Focusrite

LN: TUNE

£302.2m market cap

520p last close

Focusrite is a global music and audio products group supplying hardware and software used by professional and amateur musicians, which enables the high-quality production of music.

Investment summary

Focusrite has announced the €18.0m strategic acquisition of ADAM Audio, a leading German developer and global distributor of professional studio monitor loudspeakers, funded entirely from existing cash resources. Although continuing to operate as an autonomous subsidiary, we see clear opportunities to cross-sell to Focusrite’s global customer base of amateur and professional music markers and to leverage its distribution network. We increase our forecast FY20e PBT by 5% to £13.3m and raise our DCF-based valuation to 530p per share (previously 471p).

Y/E Aug
Revenue (£m)
EBITDA (£m)
PBT (£m)
EPS (fd) (p)
P/E (x)
P/CF (x)
2017A 66.1 13.1 9.5 14.8 35.1 N/A
2018A 75.1 15.5 11.3 17.5 29.7 N/A
2019E 79.8 16.3 12.5 19.0 27.4 N/A
2020E 91.4 17.7 13.3 19.9 26.1 N/A
Last updated on 25/07/2019
Industry outlook

Focusrite’s products connect with a home-based leisure movement that is outpacing overall consumer expenditure. The global music instrument and pro audio wholesale market was £2.7bn in 2013 (source MTM) but is highly fragmented. Management estimates its addressable market at US$575–850m. Currently, it estimates a 55% share of the mass interface market, 12–14% of the semi-professional Thunderbolt market and 2% of the commercial market, with Novation, maker of the Launchpad, also ranking highly in its markets.

Last updated on 25/07/2019
Sector
Consumer
Share price graph
Balance sheet
Forecast net cash (£m) 11.5
Forecast gearing ratio (%) N/A
Price performance
%
1m
3m
12m
Actual (3.2) 9.0 15.2
Relative* (4.4) 8.9 19.0
52-week high/low 560.0p/364.0p
*% relative to local index
Key management
Phil Dudderidge Chairman
Tim Carroll CEO
Jeremy Wilson CFO

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