Global music and audio products company Focusrite (TUNE:AIM) gave an upbeat trading update for the year ending 31 August 2022 in the face of tough comparisons from last year.
First half revenues are expected to be at least £91 million as overall demand for the company’s products remained ‘strong’, while profits and cash are in line with the board’s expectations.
The shares sounded a confident note, gaining 5.5% to £10.50.
SUSTAINABLE DEMAND
This time last year Focustite reported a 92% increase in first half sales to £95.3 million although there were concerns various lockdowns had pulled growth forward from future years.
However, today’s update vindicates management’s contention the business was experiencing sustainable levels of demand.
Sequentially, revenues were up 16% compared with the second half of 2021. Peel Hunt estimates this represents 10% organic growth.
Comparisons are expected to get easier in the second half while continued recovery in live events should provide an added fillip.
The company said supply constraints due to the shortage of electronic components and high freight costs continued to impact gross margins.
Actions are being taken to address these short-term challenges and meet customer demand. The company has previously highlighted its ‘excellent’ relationships with contract manufacturers and relatively high volumes as key factors in mitigating such pressures.
Net cash at 28 February 2022 was £17.8 million, reflecting a planned buildup of inventories.
Peel Hunt reiterated its buy rating and commented: ‘Net cash of £18m puts the company in a great place to make further opportunistic M&A.’
RUSSIA BAN
The group has suspended all sales to the Russian Federation and Belarus while it is understandably not possible to sell into Ukraine. The region represents a small proportion of revenues and demand from other parts of the world are expected to fill the gap.
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