- Trading in line with expectations, second half weighting
- Asian demand weakness
- Freight and supply chain headwinds reversing
Global audio products company Focusrite (TUNE:AIM) said trading in the first four months of its financial year to 31 August 2023 was in line with the board’s expectations and its full-year outlook was unchanged.
The timing of product releases means the board anticipates a second half weighting. Analyst’s have penciled in a flat sales performance for 2023 of £184 million while profit is expected to be slightly higher year-on-year at £45 million.
The boom in global demand for interface musical instruments seen during the pandemic, has since normalised but demand remains significantly above pre-pandemic levels, the company said.
Non-executive chairman Phil Dudderidge commented: ‘2023 is a year for consolidating our leading market positions, supported by significant new product launches and upgrades planned for the latter part of the year, which will underpin future growth.
The shares traded 3.5% down to 741p and have lost 45% of their value over the last year.
ASIAN DEMAND WEAKNESS
The company said it has noted ‘some industry-wide demand weakness’ in Asian markets and Focusrite branded products have been adversely impacted by the planned earlier phasing of inventory sell-in to the sales channel prior to the holiday season.
Nevertheless, the company said it was pleased with the sell-through of its content creation products which has remained robust.
Freight costs continue to fall back to more normal levels while component shortages and supply chain issues are abating which, together with pricing actions should see an improvement in margins in 2023.
Investment bank Berenberg reckons these former headwinds impacted gross margin by 2.4% and expects them to reverse in 2023 which has the potential to lift 2023 earnings per share by a tenth.
‘We do not currently model this into our base-case estimates, but we present data that gives us increasing confidence that this scenario could materialise.’
Over the last four years Focusrite has made six acquisitions which have complemented its organic growth. The latest purchase of Sonnox is said to be integrating well adding ‘skills and knowledge’ that complement existing teams.’
Berenberg estimates that mergers and acquisitions have the potential to increase its base case profit forecasts by 5% to 10% over the next two years.
