TIDMTUNE
RNS Number : 6494W
Focusrite PLC
27 April 2021
Strictly embargoed until 07:01: 27 April 2021.
Focusrite plc ("Focusrite" or "the Group")
Half year results for the period ended 28 February 2021
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 half
year results for the six months ended 28 February 2021.
Key financial metrics
HY21 HY20
Revenue (GBP million) 95.3 49.9
----- -------
Adjusted EBITDA(2) (GBP million) 29.3 9.1
----- -------
Adjusted(3) operating profit (GBP million) 26.3 6.4
----- -------
Adjusted(3) diluted earnings per share (p) 36.3 9.3
----- -------
Interim dividend per share (p) 1.5 1.3
----- -------
Net cash (debt) (GBP million) 19.1 (19.9)
----- -------
Statutory results
----- -------
Operating profit (GBP million) 24.2 3.0
----- -------
Basic earnings per share (p) 33.2 3.6
----- -------
Highlights
-- Group revenue up by 90.9% to GBP95.3 million (64.3% organic
constant currency growth(1) ) (HY20: GBP49.9 million)
-- Gross margin improved to 48.0% (HY20: 46.1%)
-- Adjusted EBITDA(2) up by 219.9% to GBP29.3 million (HY20:
GBP9.1 million)
-- Net cash of GBP19.1 million (FY20: net cash GBP3.3 million,
HY20: net debt of GBP19.9 million)
-- Consumer demand remained at record levels across the
Focusrite, Novation and ADAM Audio ranges
o Focusrite operating company revenue up by 93.1% to GBP74.0
million (HY20: GBP38.4 million)
o ADAM Audio revenue up by 78.7% to GBP12.6 million (HY20:
GBP7.0 million)
o Martin Audio profitable despite reduced demand due to COVID-19
restrictions and Optimal Audio, launched 20 April 2021
-- Interim dividend of 1.5 pence, up 15% from 1.3 pence
announced in July 2020
-- Sequential LLC, California based synthesiser company acquired
26 April 2021 for $24 million consideration.
Commenting on the results and the outlook for the Group, Tim
Carroll, Chief Executive Officer, said:
" The Group has performed exceptionally well throughout the
first half of the financial year 2020/2021, with each brand taking
on the challenges and opportunities created by the pandemic as well
as delivering on our mission of 'Removing Barriers to Creativity'.
Our teams have continued to persevere, adapt, and succeed in
challenging situations, and I salute every employee for their
efforts.
For the first half of the financial year, Focusrite, Novation
and ADAM Audio products continued to see high demand for home-based
amateur and professional audio recording solutions. This resulted
in revenue for the period being slightly ahead of our revised
expectations as announced on 19 February 2021. As previously
discussed, we believe the base has materially grown, with more
people utilising these solutions for music creation, podcasting,
social media broadcasts and other streaming workflows. The
digitisation of almost every facet of modern life continues
unabated, and audio is no exception.
We continue to see challenges, most notably component supply
issues that are impacting many industries. However, we believe our
strong relationships with our contract manufacturers and component
suppliers will enable us, over time, to navigate successfully
through this. We expect demand to remain higher than pre-COVID-19
levels for our ADAM Audio and Focusrite businesses, but recognise
the uncertainty that the end of lockdown will bring. While demand
for Martin Audio products continues to be constrained by the
shutdown of live events, we are now seeing the pipeline increase
for both installed and tour sound business.
As always, we remain appropriately cautious given the unique
global circumstances, but also optimistic about the future
prospects for the Group. "
(1) The organic constant currency growth rate is calculated by
comparing HY21 revenue to HY20 revenue adjusted for exchange rates
and the impact of acquisitions (more detail in Foreign Exchange and
Hedging section of the Financial Review).
(2) Comprising earnings adjusted for interest, taxation,
depreciation, amortisation and non-underlying items. This is shown
on the face of the income statement.
(3) Adjusted for non-underlying items which comprise costs
relating to the acquisition of Sequential LLC (GBP0.3m) and
amortisation of acquired intangibles (GBP1.8m).
Enquiries:
Focusrite plc:
Tim Carroll (CEO) +44 1494 462246
Sally McKone (CFO) +44 1494 462246
Panmure Gordon (Nominated Adviser
and Broker)
Freddy Crossley (Corporate
Finance) +44 20 7886 2500
Erik Anderson (Corporate Broking) +44 20 7886 2500
Belvedere Communications
John West +44 20 3687 2756
Llew Angus +44 20 3687 2756
The information communicated in this announcement contains
inside information for the purposes of Article 7 of the Market
Abuse Regulation (EU) No. 596/2014 .
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 six established brands: Focusrite, Focusrite
Pro, Novation, Ampify, ADAM Audio and Martin Audio, with a seventh,
Optimal Audio, recently launched on 20 April 2021.
With a high-quality reputation and a rich heritage spanning
decades, its brands are category leaders in the music-making and
audio recording 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 synthesisers 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.
The Focusrite Group has offices in four continents and a global
customer base with a distribution network covering approximately
160 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 and summary of
operations for the first six months ending 28 February 2021.
Overall, the Group has performed exceptionally well. Revenue,
EBITDA and cash have all grown considerably: Net Promoter Scores
('NPS'), an important performance indicator, have remained strong
at 73 (HY20: 72); gross margin has increased; new product
introductions have performed well; and demand for many of the
Group's products has remained at unprecedented levels.
At our core is a passionate group of employees all rallied
around a common mission of 'Removing Barriers to Creativity'. Our
customer base continues to grow and now encompasses a wide range of
customers from the beginner/enthusiast through to professionals and
enterprise facilities. At all levels, our customers depend on our
solutions to provide the highest quality audio possible in an
environment where technology aids the process instead of getting in
the way.
COVID-19
As with many businesses, COVID-19 has impacted many parts of our
Group, including routes to market and manufacturing
capabilities.
Over the last six months we have been working closely with our
people to support them to work from home, both from a practical and
wellbeing point of view. We have been operating with a skeleton
staff in our offices and supporting this via onsite testing where
possible. We recognise how difficult this has been and thank all
our people across the entire Group for their flexibility and
dedication throughout this period.
As regions come out of lockdown and more bricks and mortar
stores begin to re-open, we are seeing a balance return between
these types of resellers and those which are more e-commerce
focused. Even with heightened demand, the Group has worked to
ensure an adequate flow of product to all channels so that our
solutions are always available to the end user, no matter what
their purchasing preference. For Martin Audio, higher emphasis has
been put on installed sound, the area of business least impacted by
COVID-19 and the first to begin to return to normal.
The Group has fared well with manufacturing capacity benefiting
from our strong relationships with our contract manufacturers, and
further utilisation of a second plant in Malaysia for our Scarlett
products, which have been one of the most sought out lines during
the pandemic. Martin Audio and ADAM Audio, which both have in-house
production for certain products, implemented strict workplace rules
to ensure the safety and wellbeing of all staff. These measures
have proved effective and resulted in minimal stock out issues due
to production.
Component shortages remain an industry-wide issue. Pleasingly,
the Group has managed to keep a consistent inflow of material by
using the combined strength of all of our brands and our
good-standing with our contract manufacturers and chip suppliers.
However, we do believe this global issue will continue to affect
supply for some time.
Operating review
Our Group is comprised of six powerful brands across three main
businesses: Focusrite, Focusrite Pro, Novation and Ampify, which
make up the Focusrite Audio Engineering ('FAEL') business unit,
ADAM Audio and Martin Audio. We intend for Optimal Audio, following
its recent launch on 20 April 2021, to be included in future under
the Martin Audio brand.
Year to
Six months to Six months to 31 August
28 February 2021 29 February 2020 2020
GBP'000 GBP'000 GBP'000
--------------------------------- ------------------ ------------------ ----------------------------
Revenue from external customers
Focusrite 58,325 25,574 76,178
Focusrite Pro 2,675 1,884 3,492
Novation (including Ampify) 13,043 9,935 19,383
ADAM Audio 12,582 7,041 17,381
Martin Audio 8,651 4,526(4) 12,014
Distribution 10 966 1,693
Total 95,286 49,926 130,141
--------------------------------- ------------------ ------------------ ----------------------------
(4) Revenue from date of acquisition
Focusrite Audio Engineering Ltd ('FAEL')
The FAEL product range, which consists of Focusrite, Focusrite
Pro, Novation and Ampify, have all had a strong first half of the
financial year. The Focusrite Scarlett and Clarett audio interfaces
showed strong year-on-year growth at 111% and 47% respectively.
These products are core to home recording and audio streaming,
which have experienced large increases in demand since global
lockdowns occurred. However, as discussed previously, the increased
level of demand has continued past the end of regional lockdowns,
indicating a general rise in awareness and demand for these
solutions and a global trend towards digitisation across virtually
all forms of work and entertainment.
Focusrite Pro, which in the first half of last year was impacted
by pre-COVID-19 delays on some new product introductions, rebounded
well and finished the first half 42% up year-on-year. This is a
very pleasing result as many of the verticals for these solutions
are in the live/tour and installed sound segments which are still
shut in many places around the world. The team had a number of new
product launches and focused on helping enterprise customers
continue to create content for music, video, TV and film releases
during the pandemic. The pipeline for our Pro products continues to
grow and we are optimistic about the potential of this segment as
more production opens back up and enterprise institutions begin to
invest in capital expenditures.
Novation continues the pattern of strong growth, finishing the
first half showing a 31% increase year-on-year. A number of new
product launches, especially those that were launched late last
year, were the big contributing factors to the range's success. As
with our Scarlett interfaces, all new Novation products have the
same tailored customer onboarding journey that quickly assesses the
individual needs and current skill levels of a new customer to help
them make music quickly. We believe that our approach here remains
highly differentiated and a key reason why so many customers choose
a Novation solution against our competition.
Ampify has continued to develop, refine, improve and add to the
features on our first cross platform music creation solution:
Ampify Studio. Along with the content label, Ampify Sounds, this
platform is becoming the first immersion into music-making for many
of our Novation and Focusrite customers. Bundled for free with any
hardware offering, Ampify has also introduced a premium
subscription model that offers more features and access to the
entire Ampify sound label for royalty free use in productions.
Whilst still relatively new, the Group has seen promising growth in
line with expectations in our subscription user base and monthly
recurring revenue since inception.
In August 2020, the Group ceased distributing KRK monitors in
the UK, favouring instead the Group's own ADAM Audio Studio
monitors. Therefore, revenue from the Distribution channel is
declining to nil.
ADAM Audio GmbH
ADAM Audio, based in Berlin, is a globally recognised brand with
a passionate team focused on delivering world-class monitoring
solutions (speakers) for audio content creators. ADAM Audio's
portfolio of reference monitors encompasses the T-Series, A-Series
and S-Series. Throughout the past year, the T-Series has been the
go-to monitor for startup home studios, allowing these product
lines to grow by 142% over the previous year. The A-Series, used in
both high-end home studios and professional facilities alike, and
the enterprise level S-Series, showcased in some of the most
prestigious audio production facilities in the world, both achieved
significant growth over the last year. The product portfolio is
rounded out with an extensive line of subwoofers which contributed
to the overall segment growth of 79% over the prior year.
Martin Audio Ltd
The Martin Audio brand is comprised of a large and growing
portfolio for the live/tour sound and installed market. Hospitality
and live events have mostly not been possible during the pandemic
across much of the world, however as the pandemic rolls on the
company has managed costs well and delivered profits in line with
expectations. As different geographies have adapted to the
pandemic, so has Martin Audio. Martin Audio's Point Source products
for smaller applications are selling well globally and particularly
in the APAC region where some countries have been able to reduce
lockdown restrictions more quickly. We have also seen success in
long-term capital purchases in several installation sectors,
including cruise ships. The team continues to launch products by
investing in research and development (R&D), including the new
China exclusive P.I. series and the ground-breaking TORUS system
and Display 3 software solution, an acoustical prediction program
allowing users to see the sound coverage in 3D.
Research and development
R&D remains a cornerstone of our Group's strategy. In this
period, the Group launched 20 new products to market and a host of
software and hardware upgrades across many of the product
groups.
Regional review
Six months Six months Year to
to 28 February to 29 February 31 August
2021 2020 2020
GBP'000 GBP'000 GBP'000
----------------------------------------- ---------------- ---------------- -----------
North America 41,845 18,094 50,861
Europe, Middle East and Africa ('EMEA') 36,945 23,115 56,459
Rest of World ('ROW') 16,496 8,717 22,821
----------------------------------------- ---------------- ---------------- -----------
Total 95,286 49,926 130,141
----------------------------------------- ---------------- ---------------- -----------
North America
North America has become the largest region for the Group at 44%
of total revenue in the period. Our North American operations
continue to grow, and we have invested in sales, marketing,
logistics and customer service to support the business.
Both FAEL and ADAM Audio products are sold through a similar
sales channel, and Martin Audio's North America business is
transacted through a mix of live/tour sound rental companies,
system integrators and direct to end-users. FAEL revenue in North
America was up 148% for the first half compared with the first half
of FY20. ADAM Audio's performance was up 86% year-on-year. Martin
Audio's North America business was up 34% on the prior year due to
the short comparative period, however from a full six-month view
this represents a significant reduction due to COVID-19.
EMEA
EMEA represented 39% of the Group's revenue for the first half
of FY21. For FAEL, the region was up 57% year-on-year. This growth
was primarily driven by the increased demand for its products with
the benefit of a more established distributor base following
changes in Italy and Scandinavia in the first half of FY20. ADAM
Audio's EMEA business was up 72%, driven by increased demand in
line with FAEL. For Martin Audio, the Group had a full six months
of revenue compared to just two months for the prior year,
resulting in a 67% increase over the first half of the prior year.
On a like-for-like basis, Martin Audio revenue contracted 44% due
to the negative COVID-19 impact. For now, demand for the Group's
products has remained strong, with increased levels of sales of
FAEL and ADAM Audio solutions and we are beginning to see signs of
recovery for Martin Audio in the installed sound market.
ROW
ROW comprises all other regions outside of EMEA and North
America, principally made up of Asia Pacific ('APAC') and Latin
America ('LATAM').
The Group's APAC region performed strongly in the first half of
the financial year, resulting in an 89% increase over the prior
year. For FAEL, Asia was up 62% compared with HY20. Strong demand
for FAEL products as well as a very weak January and February in
2020 due to COVID-19 contributed to this result. ADAM Audio was up
25%, mainly attributed to the same drivers as FAEL. Martin Audio
had a satisfactory performance in APAC, where we saw the installed
sound market show a healthy recovery.
LATAM had a very impressive first half, finishing 91% up over
the prior year. This was comprised of a 106% increase for FAEL and
essentially the start of representation in the market for ADAM
Audio, where revenue went from virtually zero in the prior half to
just over GBP0.7 million this half. The team representing FAEL and
ADAM Audio, located in Mexico and Brazil, has done an excellent job
of focusing on localised support and sales and marketing tools for
the various countries. We continue to invest more resources in this
market as we believe there is more opportunity to reach the vast
population, where music is an important part of the region's
various cultures.
Financial Review
Overview
The Group has seen ongoing strong demand for its products,
resulting in 91% growth in revenue, 220% growth in adjusted EBITDA
and 294% growth in adjusted diluted earnings per share.
Income statement
HY21 HY21 HY21 HY20 HY20 HY20
GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------------
Adjusted Non-underlying Reported Adjusted Non-underlying Reported
---------------------------------- --------- --------------- --------- --------- --------------- ---------
Revenue 95.3 - 95.3 49.9 - 49.9
Cost of sales (49.6) - (49.6) (26.9) - (26.9)
---------------------------------- --------- --------------- --------- --------- --------------- ---------
Gross profit 45.7 - 45.7 23.0 - 23.0
Administrative expenses (19.4) (2.1) (21.5) (16.6) (3.4) (20.0)
---------------------------------- --------- --------------- --------- --------- --------------- ---------
Operating profit 26.3 (2.1) 24.2 6.4 (3.4) 3.0
Net finance income (0.6) - (0.6) (0.3) - (0.3)
---------------------------------- --------- --------------- --------- --------- --------------- ---------
Profit before tax 25.7 (2.1) 23.6 6.1 (3.4) 2.7
Income tax expense (4.3) - (4.3) (0.7) - (0.7)
---------------------------------- --------- --------------- --------- --------- --------------- ---------
Profit for the period 21.4 (2.1) 19.3 5.4 (3.4) 2.0
---------------------------------- --------- --------------- --------- --------- --------------- ---------
HY21 HY21 HY21 HY20 HY20 HY20
GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------------
Adjusted Non-underlying Reported Adjusted Non-underlying Reported
---------------------------------- --------- --------------- --------- --------- --------------- ---------
(3.4)
Operating profit 26.3 (2.1)(5) 24.2 6.4 (5) 3.0
Add - amortisation of intangible
assets 2.0 1.8 3.8 2.0 1.2 3.2
Add - depreciation of tangible
assets 1.0 - 1.0 0.7 - 0.7
---------------------------------- --------- --------------- --------- --------- --------------- ---------
EBITDA 29.3 (0.3) 29.0 9.1 (2.2) 6.9
---------------------------------- --------- --------------- --------- --------- --------------- ---------
(5) Non-underlying items comprise costs relating to the
acquisition of Sequential LLC (GBP0.3m) and amortisation of
acquired intangibles (GBP1.8m), see note 4 of the interim
statements.
Revenue
Revenue for the Group grew 91% to GBP95.3 million (HY20: GBP49.9
million) which, adjusting for acquisitions and constant currency,
represents organic growth of 64.3%. Both periods include six months
of ADAM Audio which contributed GBP12.6 million (HY20: GBP7.0
million), a growth of 79%. Martin Audio contributed GBP8.7 million
(HY20: GBP4.5 million for two months). As lockdowns have remained
in place, we have continued to see stronger demand for the products
made by FAEL and ADAM Audio as people have had more time to create
music, as companies that rely on an audio component have had to
ensure their employees can work and record from home, and as audio
is increasingly digitally recorded and reworked. Conversely, the
pandemic has slowed demand for Martin Audio Products, with live
events being put on hold.
Half Year ended 29 February
2020
--------------
Revenue Organic
HY21 Growth Growth
Revenue Exchange Acquisitions As adjusted Revenue (%) (%)
-------------- -------- --------- ------------- ------------ --------- -------- --------
FAEL 38.4 (0.8) - 37.6 74.0 92.7 % 96.8 %
ADAM Audio 7.0 - - 7.0 12.6 80.0 % 80.0 %
(35.1)
Martin Audio 4.5 - 8.9 13.4 8.7 93.3 % %
-------------- -------- --------- ------------- ------------ --------- -------- --------
Total 49.9 (0.8) 8.9 58.0 95.3 90.9% 64.3 %
-------------- -------- --------- ------------- ------------ --------- -------- --------
Exchange rates were mixed in the period. The Euro strengthened
slightly to EUR1.14 (HY20: EUR1.16) and the USD weakened from $1.28
in HY20 to $1.36 in HY21. The effect of the Dollar movement is to
decrease the revenue for HY21 relative to HY20. However, at the
profit level the USD effect is mitigated by the purchases of stock
in USD from the manufacturers in China and Malaysia and the Euro
effect is largely mitigated by the Group's hedging policy
(approximately 75% of Euro exposure is hedged in the current
financial year and approximately 50% is hedged in the following
financial year).
Segment profit
Segment profit is disclosed in more detail in the note to the
accounts named, 'Business Segments'. These segments compare the
revenue of the products of the relevant brands with the directly
attributable costs to create segment profit. With the acquisition
of ADAM Audio, the Group ended its distribution of third-party
monitors, hence the reduction in revenue for this segment.
Gross profit
In HY21, the gross margin was 48.0% up from 46.1% in HY20, which
was an increase from 44.3% in HY19. This is the result of several
short and long-term factors. HY21 includes the one-off benefit of a
refund of US duty of GBP0.6 million, following a reassessment of
duty codes in 2020. Historically there have been a number of
factors at play. One factor is business mix, with the removal of
the lower margin distribution business and the growth of the higher
margin ADAM Audio business at 58.7% gross margin. Another factor is
routes to market, with more products being sold either directly to
dealers rather than distributors or directly to the consumer.
Focused cost and price management, reducing royalties and tariffs,
and management of margin to get the best value out of discounts to
the reseller channel are other factors. As discussed in recent
trading updates, the Group is mindful of the impact of components
shortages on future revenue and gross margin.
Administrative expenses
Administrative expenses consist of sales, marketing, operations,
the uncapitalised element of research and development (partially
offset by the Research and Development Expenditure Credit regime
('RDEC') tax credit) and central functions such as legal, finance
and the Group Board. These expenses were GBP21.5 million, up from
GBP20.0 million last year. Excluding non-underlying costs of GBP2.1
million (see non-underlying section), the operating costs were
GBP19.4 million (HY20: GBP16.6 million). Martin Audio contributed a
full six months of costs compared to two months in HY20, an
increase of GBP1.2 million, with effective cost control in place to
mitigate the lower revenue. The underlying increase, excluding the
annualisation of Martin Audio, of 9% reflects the investment the
Group has made in increased customer support, which has been
mitigated by reduced marketing costs with many trade shows planned
for the period cancelled due to COVID-19. With markets opening up
again we expect these costs to resume as we showcase our new
product launches.
Adjusted EBITDA
Adjusted EBITDA is a non-GAAP measure, but it is widely
recognised in the financial markets as a proxy for the ongoing
trading performance of a business. It is also used within the Group
as the basis for some of the incentivisation of senior management
at both the operating company level and the Group level. EBITDA
increased from GBP9.1 million in HY20 to GBP29.3 million in HY21,
an increase of 220%. The increase of GBP20.2 million over the prior
year is greatly enhanced by the contribution of the high levels of
revenue, with the increase in gross margin more than offsetting the
slight increase in operating costs.
Depreciation and amortisation
Depreciation is charged on tangible fixed assets on a
straight-line basis over the assets' estimated useful lives,
normally ranging between two and five years. Amortisation is mainly
charged on capitalised development costs, writing-off the
development cost over the life of the resultant product. For
Focusrite and Novation this is up to three years, up to eight years
for ADAM Audio, and up to 11 years for Martin Audio, reflecting the
different lifespans of the products.
The amortisation of the acquired intangible assets for both ADAM
Audio and Martin Audio totalled GBP1.8 million during the period
(HY20: GBP1.2 million) and has been disclosed within non-underlying
costs.
Within the Group, GBP2.6 million of development costs were
capitalised (HY20: GBP2.1 million) and the amortisation of
capitalised development costs was GBP1.6 million (HY20: GBP1.5
million).
Non-underlying items
In HY21 non-underlying costs totalled GBP2.1 million (HY20
GBP3.4 million), GBP0.3 million relating to the diligence costs for
the acquisition of Sequential LLC that completed 26 April 2021 and
GBP1.8 million relating to amortisation of acquired intangible
assets. In HY20 non-underlying costs included GBP1.8 million
relating to the acquisition of Martin Audio, GBP1.2 million for
amortisation on acquired intangible assets, and GBP0.4 million due
to restructuring.
Foreign exchange and hedging
The exchange rates were as follows:
Exchange rates HY21 HY20 FY20
---------------- ----- ----- -----
Average
USD:GBP 1.36 1.28 1.27
---------------- ----- ----- -----
EUR:GBP 1.14 1.16 1.14
---------------- ----- ----- -----
Period end
---------------- ----- ----- -----
USD:GBP 1.39 1.28 1.34
---------------- ----- ----- -----
EUR:GBP 1.15 1.16 1.12
---------------- ----- ----- -----
The average USD rate has weakened at $1.36:GBP1.00 for HY21
(HY20: $1.28). The USD accounts for over half of Group revenue but
nearly all of the cost of sales so there is a useful natural
hedge.
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 year (year ending August
2021) and approximately 50% of the Euro flows for the following
financial year (FY22).
In HY21, approximately three-quarters of Euro flows were hedged
at EUR1.10, and the average transaction rate was EUR1.13, thereby
creating a blended exchange rate of approximately EUR1.11. In HY20,
the equivalent hedging contracts were at EUR1.12, versus the
transactional rate of EUR1.16 and so creating a blended exchange
rate of EUR1.13.
Hedge accounting is used, meaning that the hedging contracts
have been matched to income flows and, providing the hedging
contracts remain effective, movements in fair value are shown in a
hedging reserve in the balance sheet, until the hedge transaction
occurs.
Corporation tax
The effective tax rate for the period is 18.2% (HY20: 23.8%). In
both years the rate has been impacted by the disallowance of the
non-underlying costs for corporation tax. Adjusting for this, the
underlying effective rate of 16.7% (HY20: 10.5%). The Group's
historic rate of c10% is lower than the UK headline rate of 19%,
where most of the Group's profits are taxed, due largely to
enhanced tax relief on development costs due to the Small or
Medium-sized Enterprise regime ('SME') for the treatment of R&D
costs. From the start of this year the Group has moved to the RDEC
which is markedly less beneficial. A credit of GBP0.2 million has
been recognised against uncapitalised R&D costs within
Administrative expenses, which is taxable. As a result of the
change to RDEC, the effective tax rate is expected to be more in
line with the UK headline rate, which is due to increase on 1 April
2023 to 25% as outlined by the Chancellor in the recent budget.
Earnings per share ('EPS')
The basic EPS for the half year was 33. 2 pence, an over eight
fol d increase from 3.6 pence in HY20. This increase has largely
followed the change in reported profit after tax. The weighted
average number of shares used for the calculation has increased
compared to the prior year at 58,077,283 shares (HY20: 57,537,000
shares). In December 2020 , the Group issued 550,000 new shares for
the replenishment of the Employee Benefit Trust. The more
comparable measure, excluding non-underlying items and including
the dilutive effect of share options, is the adjusted diluted EPS.
This increased to 36. 3 pence, from 9.3 pence in HY20, an increase
of 29 0 %.
HY21 HY20 FY19
Pence Pence Pence
------------------ ------ ------ ------
Basic 33.2 3.6 7.1
Diluted 32.7 3.5 7.0
Adjusted basic 36.9 9.4 33.2
Adjusted diluted 36.3 9.3 32.8
------------------ ------ ------ ------
Balance sheet
HY21 HY20 FY20
GBPm GBPm GBPm
------------------------------- ------- ------- -------
Non-current assets 51.2 63.3 52.3
Current assets
Inventories 15.9 18.6 19.4
Trade and other receivables 18.2 19.3 18.0
Cash 18.8 12.8 15.0
Current liabilities
Other current liabilities (20.5) (15.7) (26.0)
Non-current liabilities
Bank loan or overdraft 0.3 (32.7) (11.6)
Other non-current liabilities (8.6) (10.6) (10.2)
------------------------------- ------- ------- -------
Net assets 75.3 55.0 56.9
------------------------------- ------- ------- -------
Non-current assets
The non-current assets comprise: goodwill; brands, patents and
capitalised development costs; property, plant and equipment; and
software.
The goodwill totals GBP7.9 million (HY20: GBP17.6 million). This
comprises Martin Audio's GBP2.4 million, ADAM Audio's GBP5.1
million and Novation's GBP0.4 million. In both Martin Audio and
ADAM Audio, the goodwill represented approximately 30% of the
acquisition cost.
The brands were initially valued at GBP14.3 million. This
comprises Martin Audio's GBP6.8 million, which is to be amortised
over 20 years, and ADAM Audio's GBP7.5 million, which is to be
amortised over ten years. At 28 February 2021 the brands had
carrying value of GBP12.7 million (HY20: GBP13.6 million).
The capitalised development costs comprise acquired developments
in relation to both completed products and products currently in
development, and internally generated development costs for
products currently on sale. The amortisation periods range from
three years to 11 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 and the Martin Audio live speakers. The capitalised
development costs have a carrying value of GBP25.6 million (HY20:
GBP26.8 million).
Based on current trading and management forecasts, no
impairments to the carrying value of the intangible assets have
been deemed necessary. This will be reassessed at the year-end for
evidence of any permanent diminution in value.
Overall, the amortisation of the intangible assets totals GBP3.8
million (HY20: GBP3.2 million). This is split between amortisation
of intangible assets acquired as part of the acquisition of either
ADAM Audio in July 2019 or Martin Audio in December 2019 of GBP1.8
million (HY20: GBP1.2 million), and other amortisation of GBP2.0
million (HY20: GBP2.0 million). The amortisation of acquired
intangible assets has been treated as a non-underlying expense. The
ongoing amortisation relates to the capitalised development costs
credited to the income statement. The difference between ongoing
amortisation and capitalised development costs is GBP1.2 million
(HY20: GBP0.6 million).
The remaining GBP5.0 million (HY20: GBP5.3 million) of
non-current assets consist mainly of right of use assets relating
to the Group's leased offices and warehouses, tooling equipment for
the manufacture of products and other intangible assets such as
software and trademarks.
Working capital
Working capital was 7.7% of revenue (HY20: 20.9%). This is in
line with year-end levels but is lower than historic norms which
are closer to the levels at half year 2020. Inventory has remained
low as strong demand has further delayed the replenishment to
expected levels and an ongoing focus on cash collection has kept
overdue debtors low. Notwithstanding that, Focusrite, in
particular, moved from one manufacturing site to two in 2018 and
increased production significantly. Demand has continued to
outstrip supply with ongoing global constraints for certain key
components, meaning that period end stock remains low. Going
forward the Group will work towards restoring the stock levels
needed to satisfy ongoing demand. As is our practice, creditors
continue to be paid on time.
Cash flow
HY21 HY20 FY20
GBPm GBPm GBPm
Free cash flow(6) 5.5 (0.6) 2.4
Add - non-underlying cash outflows(7) 12.0 5.0 25.8
--------------------------------------- ----- ------ -----
Underlying free cash flow 17.5 4.4 28.2
--------------------------------------- ----- ------ -----
(6) Defined as net cash from operating activities less net cash
used in investing and financing activities, excluding dividends
paid.
(7) Defined as cash payments for non-underlying costs.
The underlying free cash flow in HY21 was GBP17.5 million, which
was 18.4% of revenue. In the comparative period, the free cash flow
was GBP4.4 million which was 8.8% of revenue. Free cash flow as a
percentage of revenue is a key performance measure within the Group
and forms an important element of the incentivisation metrics for
senior management across the Group. Over the last five years
underlying free cash flow as a proportion of revenue has averaged
12%. The GBP12.0 million non-underlying cash flow in HY21 consists
of the repayment of the bank loan. In FY20, it related to the
acquisition of Martin Audio, and subsequent partial repayment of
the bank loan.
Free cash flow is 5.8% of revenue due to the high operating
profit margin and the favourable movement in working capital
diluted by the impact of phasing of payments to creditors. Going
forward, the movement in working capital is expected to be negative
as the Group replenishes stock and grows further.
The net cash balance at the period end was GBP19.1 million
(HY20: net debt of GBP19.9 million and FY20: net cash of GBP3.3
million). In December 2019, the Group acquired Martin Audio for
GBP35.3 million (net of acquired cash) and also incurred
non-underlying costs totalling GBP2.3 million. As part of the
acquisition of Martin Audio, the Group took a GBP40 million loan
facility split evenly between HSBC and NatWest. The facility lasts
for five years to December 2024.
Going concern
The Board of Directors have a reasonable expectation that the
Company and the Group have adequate resources to continue in
operational existence for at least 12 months from this report date.
Accordingly, the interim statements have been prepared on a going
concern basis.
The COVID-19 virus has caused upheaval worldwide with many
businesses experiencing a significant decline in revenue. The
Directors have prepared projected cash flow information (base case
forecasts) for the period ending 12 months from the date of their
approval of this interim statement. On the basis of this cash flow
information, the Directors consider that at the end of the 12-month
period, the Group will remain in a net cash position following the
acquisition of Sequential LLC on 26 April 2021. The Group's
revolving credit facility ('RCF') facility of GBP40.0 million is
due for renewal in December 2024. Throughout the period the
forecast cash flow information indicates that the Group will
comfortably comply with the leverage and interest cover covenants
contained within the facility.
Management's view is that a severe yet plausible downside
assumption against their base case forecasts is estimated to be a
revenue shortfall of 30% for a six-month period commencing April
2021. This model assumes that purchases of stock will, in time,
reduce to reflect reduced sales and the Group will respond to the
shortfall by taking reasonable steps to reduce overheads within its
control. Even at that level, 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
0.6 compared to the maximum of 2.5. The Group's net debt position
under this severe plausible downside scenario is still expected to
improve at the end of the 12-month period.
In their sensitivity analyses, the Directors estimate that if
the Group were to experience a shortfall in revenue of greater than
65% for six months, this could result in leverage beyond that
permitted by the current facility by September 2021, despite
consequential reductions in the purchases of stock and overheads.
As an additional measure the Directors could also stop the
dividend. However, the Director's view is that this scenario of a
revenue shortfall of greater than 65% is not plausible.
In reality, the Group is still experiencing record levels of
consumer registrations and customer demand, partially as a result
of the COVID-19 restrictions on people's movement and more
generally in line with the trend towards the digitisation of audio
for work and leisure purposes which will outlast the pandemic, and
therefore the high levels of revenue have been maintained since
year end. This is evidenced by improvements in the Group's net cash
position which has remained strong, increasing from the GBP19.1
million reported at half year to approximately GBP27.4 million at
19 April 2021. Consequently, the Directors are confident that the
Group will have sufficient funds to continue to meet its
liabilities as they fall due for at least 12 months from the date
of approval of the interim statements and therefore have prepared
the interim statements on a going concern basis. See note 1.3 for
further detail.
Dividend
The Board has approved an interim dividend of 1.5p (HY20: 1.3p).
The Board deferred the declaration of the HY20 interim dividend at
the interim results due to the uncertainty at the start of the
COVID-19 pandemic. Following strong trading this was subsequently
approved and announced in July 2020.
Summary and outlook
"The Group has performed exceptionally well throughout the first
half of the financial year 2020/2021, with each brand taking on the
challenges and opportunities created by the pandemic as well as
delivering on our mission of 'Removing Barriers to Creativity'. Our
teams have continued to persevere, adapt, and succeed in
challenging situations, and I salute every employee for their
efforts.
For the first half of the year, Focusrite, Novation and ADAM
Audio products continued to see high demand for home-based amateur
and professional audio recording solutions. This resulted in
revenue for the period being slightly ahead of our revised
expectations as announced on 19 February 2021. As previously
discussed, we believe the customer base has materially grown, with
more people utilising these solutions for music creation,
podcasting, social media broadcasts and other streaming workflows.
The digitisation of almost every facet of modern life continues
unabated, and audio is no exception.
We continue to see challenges, most notably component supply
issues that are impacting many industries. However, we believe our
strong relationships with our contract manufacturers and component
suppliers will enable us, over time, to navigate successfully
through this. We expect demand to remain higher than pre-COVID-19
levels for our ADAM Audio and Focusrite businesses, but recognise
the uncertainty that the end of lockdown will bring. While demand
for Martin Audio products continues to be constrained by the
shutdown of live events, we are now seeing the pipeline increase
for both installed and tour sound business.
As always, we remain appropriately cautious given the unique
global circumstances, but also optimistic about the future
prospects for the Group."
Tim Carroll Sally McKone
Chief Executive Officer Chief Financial Officer
27 April 2021 27 April 2021
Principal Risks and Uncertainties
There are a number of potential risks and uncertainties which
could have a material impact on the Group's performance over the
remaining six months of the financial year although they are not
expected to cause the Group's actual results to differ materially
from the expected results.
The Directors do not consider that the principal risks and
uncertainties have changed materially since the publication of the
Annual Report for the year ended 31 August 2020, save as set out
below.
The principal risks and how the Group seeks to mitigate these
risks is set out on pages 26 - 30 inclusive of the Annual Report
and Accounts 2020.
COVID-19
The past 12 months have been defined by the impact of COVID-19
and whilst the threat of general disruption to operations,
including from government restrictions, the impact on the supply
chain and people availability remains, and the Group has responded
to the continuing uncertainty.
Demand has remained strong as government lockdown measures have
resulted in a unique set of circumstances when consumers remained
at home with little outlet and audio equipment became an
increasingly essential part of everyday life. As a result, we
experienced a strong increase in demand and delivered record
volumes to customers.
The Group's management team continue to monitor the
circumstances, with a focus on the health and wellbeing of our
people and ensuring our systems are secure, robust and can support
sustained remote working. Similarly, our manufacturing partners
have taken measures to ensure their workforce welfare with
cleaning, social distancing and testing protocols in place.
Product supply
The Group's home audio products continue to be in high demand
across all major markets. This demand presents its own challenges:
supply chain risks arise for the Group in particular from the
availability of raw materials and components. The market is
suffering from a restricted capacity caused by supplier failure and
excessive demand on suppliers globally across the electronics
supply chain, including automotive and other consumer electronic
goods.
In order to manage this uncertainty of supply, work is ongoing
with the Group's suppliers to source and buy materials and
components to meet our production schedules and with its
distributors and resellers to manage the supply of products to the
market.
Emerging risks: Climate
Future risks continue to be a discussion as we try to predict
what the music industry may look like in the short and long term.
As an equipment manufacturer with a worldwide reach, we are aware
that our very existence contributes to factors affecting climate
change. During the first six months ending 28 February 2021, our
Green Team has been building on existing commitments to improve
product longevity and supplier sustainability expectations as
outlined in our Annual Report and Accounts. The Group is in talks
with external sustainability advisers as we define our response to
climate change and the actions we can take to preserve the
environment.
FORWARD-LOOKING STATEMENTS
Certain statements in this half year report are forward looking.
Although the Directors believe that their expectations are based on
reasonable assumptions, any statements about future outlook may be
influenced by factors that could cause actual outcomes and results
to be materially different.
Condensed Consolidated Income Statement
For the six months ended 28 February 2021
Six months to Six months to Year to
Note 28 February 2021 29 February 2020 31 August 2020
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
----------------------------------------------- ----- ------------------ ------------------ ----------------
Revenue 2 95,286 49,926 130,141
Cost of sales (49,594) (26,920) (70,248)
----------------------------------------------- ----- ------------------ ------------------ ----------------
Gross profit 45,692 23,006 59,893
Administrative expenses (21,615) (19,342) (51,485)
Impairment gain/(loss)on trade and other
receivables 74 (649) (474)
Adjusted EBITDA (non-GAAP measure) 29,236 9,139 28,565
Depreciation and amortisation (2,946) (2,757) (5,530)
Non-underlying items for Adjusted EBITDA:
Impairment of goodwill on acquisition - - (10,200)
Amortisation of acquired intangible assets (1,869) (1,144) (3,013)
Non-underlying items 4 (270) (2,223) (1,888)
Operating profit 24,151 3,015 7,934
Finance income - 28 36
Finance costs (589) (353) (945)
----------------------------------------------- ----- ------------------ ------------------ ----------------
Profit before tax 23,562 2,690 7,025
Income tax expense 5 (4,296) (639) (2,934)
----------------------------------------------- ----- ------------------ ------------------ ----------------
Profit for the period from continuing operations 19,266 2,051 4,091
------------------------------------------------------ ------------------ ------------------ ----------------
Earnings per share
From continuing operations
----- ------------------ ------------------
Basic (pence per share) 7 33.2 3.6 7.1
----------------------------------------------- ----- ------------------ ------------------ ----------------
Diluted (pence per share) 7 32.7 3.5 7.0
----------------------------------------------- ----- ------------------ ------------------ ----------------
Condensed Consolidated Statement of Other Comprehensive
Income
For the six months ended 28 February 2021
Six months to Six months to Year to
28 February 2021 29 February 2020 31 August 2020
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
----------------------------------------------------- ------------------ ------------------ ----------------
Profit for the period 19,266 2,051 4,091
Items that may be reclassified subsequently to the income statement
Exchange differences on translation of foreign
operations (265) 88 105
Gain on forward foreign exchange contracts designated
and effective as a hedging instrument 626 ---1,069 459
Tax on hedging instrument (151) (203) (87)
------------------------------------------------------ ------------------ ------------------ ----------------
Total comprehensive income for the period 19,476 3,005 4,568
------------------------------------------------------ ------------------ ------------------ ----------------
Profit attributable to:
Equity holders of the Company 19,476 3,005 4,568
------------------------------------------------------ ------------------ ------------------ ----------------
19,476 3,005 4,568
----------------------------------------------------- ------------------ ------------------ ----------------
Condensed Consolidated Statement of Financial Position
Note 28 February 2021 29 February 2020 31 August 2020
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
---------------------------------------------- ----- ----------------- ----------------- ---------------
Assets
Non-current assets
Goodwill 7,882 17,587 7,882
Other intangible assets 8 39,500 41,539 40,374
Property, plant and equipment 3,833 4,170 4,082
---------------------------------------------- ----- ----------------- ----------------- ---------------
Total non-current assets 3 51,215 63,296 52,338
---------------------------------------------- ----- ----------------- ----------------- ---------------
Current assets
Inventories 15,908 18,589 19,372
Trade and other receivables 17,326 18,437 17,744
Derivative financial instruments 9 846 881 271
Cash and cash equivalents 9 18,792 12,767 14,975
---------------------------------------------- ----- ----------------- ----------------- ---------------
Total current assets 52,872 50,674 52,362
---------------------------------------------- ----- ----------------- ----------------- ---------------
Total assets 104,087 113,970 104,700
---------------------------------------------- ----- ----------------- ----------------- ---------------
Equity and liabilities
Capital and reserves
Share capital 59 58 58
Share premium 115 115 115
Merger reserve 14,595 14,595 14,595
Merger difference reserve (13,147) (13,147) (13,147)
Translation reserve (68) 180 197
Hedging reserve 846 714 220
EBT reserve (1) (1) (1)
Retained earnings 72,945 52,474 54,861
Equity attributable to owners of the Company 75,344 54,988 56,898
---------------------------------------------- ----- ----------------- ----------------- ---------------
Total equity 75,344 54,988 56,898
---------------------------------------------- ----- ----------------- ----------------- ---------------
Current liabilities
Trade and other payables 14,938 13,453 23,417
Other liabilities 888 969 1,018
Current tax liabilities 3,390 551 452
Provisions 1,319 757 1,094
Total current liabilities 20,535 15,730 25,981
---------------------------------------------- ----- ----------------- ----------------- ---------------
Non-current liabilities
Deferred tax 6,311 8,147 7,772
Other liabilities 681 1,446 889
Provisions 1,519 1,019 1,519
Bank loan and arrangement fee 9 (303) 32,640 11,641
Total liabilities 28,743 58,982 47,802
---------------------------------------------- ----- ----------------- ----------------- ---------------
Total equity and liabilities 104,087 113,970 104,700
---------------------------------------------- ----- ----------------- ----------------- ---------------
Condensed Consolidated Statements of Changes in Equity
For the six
months ended Merger
28 February Share Share Merger difference Translation Hedging EBT Retained
2021 capital premium reserve reserve reserve reserve reserve earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1
September
2020 58 115 14,595 (13,147) 197 220 (1) 54,861 56,898
--------------- --------- --------- --------- ----------- ------------ --------- --------- --------- --------
Profit for the
period - - - - - - - 19,266 19,266
Other
comprehensive
income for
the period - - - - (265) 626 - (151) 210
--------------- --------- --------- --------- ----------- ------------ --------- --------- --------- --------
Total
comprehensive
income for
the period - - - - (265) 626 - 19,115 19,476
--------------- --------- --------- --------- ----------- ------------ --------- --------- --------- --------
Transactions
with owners of
the Company:
Shares issued
to EBT 1 - - - - - (1) - -
Share-based
payment
deferred tax
deduction in
excess of
remuneration
expense - - - - - - - 259 259
Share-based
payment
current tax
deduction in
excess of
remuneration
expense - - - - - - - 447 447
Shares from
EBT exercised - - - - - - 1 300 301
Share-based
payments - - - - - - - 305 305
Shares
withheld to
settle
employees'
tax
obligations
associated
with
share-based
payments - - - - - - - (720) (720)
Premium on
shares
awarded in
lieu of
bonuses - - - - - - - 60 60
Dividends paid - - - - - - - (1,682) (1,682)
Balance at 28
February 2021 59 115 14,595 (13,147) (68) 846 (1) 72,945 75,344
--------------- --------- --------- --------- ----------- ------------ --------- --------- --------- --------
Condensed Consolidated Statements of Changes in Equity
(Continued)
For the six
months ended Merger
29 February Share Share Merger difference Translation Hedging EBT Retained
2020 capital premium reserve reserve reserve reserve reserve earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1
September
2019 58 115 14,595 (13,147) 92 (152) (1) 51,827 53,387
--------------- --------- --------- --------- ----------- ------------ --------- --------- --------- --------
Profit for the
period - - - - - - - 2,051 2,051
Other
comprehensive
income for
the period - - - - 88 866 - - 954
--------------- --------- --------- --------- ----------- ------------ --------- --------- --------- --------
Total
comprehensive
income for
the period - - - - 88 866 - 2,051 3,005
--------------- --------- --------- --------- ----------- ------------ --------- --------- --------- --------
Transactions
with owners of
the Company:
Share-based
payment
deferred tax
deduction in
excess of
remuneration
expense - - - - - - - (147) (147)
Share-based - - - - - - - - -
payment
current tax
deduction in
excess of
remuneration
expense
Shares from
EBT exercised - - - - - - - 233 233
Share-based
payments - - - - - - - 225 225
Shares
withheld to
settle
employees'
tax
obligations
associated
with
share-based
payments - - - - - - - (214) (214)
Premium on - - - - - - - - -
shares awarded
in lieu of
bonuses
Dividends paid - - - - - - - (1,501) (1,501)
Balance at 29
February 2020 58 115 14,595 (13,147) 180 714 (1) 52,474 54,988
--------------- --------- --------- --------- ----------- ------------ --------- --------- --------- --------
Condensed Consolidated Statements of Changes in Equity
(Continued)
For the year Merger
ended 31 Share Share Merger difference Translation Hedging EBT Retained
August 2020 capital premium reserve reserve reserve reserve reserve earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1
September
2019 58 115 14,595 (13,147) 92 (152) (1) 51,827 53,387
--------------- --------- --------- --------- ----------- ------------ --------- --------- --------- --------
Profit for the
period - - - - - - - 4,091 4,091
Other
comprehensive
income for
the period - - - - 105 372 - - 477
--------------- --------- --------- --------- ----------- ------------ --------- --------- --------- --------
Total
comprehensive
income for
the period - - - - 105 372 - 4,091 4,568
--------------- --------- --------- --------- ----------- ------------ --------- --------- --------- --------
Transactions
with owners of
the Company:
Share-based
payment
deferred tax
deduction in
excess of
remuneration
expense - - - - - - - 162 162
Share-based
payment
current tax
deduction in
excess of
remuneration
expense - - - - - - - 457 457
Shares from
EBT exercised - - - - - - - 252 252
Share-based
payments - - - - - - - 537 537
Shares
withheld to
settle
employees'
tax
obligations
associated
with
share-based
payments - - - - - - - (192) (192)
Premium on
shares
awarded in
lieu of
bonuses - - - - - - - (22) (22)
Dividends paid - - - - - - - (2,251) (2,251)
Balance at 31
August 2020 58 115 14,595 (13,147) 197 220 (1) 54,861 56,898
--------------- --------- --------- --------- ----------- ------------ --------- --------- --------- --------
Consolidated Statement of Cash Flow
For the six months ended 28 February 2021
Six months to Six months to Year to
28 February 2021 29 February 2020 31 August 2020
GBP'000 GBP'000 GBP'000
Cash flows from operating activities
Profit for the period 19,266 2,051 4,091
Adjustments for:
Income tax expense 4,296 639 2,934
Net finance charge 589 325 909
Profit on disposal of property, plant and equipment - (1) -
Amortisation of intangibles 3,786 3,244 6,780
Impairment of goodwill - - 10,200
Depreciation of property, plant and equipment 1,029 644 1,777
Share-based payments 416 225 537
Operating cash flow before movements in working capital 29,382 7,127 27,228
Decrease in trade and other receivables 527 3,535 3,839
Decrease in inventories 3,465 2,579 1,914
(Decrease)/increase in trade and other payables (8,169) (4,222) 7,932
Operating cash flow before interest and tax paid 25,205 9,019 40,913
Net interest paid (145) (155) (441)
Income tax paid (2,819) (816) (3,539)
Net foreign exchange movement (700) (85) (322)
Net cash inflow from operating activities 21,541 7,963 36,611
---------------------------------------------------------- ------------------ ------------------ ----------------
Cash flows from investing activities
Purchases of property, plant and equipment (779) (2,698) (3,966)
Development of intangible assets (2,911) (3,251) (5,649)
Acquisition of subsidiary, net of cash acquired - (35,265) (35,309)
---------------------------------------------------------- ------------------ ------------------ ----------------
Net cash used in investing activities (3,690) (41,214) (44,924)
---------------------------------------------------------- ------------------ ------------------ ----------------
Cash flows from financing activities
Issue of equity shares 1 1 -
Proceeds from loans and borrowings - 36,000 36,000
Repayments from loans and borrowings (12,000) (3,000) (24,000)
Loan arrangement fee - (360) (359)
Payment of right of use liabilities (338) - (939)
Payment of interest on right of use liabilities (15) - (41)
Equity dividends paid (1,682) (1,501) (2,251)
Net cash (used)/generated in financing activities (14,034) 31,140 8,410
---------------------------------------------------------- ------------------ ------------------ ----------------
Net increase in cash and cash equivalents 3,817 (2,111) 97
Cash and cash equivalents at beginning of the period 14,975 14,878 14,878
---------------------------------------------------------- ------------------ ------------------ ----------------
Cash and cash equivalents at end of the period 18,792 12,767 14,975
---------------------------------------------------------- ------------------ ------------------ ----------------
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 2021 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 interim financial statements are for the six months ended 28
February 2021 and are presented in pounds Sterling ('GBP'). This is
the functional currency of the Group. The statement is presented to
the nearest GBP1,000 ('GBP'000'). The interim financial report has
been prepared in accordance with the recognition and measurement
requirements of international accounting standards in conformity
with the requirements of the Companies Act 2006 that are used for
the annual financial statements. The annual financial statements of
the Group for the year ended 31 August 2021 will be prepared in
accordance with 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. They 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 2020.
These interim financial statements were authorised for issue by
the Company's Board of Directors on 27 April 2021.
The comparative figures for the financial year ended 31 August
2020 are not 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.
Significant accounting policies
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 2020 which were
prepared in accordance with IFRSs as adopted by the EU.
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 2021.
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 for at least 12 months from the date of
approval of the interim financial statements. 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 GBP40.0 million is
due for renewal in December 2024. As further described below, the
availability of the revolving credit facility is subject to
continued compliance with certain covenants.
The COVID-19 virus has caused upheaval worldwide with many
businesses experiencing a significant decline in revenue. The
Directors have prepared projected cash flow forecasts for the
period ending 12 months from the date of their approval of this
financial statement. These forecasts include a severe but plausible
downside scenario, which includes potential impacts from the
continued uncertainty of COVID-19 (see below).
The base case covers the period to May 2022 and includes
demanding but achievable forecast growth. The forecast has been
extracted from the Group's three-year plan. Key assumptions
include:
-- Future growth assumptions consistent with those recently
achieved by the business excluding an estimate of the impact of
COVID-19 but including the Group's expectation of Martin Audio
recovery from the pandemic, and annualisation of Martin Audio
results.
-- Free cash flow as a percentage of revenue held steady compared to previous years.
-- Continued investment in research and development in all areas of the Group.
-- Dividends consistent with the Group's dividend policy.
-- Additional investment in acquisitions in the forecast period.
Throughout the period the forecast cash flow information
indicates that the Group will have sufficient cash reserves and
comply with the leverage and interest cover covenants contained
within the facility.
The Directors' view is that a severe yet plausible downside
assumption against their base case forecasts is estimated to be a
revenue shortfall of 30% for a six-month period commencing April
2021. This model assumes that purchases of stock would, in time,
reduce to reflect reduced sales, if they occurred, and the Group
would respond to a revenue shortfall by taking reasonable steps to
reduce overheads within its control. Even at that level, 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 0.6x compared to the maximum of 2.5x.
The Group's net debt position under this severe plausible downside
scenario would still be expected to improve at the end of the
12-month period.
Separately, the Directors estimate that if the Group were to
experience a shortfall in revenue of greater than 65% for six
months, debt and leverage could rise to the upper limits allowed by
the banking covenants by September 2021. This scenario includes
consequential reductions in the purchases of stock and overheads.
As an additional measure, the Directors could also cancel the
dividend. However, the Directors view is that any scenario of a
revenue shortfall of greater than 30% is not plausible.
In reality, the Group is still experiencing record levels of
consumer registrations and customer demand, partially as a result
of the COVID-19 restrictions on people's movement, and therefore
the high levels of revenue have been maintained since year end.
This is evidenced by improvements in the Group's cash position
which has remained strong, increasing from the GBP18.8 million
reported at half year to approximately GBP27.4 million at 19 April
2021. Consequently, the Directors are confident that the Company
will have sufficient funds to continue to meet its liabilities as
they fall due for at least 12 months from the date of approval of
the interim 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 2020.
1.6 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 except for:
-- exchange differences on transactions entered into to hedge
certain foreign currency risks; and
-- exchange differences on monetary items receivable from or
payable to a foreign operation for which settlement is neither
planned nor likely to occur (therefore forming part of the net
investment in the foreign operation), which are recognised
initially in other comprehensive income and reclassified from
equity to profit or loss on disposal or partial disposal of the net
investment.
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.
1.7 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.
For cash flow hedges, the associated cumulative gain or loss is
removed from equity and recognised in the income statement in the
same period or periods during which the hedged forecast transaction
affects profit or loss.
When a hedging instrument expires or is sold, 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.
A derivative with a positive fair value is recognised as a
financial asset whereas a derivative with a negative fair value is
recognised as a financial liability.
1.8 Government grants
Government grants are recognised when there is reasonable
assurance that the Group will comply with the relevant conditions
and the grant will be received.
Government grants related to assets are deducted from the cost
of the asset and amortised over the useful life of the asset.
Government grants related to income are presented as an offset
against the related expenditure, and government grants that are
awarded as incentives with no ongoing performance obligations to
the Group are recognised as other income in the period in which the
grant is received.
1.9 Alternative Performance Measures (APMs) and non-underlying
items
The Group have applied 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 refer to
'Adjusted' measures and 'non-underlying' items to better reflect
the trading performance of the Group.
Non-underlying items are those items that are unusual because of
their size, nature of incidence. 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 one-off acquisition costs and
restructuring costs.
The following APMs have been used in these interim results:
-- Adjusted EBITDA - Comprising earnings adjusted for interest,
taxation, depreciation, amortisation and non-underlying items. This
is shown on the face of the income statement.
-- Adjusted operating profit - Operating profit adjusted for
non-underlying items which comprise costs relating to the
acquisition of Sequential LLC (GBP0.3 million) and amortisation of
acquired intangibles (GBP1.8 million).
-- Adjusted earnings per share (EPS) - Earnings per share
excluding non-underlying items.
-- Free cash flow - defined as net cash from operating
activities less net cash used in investing and financing
activities, excluding dividends paid.
-- Underlying free cash flow - as free cash flow but adding back
non-underlying cash flows relating to repayment of RCF drawn down
for acquisitions.
-- Net debt - comprised of cash and cash equivalents, overdrafts
and amounts drawn against the RCF including the costs of arranging
the RCF.
2. Revenue
An analysis of the Group's revenue is as follows:
Six months to February Six months to February
2021 2020
----------------------------------------- ------------------------------- --------
EMEA North Rest Total EMEA North Rest Total
America of World America of World
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------- -------- --------- ---------- -------- -------- --------- ---------- --------
Focusrite 21,787 28,578 7,960 58,325 11,748 10,077 3,749 25,574
Focusrite Pro 919 1,324 432 2,675 607 853 424 1,884
-------- --------- ---------- -------- -------- --------- ---------- --------
Focusrite segment 22,706 29,902 8,392 61,000 12,355 10,930 4,173 27,458
Novation segment 5,253 5,880 1,910 13,043 4,521 3,506 1,908 9,935
ADAM Audio 6,356 4,111 2,115 12,582 3,700 2,205 1,136 7,041
Martin Audio 2,620 1,952 4,079 8,651 1,573 1,453 1,500 4,526
Distribution segment 10 - - 10 966 - - 966
---------------------- -------- --------- ---------- -------- -------- --------- ---------- --------
Total 36,945 41,845 16,496 95,286 23,115 18,094 8,717 49,926
---------------------- -------- --------- ---------- -------- -------- --------- ---------- --------
Year to August 2020
-----------------------------------------
EMEA North Rest Total
America of World
GBP'000 GBP'000 GBP'000 GBP'000
---------------------- -------- --------- ---------- --------
Focusrite 32,128 32,782 11,268 76,178
Focusrite Pro 1,071 1,625 796 3,492
-------- --------- ---------- --------
Focusrite segment 33,199 34,407 12,064 79,670
Novation segment 8,290 7,013 4,080 19,383
ADAM Audio 8,784 6,352 2,245 17,381
Martin Audio 4,493 3,089 4,432 12,014
Distribution segment 1,693 - - 1,693
---------------------- -------- --------- ---------- --------
Total 56,459 50,861 22,821 130,141
---------------------- -------- --------- ---------- --------
In August 2020, the Group ceased distributing KRK monitors in
the UK, favouring instead the Group's own ADAM Audio Studio
monitors. Therefore, revenue from the Distribution channel is
declining to nil.
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 - Sales of Focusrite branded products
Focusrite Pro - Sales of Focusrite Pro branded products
Novation - Sales of Novation and Ampify branded products
ADAM Audio - Sale of ADAM Audio products
Martin Audio - Sale of Martin Audio products. Only applies after
acquisition on 30 December 2019
The revenue and profit generated by each of the Group's
operating segments are summarised as follows:
Six months to Year to
Six months to 29 February 31 August
28 February 2021 2020 2020
(unaudited)
(unaudited) restated (audited)
GBP'000 GBP'000 GBP'000
-------------------------------------------------------- ------------------ -------------- -----------
Revenue from external customers
Focusrite 58,325 25,574 76,178
Focusrite Pro 2,675 1,884 3,492
Novation 13,043 9,935 19,383
ADAM Audio 12,582 7,041 17,381
Martin Audio 8,651 4,526 12,014
Distribution 10 966 1,693
Total 95,286 49,926 130,141
-------------------------------------------------------- ------------------ -------------- -----------
Segment profit
Focusrite 28,292 11,781 35,602
Focusrite Pro 1,332 1,031 1,916
Novation 4,726 4,230 8,458
ADAM Audio 7,391 3,856 8,828
Martin Audio 3,963 1,943 5,032
Distribution (12) 165 57
-------------------------------------------------------- ------------------ -------------- -----------
45,692 23,006 59,893
Central distribution costs and administrative expenses (19,402) (16,624) (36,858)
Goodwill impairment - - (10,200)
Non-underlying items (2,139) (3,367) (4,901)
Operating profit 24,151 3,015 7,934
Finance income - 28 36
Finance costs (589) (353) (945)
-------------------------------------------------------- ------------------ -------------- -----------
Profit before tax 23,562 2,690 7,025
Tax (4,296) (639) (2,934)
Profit after tax 19,266 2,051 4,091
-------------------------------------------------------- ------------------ -------------- -----------
Segment profit represents the profit earned by each segment
without allocation of the share of central administration costs,
including Directors' salaries, 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. Segment profit at year end and
28 February 2021 includes all costs of goods sold. The figure for
the six months to 29 February 2020 previously only included
directly attributable costs of goods sold, and so excluded costs
such as duty and freight which were not allocated directly to a
particular brand. For the periods including year-end 31 August 2020
onwards, such costs are allocated to the segments to better
demonstrate the performance of each brand. Therefore, the period
ending 29 February 2020 has been restated to offer a better
comparative to the other periods.
Central administration costs comprise principally the
employment-related costs and other overheads incurred by the Group.
Also included within central administration costs is the charge
relating to the share option scheme of GBP416,000 for the six-month
period to 28 February 2021 (six months to 29 February 2020:
GBP225,000; year to 31 August 2020: GBP537,000).
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 consolidated financial
information.
The Group's non-current assets, analysed by region, were as
follows:
28 February 29 February 31 August
2021 2020 2020
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
-------------------------------- ------------ ------------ ----------
Non-current assets
North America 590 124 760
Europe, Middle East and Africa 49,278 61,464 49,611
Rest of World 1,347 1,708 1,967
Total non-current assets 51,215 63,296 52,338
-------------------------------- ------------ ------------ ----------
4. Non-underlying costs
The following non-underlying costs have been charged in the
period
28 February 29 February 31 August
2021 2020 2020
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
------------------------------------------------ ------------ ------------ ----------
Non-underlying costs
Acquisition and due diligence costs 270 1,813 1,737
Restructuring - 410 151
------------------------------------------------ ------------ ------------ ----------
Non-underlying costs 270 2,223 1,888
------------------------------------------------ ------------ ------------ ----------
Amortisation of acquired intangible assets 1,869 1,144 3,013
Impairment of goodwill on acquisition - - 10,200
Total non-underlying costs for adjusted EBITDA 2,139 3,367 15,101
------------------------------------------------ ------------ ------------ ----------
Acquisition and due diligence costs in the six months to 28
February 2021 related to fees accrued for due diligence work
associated with the acquisition of Sequential LLC.
5. Taxation
The tax charge for the six months to 28 February 2021 is based
on the estimated tax rate for the full year in each
jurisdiction.
6. Dividends
The following equity dividends have been declared:
Year to
Six months to Six months to 31 August 2020
28 February 2021 (unaudited) 29 February 2020 (unaudited) (audited)
--------------------------------- ------------------------------- ------------------------------- -----------------
Dividend per qualifying ordinary
share 1.5p 1.3p 4.2p
--------------------------------- ------------------------------- ------------------------------- -----------------
Du ring the period, the Company paid a final dividend in respect
of the year ended 31 August 2020 of 2.9 pence per share, amounting
to GBP1,682,000.
The Board has approved an interim dividend of 1.5p (HY20: 1.3p).
At HY20, the Board deferred the declaration of the interim dividend
at the interim results due to the uncertainty at the start of the
COVID-19 pandemic. However, following strong trading this was
subsequently approved and announced in July 2020 and paid in August
2020.
7. Earnings per share
Reported EPS
The calculation of the basic and diluted EPS is based on the
following data:
Six months to Year to
28 February Six months to 31 August
2021 29 February 2020 2020
(unaudited) (unaudited) (audited)
Earnings GBP'000 GBP'000 GBP'000
----------------------------------------------------------------- ---------------- ------------------- ------------
Earnings for the purposes of basic and diluted EPS being net
profit for the period 19,266 2,051 4,091
Non-underlying items 2,139 3,367 15,101
Tax on non-underlying items - - (26)
----------------------------------------------------------------- ---------------- ------------------- ------------
Total underlying profit for adjusted EPS calculation 21,405 5,418 19,166
----------------------------------------------------------------- ---------------- ------------------- ------------
Six months to Six months to Year to
28 February 29 February 31 August
2021 2020 2020
number number number
Number of shares '000 '000 '000
----------------------------------------------------------------- ---------------- ------------------- ------------
Weighted average number of ordinary shares for the purposes of
basic EPS calculation 58,077 57,537 57,680
Effect of dilutive potential ordinary shares:
EMI share option scheme and unapproved share option plan 890 733 812
Weighted average number of ordinary shares for the purposes of
diluted EPS calculation 58,967 58,270 58,492
----------------------------------------------------------------- ---------------- ------------------- ------------
EPS Pence Pence Pence
----------------------------------------------------------------- ---------------- ------------------- ------------
Basic EPS 33.2 3.6 7.1
Diluted EPS 32.7 3.5 7.0
Adjusted basic EPS 36.9 9.4 33.2
Adjusted diluted EPS 36.3 9.3 32.8
----------------------------------------------------------------- ---------------- ------------------- ------------
At 28 February 2021, the total number of ordinary shares issued
and fully paid was 58,661,639. This included 528,916 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 (58,312,191) less the weighted average number of
shares held by the EBT (234,909). 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
Intellectual Internally Acquired Licences Trademark Computer Brands Total
property generated development software
development costs
costs
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------- ------------- ------------- ------------- --------- ---------- -------------- -------- --------
Cost
At 1
September
2019 536 20,104 4,043 103 422 1,008 7,500 33,716
Additions -
products
previously
under
development 44 - - 63 404 224 - 735
Additions -
products
developed
during the
year - 2,698 - - - 81 - 2,779
Additions -
from
development
in progress - 1,884 - - - - - 1,884
Additions
through
business
combination - - 15,900 - - 224 6,800 22,924
Disposals - (996) - - - (10) - (1,006)
-------------- ------------- ------------- ------------- --------- ---------- -------------- -------- --------
At 31 August
2020 580 23,690 19,943 166 826 1,527 14,300 61,032
-------------- ------------- ------------- ------------- --------- ---------- -------------- -------- --------
Intellectual Internally Acquired Licences Trademark Computer Brands Total
property generated development software
development costs
costs
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1
September
2020 580 23,690 19,943 166 826 1,527 14,300 61,032
Additions -
products
previously
under
development 40 909 - - 66 238 - 1,253
Additions -
products
developed
during the
period - 19 - - - - - 19
Additions -
from
development
in progress - 1,672 - - - - - 1,672
Disposals - (2,371) - - - (383) - (2,754)
At 28
February
2021 620 23,919 19,943 166 892 1,382 14,300 61,222
-------------- ------------- ------------ ------------ --------- ----------- --------- -------- ----------
As at the 28 February 2021, there were GBP2,808,000 of assets under construction within internally
generated development costs (HY20: GBP1,874,000).
Intellectual Internally Acquired Licences Trademark Computer Brands Total
property generated development software
development costs
costs
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Amortisation
At 1
September
2019 353 13,386 110 95 269 576 95 14,884
Charge for
the year 167 3,026 2,042 27 195 260 973 6,690
Eliminated on
disposal - (906) - - - (10) - (916)
At 1
September
2020 520 15,506 2,152 122 464 826 1,068 20,658
Charge for
the period 14 1,612 1,321 17 139 167 548 3,818
Eliminated on
disposal - (2,371) - - - (383) - (2,754)
At 28
February
2021 534 14,747 3,473 139 603 610 1,616 21,722
-------------- ------------- ------------ ------------ --------- ----------- --------- -------- --------
Intellectual Internally Acquired Licences Trademark Computer Brands Total
property generated development software
development costs
costs
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Carrying
amount
At 28
February
2021 86 9,172 16,470 27 289 772 12,684 39,500
-------------- ------------- ------------- ------------- --------- ---------- -------------- -------- --------
At 31 August
2020 60 8,184 17,791 44 362 701 13,232 40,374
-------------- ------------- ------------- ------------- --------- ---------- -------------- -------- --------
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
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 2021 29 February 2020 31 August 2020
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
-------------------------------------------- -------------------------- -------------------------- ----------------
Financial assets
Amortised cost
Cash and cash equivalents 18,792 12,767 14,975
Trade and other receivables 14,638 16,306 15,353
Designated cash flow hedge relationships
Derivative financial assets designated and
effective as cash flow hedging instruments 846 881 271
34,276 29,954 30,599
-------------------------------------------- -------------------------- -------------------------- ----------------
Financial liabilities
Amortised cost
Trade and other payables 7,459 9,133 14,137
Bank loan and arrangement fee (303) 32,640 11,641
7,156 41,773 25,778
-------------------------------------------- -------------------------- -------------------------- ----------------
The GBP0.3 million recorded against bank loan and arrangement
fee is the amount paid to arrange the RCF in December 2020. The
cost is being written down over the term of the RCF, which is five
years. In previous periods it has been shown net with the loan
amount, however as at 28 February 2021 no amount is drawn down
against the RCF.
10. Subsequent events
On 26 April 2021 the Group completed the acquisition of 100% of
the share capital of Sequential LLC. The total consideration paid
was $20 million (cGBP15 million) on completion, with a potential
for a further $4 million if certain performance targets are
achieved. This has been funded through a combination of existing
cash resources and an GBP8 million drawdown on the existing
revolving credit facility of GBP40 million with HSBC and NatWest.
Following the acquisition of Sequential LLC , the Group will have
net cash of approximately GBP12 million.
Independent Review Report to Focusrite plc
Conclusion
We have been engaged by the company to review the condensed set
of financial statements in the half-yearly report for the six
months ended 28 February 2021 which comprises Condensed
Consolidated Income Statement, Condensed Consolidated Statement of
Other Comprehensive Income, Condensed Consolidated Statement of
Financial Position, Condensed Consolidated Statements of Changes in
Equity, Consolidated Statement of Cash Flow and the related
explanatory notes.
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly report for the six months ended 28 February 2021
is not prepared, in all material respects, in accordance with the
recognition and measurement requirements of international
accounting standards in conformity with the requirements of the
Companies Act 2006 that are used for the annual financial
statements and the AIM Rules.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity issued by the Auditing Practices Board for use in the
UK. A review of interim financial information consists of making
enquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review
procedures. We read the other information contained in the
half-yearly report and consider whether it contains any apparent
misstatements or material inconsistencies with the information in
the condensed set of financial statements.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
Directors' responsibilities
The half-yearly report is the responsibility of, and has been
approved by, the directors. The directors are responsible for
preparing the half-yearly report in accordance with the AIM
Rules.
As disclosed in note 1, the latest annual financial statements
of the group were prepared in accordance with International
Financial Reporting Standards as adopted by the EU and the next
annual financial statements will be prepared in accordance with
international accounting standards in conformity with the
requirements of the Companies Act 2006. The directors are
responsible for preparing the condensed set of financial statements
included in the half-yearly report in accordance with the
recognition and measurement requirements of international
accounting standards in conformity with the requirements of the
Companies Act 2006 that are used for the annual financial
statements.
Our responsibility
Our responsibility is to express to the company a conclusion on
the condensed set of financial statements in the half-yearly report
based on our review.
The purpose of our review work and to whom we owe our
responsibilities
This report is made solely to the company in accordance with the
terms of our engagement. Our review has been undertaken so that we
might state to the company those matters we are required to state
to it in this report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility
to anyone other than the company for our review work, for this
report, or for the conclusions we have reached.
Michael Froom
for and on behalf of KPMG LLP
Chartered Accountants
One Snowhill
Snow Hill Queensway
Birmingham
B4 6GH
27 April 2021
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
IR IFMMTMTMTTFB
(END) Dow Jones Newswires
April 27, 2021 02:01 ET (06:01 GMT)
Focusrite (LSE:TUNE)
Gráfica de Acción Histórica
De Feb 2024 a Mar 2024
Focusrite (LSE:TUNE)
Gráfica de Acción Histórica
De Mar 2023 a Mar 2024