Tax on adjusting items (573) (708) (2,842)
Total adjusted profit for adjusted EPS calculation 3,951 4,597 10,715
Number of shares Six Months to 28 February Six Months to 29 February Year to
31 August
2025 2024
2024
Weighted average number of ordinary shares for the purposes of basic EPS 58,628 58,872
calculation
58,612
Effect of dilutive potential ordinary shares:
Employee and Director share option plans 1,052 877 788
Weighted average number of ordinary shares for the purposes of diluted EPS 59,680 59,749 59,400
calculation
Pence Pence
EPS Pence
Basic EPS 3.1 4.2 4.5
Diluted EPS 3.1 4.1 4.4
Adjusted basic EPS(1) 6.7 7.8 18.3
Adjusted diluted EPS(1) 6.6 7.7 18.0
( )
At 28 February 2025, the total number of ordinary shares issued and fully paid
was 59,211,639. This included shares held by the Employee Benefit Trust
('EBT') to satisfy options vesting in future years. The operation of this EBT
is funded by the Group so the EBT is required to be consolidated, with the
result that the weighted average number of ordinary shares for the purpose of
the basic EPS calculation is the net of the weighted average number of shares
in issue less the weighted average number of shares held by the EBT. It should
be noted that the only right relinquished by the Trustees of the EBT is the
right to receive dividends. In all other respects, the shares held by the EBT
have full voting rights.
The effect of dilutive potential ordinary share issues is calculated in
accordance with IAS 33 and arises from the employee share options currently
outstanding, adjusted by the profit element as a proportion of the average
share price during the period.
8. Other intangible assets
Brands Acquired technology and patents costs Internally generated technology and patents costs Technology and patents under Development Intellectual property, Licences and Trademarks Computer software Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Cost
At 1 September 2023 25,708 35,051 31,531 8,529 5,430 1,565 107,814
Additions - acquired separately - - - - 3,037 3 3,040
Additions - products developed during the period - - 1,859 6,934 - - 8,793
Additions through business combination - 2,242 - - - - 2,242
Transfer - - 8,306 (8,306) - - -
Disposals - - (2,446) - (55) - (2,501)
Foreign exchange (468) (135) (207) (54) (11) - (875)
At 31 August 2024 25,240 37,158 39,043 7,103 8,401 1,568 118,513
Additions - acquired separately - - - - 798 104 902
Additions - products developed during the period - - 916 3,931 - - 4,847
Transfer - 465 2,150 (2,615) - - -
Foreign exchange 285 213 154 (33) (6) - 613
At 28 February 2025 25,525 37,836 42,263 8,386 9,193 1,672 124,875
Amortisation
At 1 September 2023 5,598 10,797 21,522 - 2,024 1,164 41,105
Charge for the period 1,888 3,536 4,988 - 470 230 11,198
Impairment 1,303 784 745 - - - 2,832
Eliminated on disposal - - (2,411) - (15) - (2,426)
Foreign exchange (156) (67) (33) - (5) - (261)
At 31 August 2024 8,633 15,136 24,811 - 2,474 1,394 52,448
Charge for the year 865 1,817 2,624 - 533 104 5,943
Foreign Exchange 195 (82) (14) - (2) - 97
At 28 February 2025 9,693 16,871 27,421 - 3,005 1,498 58,488
Carrying amount
At 28 February 2025 15,832 20,965 14,842 8,386 6,188 174 66,387
At 31 August 2024 16,607 22,022 14,232 7,103 5,927 174 66,065
9. Financial instruments
The fair value of the Group's derivative financial instruments is calculated
using the quoted prices. Where such prices are not available, a discounted
cash flow analysis is performed using the applicable yield curve for the
duration of the instruments for non-optional derivatives, and an option
pricing model for optional derivatives. Foreign currency forward contracts are
measured using quoted forward exchange rates and yield curves derived from
quoted interest rates matching maturities of the contract.
IFRS 13 'Fair Value Measurements' requires the Group's derivative financial
instruments to be disclosed at fair value and categorised in three levels
according to the inputs used in the calculation of their fair value.
Financial instruments carried at fair value should be measured with reference
to the following levels:
· Level 1: quoted prices (unadjusted) in active markets
for identical assets or liabilities;
· Level 2: inputs other than quoted prices included
within Level 1 that are observable for the asset or
liability, either directly (i.e., as prices) or indirectly (i.e., derived from
prices); and
· Level 3: inputs for the asset or liability that are not
based on observable market data (unobservable inputs).
The financial instruments held by the Group that are measured at fair value
all related to financial assets/(liabilities) measured using a Level 2
valuation method.
The fair value of financial assets and liabilities held by the Group are:
28 February 2025 29 February 2024 31 August 2024
£'000 £'000 £'000
Financial assets
Fair value
Cash and cash equivalents 15,637 8,924 22,040
Trade and other receivables 38,776 37,186 33,454
Designated cash flow hedge relationships
Derivative financial assets designated and effective as cash flow hedging - 301 -
instruments
54,413 46,411 55,494
Financial liabilities
Fair value
Trade and other payables 16,659 12,080 18,710
Bank loan and arrangement fee 33,497 36,228 34,565
Amounts payable in relation to staged acquisition payments 2,287 2,790 2,166
Lease liabilities 5,823 6,594 6,331
Designated cash flow hedge relationships
Derivative financial assets designated and effective as cash flow hedging 267 - -
instruments
58,533 57,692 61,772
10. Acquisition of a subsidiary
There were no acquisitions in the period.
On 19 December 2023, the Group completed the acquisition of 100% of the share
capital of Sheriff Technology Limited (Sheriff), which trades principally
under the OutBoard and TiMax brands. The total consideration was calculated as
£2.8 million, with £2.4 million paid on completion and a forecast discounted
amount of £0.5 million included as additional consideration. The final
payment of £0.4 million was made in March 2025.
1 Restated for the reclassification of outstanding bank loans as non-current
liabilities from current liabilities. See note 1.10 for more details.
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