- Surplus inventory amid market weakness hits sales
- Inventories back to normal pre-pandemic levels
- Second half trading in line with expectations
Despite seeing a strong rebound in live events, global audio products company Focusrite (TUNE:AIM) said surplus channel inventories and market weakness led to a 7% drop in first-half revenues and a 26% fall in adjusted operating profit.
The shares fell 10.6% to 514p taking the drop since the 3 February trading update to 31%, which leaves them more than 50% lower than a year ago.
WHAT DID THE COMPANY SAY?
Chief executive Tim Carroll said: ‘This past half year has showcased just how well the group's diversification strategy has paid off, giving us increased resilience in the face of global and industry-wide headwinds.
‘Revenue in our Content Creation division has been impacted by industry-wide surplus channel inventory and softening in demand along with a planned channel inventory reduction ahead of a large product release programme coming in the second half.’
First half revenue to 28 February fell 7.2% to £86.2 million with the larger content creation business (78% of revenue) dropping by 16% to £67.4 million offset by a 50.7% jump across audio reproduction brands to £18.8 million driven by a resurgence of live events.
A tick-up in gross margin by 0.5% to 47.1% was not enough to compensate for the fall in revenue which translated into an 18.5% drop in adjusted EBITDA (earnings before interest, tax, depreciation, and amortisation) to £18.1 million.
Adjusted operating profit fell by 26% to £14.2 million impacted increased amortisation from acquisitions and new product launches.
Focusrite launched 21 new products in the half with further releases planned for the second half.
RESILIENT PERFORMANCE IN TOUGH MARKET
The company said inventory levels were back to pre-pandemic levels of four months having dropped to half a month during the early stages of lockdowns which saw a surge in sales.
Data provided by the company from the biggest US and European resellers suggest Focusrite is retaining high market shares despite the softer market.
Trading in the second half has remained ‘solid’ and the company reiterated revenue growth is expected to be in line with expectations driven by new products alongside ‘elevated costs’ due to promotional activity for existing products.
