TIDMTUNE
RNS Number : 0202X
Focusrite PLC
21 November 2017
Strictly embargoed until: 07.00, 21 November 2017.
Focusrite Plc
("the Company" or "the Group")
Final Results for the Year Ended 31 August 2017
Focusrite Plc (AIM: TUNE), the global music and audio products
company, announces Final Results for the year ended 31 August
2017.
Financial highlights
-- Group revenue grew by 21.6% (constant currency(3) : 13%) to
GBP66.1 million (FY16: GBP54.3 million)
-- Adjusted EBITDA(1) grew by 27.9% to GBP13.1 million (FY16: GBP10.2 million)
-- Operating profit grew 32.6% to GBP9.5 million (FY16: GBP7.1 million)
-- Profit before tax grew 33.5% to GBP9.5 million (FY16: GBP7.1 million)
-- Basic earnings per share grew 30.5% to 15.4p (FY16: 11.8p)
-- Adjusted(2) diluted earnings per share grew 29.8% to 14.8p (FY16: 11.4p)
-- Net cash of GBP14.2 million (FY16: GBP5.6 million)
-- Final dividend of 1.95p recommended, resulting in 2.7p for the year, up 38% on prior year
Operational highlights
-- Strong growth continued across both our major segments, Focusrite and Novation
-- In Focusrite, Scarlett, Clarett and RedNet ranges all grew,
leading to total segment revenue growth of 18.6%
-- In Novation, the growth of Launchpad and Launchkey both
accelerated resulting in segment revenue growth of 37.8%
-- All major geographic regions grew, including the USA, our
largest market, where revenue growth was 30.9% in the year
-- Ten new products launched over the year with positive early industry and user feedback
-- Continued investment in the Software division has generated
continued growth - now three apps with approximately 550,000 active
users
-- e-commerce website now established and delivering products globally
1 Comprising of earnings adjusted for interest, taxation,
depreciation, amortisation and non-underlying items (see page
14).
2 Adjusted for non-underlying items (see note 4).
3 Constant currency revenue growth is calculated by taking the
sterling value of FY17 revenue; converting to FY16 annual average
exchange rates and comparing with the reported revenue for FY16. In
addition, all foreign exchange movements disclosed in revenue are
excluded from both years.
Commenting on the results, Executive Chairman Phil Dudderidge
said:
"I am delighted Focusrite Plc has delivered another strong year
of growth. Our foundations as a company that has a history at the
leading edge of music technology innovation, with an established,
global customer base for its market-leading brands and a strong
culture, make us well placed for further growth."
Commenting on current trading, Chief Executive Officer Tim
Carroll said:
"Since the year end, revenue and cash have both grown further.
We continue to see strong market acceptance across our expanding
portfolio and our new product pipeline continues to grow. Our solid
momentum has continued into the current year and we continue to
look forward with confidence."
Availability of Annual Report and Notice of AGM
The Annual Report and Accounts for the financial year ended 31
August 2017 and notice of the Annual General Meeting ("AGM") of
Focusrite will be posted to shareholders by 5 December 2017 and
will be available on Focusrite's website at
www.focusriteplc.com.
Dividend timetable
The final dividend is subject to shareholder approval, which is
being sought at Focusrite's Annual General Meeting to be held on 10
January 2018.
The timetable for the final dividend is as follows:
28 December 2017 Ex-dividend Date
29 December 2017 Record Date
10 January 2018 AGM to approve the recommended final dividend
19 January 2018 Dividend payment date
- ends -
Enquiries:
Focusrite Plc:
Tim Carroll (CEO) +44 1494 836301
Jeremy Wilson (CFO) +44 1494 836301
Panmure Gordon
Freddy Crossley +44 20 7886 2968
Tom Salvesen +44 20 7886 2904
Belvedere Communications
John West +44 20 3567 0510
Kim Van Beeck +44 7477 967 446
This announcement contains inside information for the purposes
of Article 7 of Regulation (EU) No 596/2014 (MAR)
Notes to Editors
Focusrite plc is a global music and audio products group that
develops and markets proprietary hardware and software products.
Used by audio professionals and amateur musicians alike, its
solutions facilitate the high-quality production of recorded and
live sound. The Focusrite Group trades under four established and
rapidly growing brands: Focusrite, Focusrite Pro, Novation and
Ampify.
With a high-quality reputation and a rich heritage spanning
decades, its brands are category leaders in the music-making
industry. 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.
The Focusrite Group has a global customer base with a
distribution network covering approximately 160 territories.
Focusrite is headquartered in High Wycombe, UK, with marketing
offices in Los Angeles and Hong Kong. Focusrite plc is traded on
the AIM market, London Stock Exchange.
Chairman's Statement
I am very pleased to report that FY17 has proved to be another
successful year, exceeding our expectations for revenue, at
GBP66.1million (+21.6%), profit and cash flow. The Company's
products have continued to grow market share in our established and
growth markets. Revenue and profits have been boosted by the
strengthening of the Euro and US Dollar but, even on a constant
currency basis, the Company has enjoyed excellent growth.
This is our first set of results with Tim Carroll as CEO, having
joined the Company in January 2017. He has successfully established
himself with the management team and the Company more broadly and
is building on Focusrite's strong foundations. Tim enjoyed almost
20 years with Avid Technology Inc, a respected business in our
marketplace, in global sales roles and latterly heading the audio
division, as a result of which he has an unmatched experience of
the markets that Focusrite seeks to serve, from the professional to
amateur.
FY17 has seen continued development of our sales channels. I am
particularly pleased with the progress of our e-commerce platform,
only in its second year and which is now offering the Company's
products globally. Sales in the Far East, notably China, continue
to grow faster than most other regions of the world. In response to
this demand, the Company has established a Hong Kong office to
manage our third-party distributors and marketing in the
Asia-Pacific region and to provide customer support to Asian
customers. This office continues to grow and, importantly, enables
us to provide support to customers who use our products all over
the world, 24/7. Looking forward, new distribution initiatives in
Japan promise to underpin growth prospects in this important but
challenging market.
Last year, I reported on the launch of the second generation of
Focusrite's Scarlett range of audio interfaces. Scarlett is the
market-leading range globally and our results very much reflect the
outstanding success and growth of this range, that provides
musicians and the wider recording community with outstanding
performance and reliability. Focusrite Clarett is a premium range
of interfaces for those whose recordings are more likely to have
commercial potential.
Our Novation brand of musical instruments comprising
synthesisers, keyboard controllers and the Launchpad grid
controller family enjoyed a 37.8% uplift in demand compared with a
flat 2016. A new flagship synthesiser, Peak, was launched to much
acclaim.
Focusrite continues to build demand for products designed for a
professional audience and business enterprises, namely the RedNet
and Red ranges. A Focusrite Pro team has been formed to develop the
professional and commercial sales channels, as well as bringing
better focus to product development and marketing to these
specialist vertical markets that include broadcast,
post-production, education and entertainment facilities. This
market segment is seen as an exciting growth opportunity where our
investment in this segment over recent years is expected to pay off
handsomely.
I am delighted Focusrite Plc has delivered another strong year
of growth. Our foundations as a company that has a history at the
leading edge of music technology innovation, with an established,
global customer base for its market-leading brands and a strong
culture, make us well placed for further growth. The Company has no
debt, continues to be highly cash-generative and continues to
consider acquisition opportunities that would complement the
existing business.
I would like to take this opportunity to thank our employees,
manufacturing partners, distribution partners and professional
advisers for their contributions to our success.
Phil Dudderidge
Founder and Executive Chairman
Chief Executive's Statement
Introduction
This is my first full year report, having joined the Company in
January 2017, and I am delighted to update shareholders on another
year of operational and financial success. It has been another busy
and productive year, during which we have expanded our product
portfolio; launched two new brands; and refined our growth strategy
to optimise our expansion opportunities now and for the future.
Focusrite is a business I knew well before I joined; with a
well-earned reputation for high-quality products and a history of
innovation and disruption, and I was honoured and proud to be asked
to lead the Company into its next phase of growth. One of the
primary factors that led to my decision to join the Company was the
passion that came through from the employees. Many of our people
are musicians, audio engineers, or DJs themselves and they use our
products in real-world environments every week, bringing to work a
real drive to push the boundaries of modern-day audio production.
Our employee footprint continues to expand in our High Wycombe,
London, Los Angeles and Hong Kong offices, as well as with remote
employees all over the globe. It is a great pleasure and privilege
to help guide and lead them and I thank them for their hard work
and dedication.
Overview
The Group's products are now sold in approximately 160
territories and countries all over the world. We utilise an
effective mix of retailers - online and 'bricks and mortar'
locations, distributors in areas where localisation is a factor, a
hybrid approach in the USA utilising a distributor with our own
demand generation team, and direct business to consumer with our
own e-commerce store and in-app software purchases.
We sold approximately 800,000 physical products to end-users
last year, and our music creation apps were downloaded 2.7 million
times with around 700,000 in-app customer transactions. Our
manufacturing partners are located in South China and we use
third-party logistics support. We employ around 190 people in the
UK, USA, Germany and Hong Kong.
This is a business of considerable scale with scope for further
growth and our market position, products, people and customer base
are the envy of many in the industry.
The market
The global audio production market continues to grow and we
believe we remain well poised to increase our market share with
existing products and also to exploit opportunities to expand into
adjacent product categories that would make commercial sense and
are a strategic fit for our existing business. This can be done
organically and, when it makes commercial and economic sense, by
acquisition.
For many personal and professional audio recording customers,
Focusrite technology and solutions are a cornerstone of their
set-ups and creative workflows. We know that puts us in a unique
position to expand our offerings and participate in more of the
economic value chain. Alongside that, we recognise the opportunity
to continue to make audio recording technology easier to use and
more accessible to a larger addressable market.
Operating review
This year has seen further operational progress and this has
translated into financial success with careful management of our
cost base and a focus on cash generation. Revenues grew by 21.6% to
GBP66.1 million, delivering an operating profit of GBP9.5 million,
representing year-on-year growth of 32.6%. These results were
materially ahead of forecasts and represent a very pleasing outcome
for the Group.
This positive performance has been driven by a number of
factors, including a wider market acceptance and growth of share in
many of our core products; along with a suite of new innovative
offerings, giving us more depth to our portfolio and the
opportunity to sell more to our customer base.
The Group continues to penetrate new market segments and price
points with best-in-class, user-friendly products. Customer and
sales channel satisfaction feedback remains strong on new and
existing products and continued high levels of end-user
satisfaction are illustrated by our top net promotor scores for
individual products.
Focusrite
Within Focusrite, our Scarlett, Clarett and RedNet ranges all
grew, leading to total segment revenue growth of 18.6%. In each
category we increased market share and experienced growth beyond
the industry norms.
Sales of our second generation Scarlett USB audio interface
range, upgraded and launched in June last year, were particularly
strong. The Scarlett family has earned the reputation as a
best-in-class, premium solution at affordable pricing. This product
line remains the number one selling audio interface product in the
world.
The Clarett range continues to set new price/performance
standards in our mid-range interface offerings and with an advanced
set of features catered to creative professionals, we are very
pleased to see that Clarett has been warmly received and enjoyed
numerous accolades from the industry.
Our commercial and pro-audio range, led by RedNet, is gaining
momentum as applications for its use and potential customers grow,
especially in post-production, education and broadcast markets.
This year we have witnessed some of the top production facilities
in the world transition their entire infrastructure to RedNet and
reap numerous benefits in efficiency, costs and productivity.
During the year we also launched the Focusrite Pro brand to
support our growing Red/RedNet business and bring key sales talent
and focus to this market. This additional investment will continue
next year. We believe that our portfolio of professional audio over
internet protocol ('AOIP') solutions are well poised to become
industry standards in post-production, broadcast, installed and
live sound.
Novation
The Novation segment now consists of Novation and Ampify, the
Group's own software brand.
Launchpad, Launchkey, and the synthesiser product categories all
experienced accelerated sales growth, with overall growth in this
business segment of 37.8%.
Wider market acceptance of grid-based controllers in the
electronic music space, coupled with larger penetration from online
distribution channels such as Amazon, has driven demand for
Launchpad. This product range experienced significant worldwide
uplift in demand with year-on-year sales volume growth of
39.0%.
Our Launchkey family of keyboard controllers also enjoyed
significant uplift in worldwide demand, with its intuitive feature
set and extensive integrated control features with top music-making
software such as Ableton Live.
Our new flagship synthesiser, Peak, has seen widespread adoption
within the professional music community and won numerous accolades
from the industry as a true next-generation synthesiser; building
off the legacy of the Novation brand and its many famous earlier
synthesiser products.
During the year we rebranded our apps division to Ampify: a
brand on which we will continue to develop powerful audio software
tools for new customers and our existing customers alike. We are
investing substantially in Ampify, as we aim to grow the Company's
own software capability. This investment is starting to be rewarded
with operational progress and we now have three music-making apps
with around 550,000 active users. Revenues are still small when
seen as a percentage of total Group revenue, but growing
significantly year-on-year as we continue to increase our library
of in-app purchases for these customers. Our apps consistently rank
in the top ten for music creation tools on Apple's app store and
are currently displayed in Apple stores worldwide. We recently
launched Groovebox - 'a new beats and synth music studio' for iPad
and iPhone - and to date it has had over 200,000 downloads and is
growing fast.
Innovation
Innovation is key driver of growth and we continue to spend
around 6% to 7% of revenue on research and development so as to
provide a constant stream of new and relevant products for our
various customer channels.
During the year we launched eight new hardware and two new
software products, including: Red 8 Pre, Clarett OctoPre, Scarlett
OctoPre, Scarlett OctoPre Dynamic, iTrack One Pre and Circuit
Components update.
These new products are across different price segments and
target customer markets, giving us further penetration and reach.
Feedback from the consumer, retailer and distribution channels has
been positive and acceptance so far has been pleasing.
We continue to enhance our offerings with improved drivers, new
tool sets and capabilities that make our solutions easier to
install and use, netting us industry-leading Net Promoter Scores
and overall customer experience statistics.
Additionally, we have focused some of our development resources
on the 'out-of-the-box' experience for new customers, as we believe
that ensuring customers have a great first experience with our
products is paramount to our overall success and growth
strategy.
Geographic overview
I am pleased to report that our success this past year was truly
global and sales in all major regions grew.
The USA finished with a 30.9% rise in revenue when compared with
last year. Europe experienced 11.4% growth. Finally, the Rest of
the World (incorporating Asia, Latin America and Canada) finished
the year with 24.9% year-on-year growth.
The USA market, the largest market for our portfolio and
currently 42% of total Group sales, remains a key focus for our
sales efforts and we continue to expand the team in our Los Angeles
office.
In Europe, where we saw increased competition between the major
continental resellers, our growth was lower than our other regions
but still ahead of industry averages in our segment.
Within the Rest of the World, Asia-Pacific sales were strong
across most countries, especially in China, and our Hong Kong
office is now fully functional and integrated with our Company
systems. Additionally, we are investing in more sales talent to
scale for what we believe is still a large opportunity in this
region.
Finally, Latin America and Canada both had healthy growth and we
will continue to invest in resources and tools to grow these
regions into this next year and beyond.
Distribution and logistics initiatives
Focusrite's distribution of adjacent products, such as KRK
monitors and sE Electronics microphones, remains a small overall
proportion of Group revenue. It remains important to us as it
offers add-on products within the music-making industry and
provides us with invaluable market feedback, insight and
knowledge.
e-commerce initiatives
The Group's e-commerce store, which launched in March last year,
accounted for over 1% of the Group's revenue and this continues to
improve. With a global presence but specific emphasis on markets
where localised content, language support and swift delivery to
end-users are key to success, we believe this segment will grow
further.
Summary and outlook
We are focused on three core goals: growing our customer base;
increasing the lifetime value of our customers; and expanding into
new market segments both from a price and product perspective. To
achieve this we will continue to innovate, disrupt, grow our
audience and ultimately continue in our tradition of making the
creative process of music creation and audio recording easier for
our customers.
Although competitive pressures remain strong, changes in
technology and new customer requirements can emerge quickly, and
macroeconomic and political factors affect our end customers and
distributors alike, we remain committed to keeping abreast of these
risks in order to continue to deliver strong growth.
Since the year end, revenue and cash have both grown further. We
continue to see strong market acceptance across our expanding
portfolio and our new product pipeline continues to grow. Our solid
momentum has continued into the current year and we continue to
look forward with confidence.
Tim Carroll
Chief Executive Officer
Financial Review
Overview
The Group has had an excellent year, with revenue growth of
21.6%, adjusted EBITDA growth of 27.9% and adjusted diluted
earnings per share up by 29.8%. In addition, the Group has managed
working capital tightly, leading to good cash generation.
Income statement
Revenue
Revenue grew from GBP54.3 million to GBP66.1 million, a rise of
21.6%. Since 2009, when the Group revenue was GBP9.1 million, the
Group has grown revenue every year at a growth rate of at least
10%.
The largest segment, Focusrite, grew by 18.6%, from GBP37.6
million to GBP44.6 million, as the second generation of the
Scarlett range continued to gain market share following its launch
in June 2016. Scarlett is approximately three-quarters of the
Focusrite segment by revenue and the Group has developed related
ranges of products such as Clarett and RedNet, which are
diversifying the Focusrite segment as they also grow and establish
themselves in their markets.
The Novation segment consists of Novation and Ampify, the
Group's new software brand. The combined revenue was GBP18.9
million, up 37.8% on GBP13.7 million last year. The Novation
segment is relatively diverse: the largest range is Launchpad,
which is approximately half of the segment revenue and, for which,
demand grew strongly. Approximately a quarter of segment revenue is
the Launchkey range and the remainder is split between
synthesisers, Circuit and the remaining products.
In the UK, the Group distributes products such as microphones
and monitors manufactured by other organisations. Revenue was
GBP2.6 million, down 13.6% from GBP3.1 million in 2016.
All regions grew. Regionally, the USA is the largest market in
the music industry and the largest market for the Group's products.
Revenue in the USA grew 30.9% (constant currency: 18%) to GBP28.0
million, Europe grew 11.4% (constant currency: 7%) to GBP25.2
million and the Rest of the World grew by 24.9% (constant currency:
13%) to GBP12.9 million. The primary drivers of growth in the USA
were the further consolidation of the Scarlett range in the market
and strong growth of Novation. In Europe, there was increased
competition between the major continental resellers which held back
growth. In the Rest of the World, the major portion of the revenue
is in Asia, which continues to grow as the new regional sales
office in Hong Kong becomes more established.
Exchange rates were important this year. In essence, in FY16
there were ten months 'pre-Brexit' and two months post. Therefore,
there was a more pronounced effect this year of the stronger US
Dollar and Euro. At constant currency, revenue grew by 13%.
Gross profit
Gross profit increased to GBP26.4 million, up from GBP20.9
million in FY16. This represented a gross margin of 39.9% (FY16:
38.4%). This growth in gross margin was driven by several factors:
closer attention paid to the fluctuations of market prices and then
management of discounts given to resellers; the stronger Euro and a
minor range mix impact.
Administrative expenses
Administrative expenses consist of sales, marketing, operations,
the uncapitalised element of research and development and central
functions such as legal, finance and the Group Board. These
expenses were GBP16.9 million, up from GBP13.7 million last year.
Directionally, the greater growth was on sales and marketing as the
Group invested, via the profit and loss account, in key initiatives
such as the Asia office and e-commerce.
Adjusted EBITDA
Adjusted EBITDA increased by 27.9% to GBP13.1 million (FY16:
GBP10.2 million).
In FY17, there were no non-underlying costs. In FY16, there was
a non-underlying cost of GBP0.5 million due to legal disputes
relating to intellectual property and distribution contracts, which
have no significant effect on our ongoing business. All of these
legal disputes have now been resolved, with no further cost to the
Group.
Income statement
2017 2017 2017 2016 2016 2016
-------------------
GBPm GBPm GBPm GBPm GBPm GBPm
-------------------
Reported Non- Adjusted Reported Non- Adjusted
underlying underlying
------------------- --------------- ------------- --------------- -------------- --------------- ---------------
Revenue 66.1 - 66.1 54.3 - 54.3
Cost of sales (39.7) - (39.7) (33.4) - (33.4)
------------------- --------------- ------------- --------------- -------------- --------------- ---------------
Gross profit 26.4 - 26.4 20.9 - 20.9
Administrative
expenses (16.9) - (16.9) (13.8) 0.5 (13.3)
------------------- --------------- ------------- --------------- -------------- --------------- ---------------
Operating profit 9.5 - 9.5 7.1 0.5 7.6
Net finance income (0.0) - (0.0) (0.0) - (0.0)
------------------- --------------- ------------- --------------- -------------- --------------- ---------------
Profit before tax 9.5 - 9.5 7.1 0.5 7.6
Income tax expense (0.9) - (0.9) (0.8) (0.1) (0.9)
------------------- --------------- ------------- --------------- -------------- --------------- ---------------
Profit for the
period 8.6 - 8.6 6.3 0.4 6.7
------------------- --------------- ------------- --------------- -------------- --------------- ---------------
2017 2017 2017 2016 2016 2016
-------------------
GBPm GBPm GBPm GBPm GBPm GBPm
-------------------
Non- Non-
Reported underlying Reported Reported underlying Adjusted
------------------- --------------- ------------- --------------- -------------- --------------- ---------------
Operating profit 9.5 - 9.5 7.1 0.5 7.6
Add - amortisation
of intangible
assets 2.9 - 2.9 2.1 - 2.1
Add - depreciation
of tangible
assets 0.7 - 0.7 0.5 - 0.5
------------------- --------------- ------------- --------------- -------------- --------------- ---------------
EBITDA 13.1 - 13.1 9.7 0.5 10.2
------------------- --------------- ------------- --------------- -------------- --------------- ---------------
Foreign exchange and hedging
The Brexit vote in June 2016 changed the exchange rates
substantially but there has been greater stability since then.
Therefore, the average exchange rates show a strengthening of US
Dollar and Euro, whereas the year-end rates are more similar.
Exchange 2017 2016
rates
---------- ----- -----
Average
USD:GBP 1.27 1.45
---------- ----- -----
EUR:GBP 1.16 1.29
---------- ----- -----
Year end
---------- ----- -----
USD:GBP 1.29 1.31
---------- ----- -----
EUR:GBP 1.09 1.18
---------- ----- -----
The Group buys product in US Dollars and approximately 60% of
its revenue is in US Dollars so there is a natural hedge.
Therefore, the US Dollar strengthening from $1.45 to $1.27
increased revenue but had little effect on gross profit.
Approximately a quarter of revenue is in Euro but little cost.
The Group enters into forward contracts to convert Euro to GBP. In
FY16, approximately three-quarters of Euro flows were hedged at
EUR1.39, thereby creating a blended exchange rate of approximately
EUR1.37. In FY17, the equivalent hedging contracts were at EUR1.28
(a blended rate of approximately EUR1.26). For FY18, the equivalent
rate for the forward contracts is EUR1.12.
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
Corporation tax as a proportion of profit before tax was 10.1%
(FY16: 12.2%). The effective tax rate is lower than the headline
rate, largely due to enhanced tax relief on R&D, a small
element of vesting share options and a lower than expected payment
in the prior year. In addition, the UK headline tax rate has been
reduced by 1 percentage point to 19% within the last year.
Earnings per share
The basic earnings per share for the year was 15.4 pence, up
30.5% from 11.8 pence in FY16. This rise was driven largely by the
rise in profit and the fact that there were no non-underlying items
in FY17. The more comparable measure, excluding non-underlying
items and including the small dilutive effect of share options, is
adjusted diluted earnings per share. This was 14.8 pence, up 29.8%
from 11.4 pence in FY16.
Earnings per share
2017 2016 Growth
p p %
------------------ ----- ----- -------
Basic 15.4 11.8 30.5%
Diluted 14.8 10.7 38.3%
Adjusted basic 15.4 12.6 22.2%
Adjusted diluted 14.8 11.4 29.8%
------------------ ----- ----- -------
Balance sheet
2017 2016
GBPm GBPm
----------------------------- ------ -------
Non-current assets 6.3 6.4
Current assets
Inventories 8.3 11.4
Trade and other receivables 13.0 11.2
Cash 14.2 5.6
Current liabilities (8.7) (10.4)
Non-current liabilities (0.2) (0.3)
----------------------------- ------ -------
Net assets 32.9 23.9
----------------------------- ------ -------
Cash flow
2017 2016
GBPm GBPm
Free cash flow(1) 9.4 0.2
Add - non-underlying cash outflows 0.1 0.2
------------------------------------ ----- -----
Underlying free cash flow 9.5 0.4
------------------------------------ ----- -----
(1) Defined as net cash from operating activities less net cash
used in investing activities.
Balance sheet
Non-current assets
The non-current assets comprise mainly capitalised R&D
costs. Between 70% and 80% of R&D costs are capitalised and
they are amortised over three years. The typical product life is
three to six years. This policy is unchanged from last year.
Working capital
Working capital fell from 22.4% of revenue to 19.1%. The main
driver of this reduction was stock, which was reduced from GBP11.4
million to GBP8.3 million. The reduction in stock was achieved
through lower levels of safety stock and the rising sales of new
products, launched in FY15 and FY16, for which the Group had bought
larger initial quantities to protect against possible 'stock-outs'
should demand have risen more quickly than expected. As commented
on in last year's Annual Report, stock quantities have been reduced
as the demand pattern for these products has become more
predictable. There have been no significant changes in payment
terms relating to either customers or suppliers.
Cash flow
Cash at the year end was GBP14.2 million, up from GBP9.4 million
at the half year and GBP5.6 million at 31 August 2016, driven by
the higher profit and lower working capital explained previously.
Free cash flow was strong, at GBP9.4 million (FY16: GBP0.2
million), which represented 14.3% of revenue (FY16: 0.4%). Finally,
the Group has a GBP10 million revolving credit facility with
HSBC.
Dividend
The Board is proposing a final dividend of 1.95 pence per share
(FY16 final dividend: 1.3 pence), which would result in a total of
2.7 pence per share for the year (FY16: 1.95 pence). At this level,
the dividend is covered approximately 5.5 times by earnings. This
represents the first step towards an ongoing target dividend cover
of between 4 and 5 times. The Group is focused on, and investing
in, future growth and therefore maintains a strong dividend cover
whilst maintaining a sustainable and progressive annual
dividend.
Going concern
As required, the Board have considered the ability of the Group
to continue as a going concern. The Board reviewed the cash
position, the management of working capital, the strategic plans,
the forecast cash flow and the borrowing arrangements and capacity.
The Board have concluded that the Group will remain as a going
concern and that this Annual Report should be prepared on that
basis.
Summary
The Group has had an excellent year. Revenue has grown by 21.6%,
adjusted EBITDA by 27.9%, adjusted diluted earnings per share by
29.8% and the cash balance has increased from GBP5.6 million to
GBP14.2 million. The Board remains focused on extending our track
record of growth in future years.
Jeremy Wilson
Chief Financial Officer
21 November 2017
Principal Risks and Uncertainties
Risk factors
In common with all businesses, the Group faces risks, the
effective management of which is necessary to enable it to achieve
its strategic objectives and secure the resilience of the business
for the long term. Management of risk is critical to the effective
running of the business and is considered as part of the Group's
decision-making processes.
Risk area Description Mitigation
--------------------- ------------------------------ --------------------------------
Economic environment The Group operates The Group sells products
in the global economy in around 160 territories
and ultimately within worldwide via two distinct
a retail environment product categories
to consumer end-user and so aims to avoid
musicians. Such operations being unduly reliant
are in uenced by global on any single product
and national economic or territory.
factors.
--------------------- ------------------------------ --------------------------------
UK exit from The impact of the The Group has increased
the European decision to exit the selling prices in the
Union European Union remains UK to correct the imbalance
uncertain. There has caused by the significant
already been foreign foreign exchange rate
exchange volatility changes. The Group
and it is possible will continue to monitor
that, in future, the other possible effects
UK may not be part of Brexit and act accordingly
of the European free as they become known.
trade zone or the
customs union.
--------------------- ------------------------------ --------------------------------
Technological The market for the The Group invests signi
changes, product Group's products is cantly in its R&D and
innovation characterised by continued operates a rigorous,
and competition evolution in technology, disciplined product
evolving industry introduction process
standards, changes to ensure that as far
in customer needs as possible the fast-changing
and frequent new competitive needs of its target
product introductions. markets are met. In
If the Group is unable addition, the Board
to anticipate or respond aims to operate an
to these challenges, efficient, low-cost
or fails to develop business.
and introduce successful
products on a timely
basis, it could have
an adverse impact
on the Group's business
and prospects.
--------------------- ------------------------------ --------------------------------
Dependence The Group is dependent The Group aims to diversify
on a small on a small number its risk by using four
number of of suppliers, in particular major Chinese manufacturers
suppliers its largest supplier, for the production
which supplies Focusrite of its products. The
interfaces. Failure Group maintains appropriate
or material delay levels of insurance
by its suppliers to to mitigate the financial
perform or failure impacts of a failure
by the Group to renew of one of its suppliers.
such arrangements Relationships are long-lasting
could have a material and strong. Typically,
adverse effect on members of the operations
the Group's business, department within Focusrite
operating results meet each supplier
and nancial position. every quarter to review
performance and costs.
--------------------- ------------------------------ --------------------------------
Key resellers In certain countries, In cases where there
and distributors the Group operates is a large distributor
via a single distributor in a significant market
or has large individual (e.g. the USA distributor
reseller customers. purchased GBP28 million
In certain cases, of stock in FY17),
a failure of or breakdown the Group also maintains
in the relationship relationships with
with a key reseller the major retailers.
or distributor, or In addition, the Group
even the failure of carefully monitors
a major customer of customer credit limits
that distributor, and has credit insurance
could significantly which typically covers
and adversely affect the majority of the
the Group's business. customer debts outstanding
at any point in time.
--------------------- ------------------------------ --------------------------------
Risk area Description Mitigation
----------------- ------------------------------ --------------------------------
Development Significant change The Group or its distributors
of the channels in the methods by sell to both 'bricks
to market which end-users wish and mortar' and e-commerce
to buy Focusrite retailers so that
products could significantly the Group can satisfy
affect the Group's customer demand via
business. both methods.
----------------- ------------------------------ --------------------------------
Currency The Group is exposed There is a largely
risks to currency and exchange effective natural
rate uctuations, hedge for US Dollar
which may affect transactions in as
the Group's revenue much as the Group
and costs when reported uses its generation
in Sterling. of US Dollars to buy
product in US Dollars.
In addition, the Group
mitigates its Euro
exposure by entering
into forward foreign
exchange hedging contracts
for the conversion
of Euros to Sterling.
----------------- ------------------------------ --------------------------------
Scarcity The nature of the The Group is a leading
of experienced Group's business music industry company
technical requires its employees in the UK and so attracts
personnel in the technical high-quality technical
and development teams personnel. The Group
to be highly skilled also attracts graduates
and experienced in from music technology
their respective courses at local universities.
elds. The Group is The Group has wide-ranging
dependent for its share ownership incentives
continued success and other employment
on being able to benefits to aid retention.
hire and retain such
individuals.
----------------- ------------------------------ --------------------------------
Intellectual The intellectual The Group has data
property property and data and information technology
and data developed by the controls which are
protection Group is valuable reviewed by the Group
and the Group could Board. Additionally,
be harmed by infringement the Group includes
or loss. data protection provisions
in the contracts of
all Group employees.
The Group also aims
to protect its intellectual
property and pursues
infringements.
----------------- ------------------------------ --------------------------------
Information Information security The Group has carried
security and cyber threats out a detailed review
are currently a priority of IT systems to identify
across all industries elements requiring
and remain a key upgrade. There has
Government agenda already been a widespread
item. upgrade of core IT
functionality and
the improvement of
backup and disaster
recovery processes.
The Group has moved
core ERP systems to
cloud with robust
SLAs in place to ensure
data availability
and security. There
is an improving business
continuity framework
and a dedicated internal
IT support team aided
by external support
providers.
----------------- ------------------------------ --------------------------------
FORWARD LOOKING STATEMENTS
Certain statements in this full 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
Consolidated Income Statement
For the year ended 31 August 2017
Note 2017 2016
GBP'000 GBP'000
-------------------------------------------------- ----- ---------------------- ----------------------
Revenue 1 66,055 54,301
Cost of sales (39,704) (33,439)
-------------------------------------------------- ----- ---------------------- ----------------------
Gross profit 26,351 20,862
Administrative expenses (16,881) (13,722)
-------------------------------------------------- ----- ---------------------- ----------------------
Adjusted EBITDA (non-GAAP measure) 13,109 10,249
Depreciation and amortisation (3,639) (2,572)
Non-underlying items - (537)
-------------------------------------------------- ----- ---------------------- ----------------------
Operating profit 9,470 7,140
-------------------------------------------------- ----- ---------------------- ----------------------
Finance income 86 325
Finance costs (44) (339)
-------------------------------------------------- ----- ---------------------- ----------------------
Profit before tax 9,512 7,126
Income tax expense 5 (959) (870)
-------------------------------------------------- ----- ---------------------- ----------------------
Profit for the period from continuing operations 8,553 6,256
-------------------------------------------------- ----- ---------------------- ----------------------
Earnings per share
From continuing operations
Basic (pence per share) 7 15.4 11.8
-------------------------------------------------- ----- ---------------------- ----------------------
Diluted (pence per share) 7 14.8 10.7
-------------------------------------------------- ----- ---------------------- ----------------------
Consolidated Statement of Comprehensive Income
For the year ended 31 August 2017
2017 2016
GBP'000 GBP'000
---------------------------------------------------------- ------------------------ -----------------------------
Profit for the period (attributable to equity holders of
the Company) 8,553 6,256
Items that may be reclassified subsequently to the income
statement
Exchange differences on translation of foreign operations (8) 45
Profit/(loss) on forward foreign exchange contracts
designated and effective as a hedging
instrument 659 (1,143)
Tax on hedging instrument (134) 229
----------------------------------------------------------- ------------------------ -----------------------------
Total comprehensive income for the period 9,070 5,387
----------------------------------------------------------- ------------------------ -----------------------------
Total comprehensive income attributable to:
Equity holders of the Company 9,070 5,387
----------------------------------------------------------- ------------------------ -----------------------------
9,070 5,387
---------------------------------------------------------- ------------------------ -----------------------------
Consolidated Statement of Financial Position
As at 31 August 2017
2017 2016
GBP'000 GBP'000
---------------------------------------------- ----------------------- -----------------------
Assets
Non-current assets
Goodwill 419 419
Other intangible assets 4,544 4,373
Property, plant and equipment 1,369 1,575
Total non-current assets 6,332 6,367
----------------------------------------------- ----------------------- -----------------------
Current assets
Inventories 8,334 11,361
Trade and other receivables 12,952 11,224
Cash and cash equivalents 14,174 5,606
----------------------------------------------- ----------------------- -----------------------
Total current assets 35,460 28,191
----------------------------------------------- ----------------------- -----------------------
Total assets 41,792 34,558
----------------------------------------------- ----------------------- -----------------------
Equity and liabilities
Capital and reserves
Share capital 58 58
Merger reserve 14,595 14,595
Merger difference reserve (13,147) (13,147)
Translation reserve 31 39
Hedging reserve (389) (914)
Treasury reserve (3) (5)
Retained earnings 31,739 23,251
Equity attributable to owners of the Company 32,884 23,877
----------------------------------------------- ----------------------- -----------------------
Total equity 32,884 23,877
----------------------------------------------- ----------------------- -----------------------
Current liabilities
Trade and other payables 7,720 8,612
Current tax liabilities 459 644
Derivative financial instruments 484 1,143
Total current liabilities 8,663 10,399
----------------------------------------------- ----------------------- -----------------------
Non-current liabilities
Deferred tax 245 282
Total liabilities 8,908 10,681
----------------------------------------------- ----------------------- -----------------------
Total equity and liabilities 41,792 34,558
----------------------------------------------- ----------------------- -----------------------
Consolidated Statement of Changes in Equity
For the year ended 31 August 2017
Merger Treasury
Share Merger difference Translation Hedging share Retained
capital reserve reserve reserve reserve reserve earnings(1) Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1
September
2015 58 14,595 (13,147) (6) - (6) 16,984 18,478
--------------- ----------- ----------- ----------- ------------ ----------- ----------- ------------ --------
Profit for the
period - - - - - - 6,256 6,256
Other
comprehensive
income for
the period - - - 45 (914) - - (869)
--------------- ----------- ----------- ----------- ------------ ----------- ----------- ------------ --------
Total
comprehensive
income for
the period - - - 45 (914) - 6,256 5,387
Transactions
with owners of
the Company:
Share-based
payment
deferred tax
deduction in
excess of
remuneration
expense - - - - - - 333 333
Share-based
payment
current tax
deduction in
excess of
remuneration
expense - - - - - - 363 363
Shares from
EBT exercised - - - - - 1 171 172
Share-based
payments - - - - - - 120 120
Dividends paid - - - - - - (976) (976)
Balance at 1
September
2016 58 14,595 (13,147) 39 (914) (5) 23,251 23,877
--------------- ----------- ----------- ----------- ------------ ----------- ----------- ------------ --------
Profit for the
period - - - - - - 8,553 8,553
Other
comprehensive
income for
the period - - - (8) 525 - - 517
--------------- ----------- ----------- ----------- ------------ ----------- ----------- ------------ --------
Total
comprehensive
income for
the period - - - (8) 525 - 8,553 9,070
Transactions
with owners of
the Company:
Share-based
payment
deferred tax
deduction in
excess of
remuneration
expense - - - - - - 114 114
Share-based
payment
current tax
deduction in
excess of
remuneration
expense - - - - - - 558 558
Shares from
EBT exercised - - - - - 2 256 258
Share-based
payments - - - - - - 145 145
Dividends paid - - - - - - (1,138) (1,138)
--------------- ----------- ----------- ----------- ------------ ----------- ----------- ------------ --------
Balance at 31
August 2017 58 14,595 (13,147) 31 (389) (3) 31,739 32,884
--------------- ----------- ----------- ----------- ------------ ----------- ----------- ------------ --------
1 Of the retained earnings totalling GBP31,739,000 (2016:
GBP23,251,000), GBP427,111 (2016: GBP171,317) relates to the gain
on exercise of share options from the EBT and is therefore
non-distributable.
The notes form part of the financial statements.
Consolidated Cash Flow Statement
For the year ended 31 August 2017
2017 2016
Note GBP'000 GBP'000
---------------------------------------------------------- ----- -------------------- --------
Operating activities
Profit for the financial year 8,553 6,256
Adjustments for:
Income tax expense 5 959 870
Net interest (42) 14
Profit on disposal of property, plant and equipment 3 (8) -
Amortisation of intangibles 3 2,950 2,051
Depreciation of property, plant and equipment 3 689 521
Share-based payments charge 3 145 120
---------------------------------------------------------- ----- -------------------- --------
Operating cash flows before movements in working capital 13,246 9,832
Increase in trade and other receivables (1,728) (3,487)
Decrease/(increase) in inventories 3,027 (2,728)
(Decrease)/increase in trade and other payables (892) 206
---------------------------------------------------------- ----- -------------------- --------
Operating cash flows before interest and tax paid 13,653 3,823
Net interest paid (42) (111)
Income taxes paid (633) (165)
---------------------------------------------------------- ----- -------------------- --------
Cash generated by operations 12,978 3,547
Net foreign exchange movements 3 84 365
---------------------------------------------------------- ----- -------------------- --------
Net cash from operating activities 13,062 3,912
---------------------------------------------------------- ----- -------------------- --------
Investing activities
Purchases of property, plant and equipment (493) (773)
Purchases of intangible assets (3,121) (2,902)
Net cash used in investing activities (3,614) (3,675)
---------------------------------------------------------- ----- -------------------- --------
Financing activities
Issue of equity shares 258 172
Equity dividends paid 6 (1,138) (976)
Net cash used in financing activities (880) (804)
---------------------------------------------------------- ----- -------------------- --------
Net increase/(decrease) in cash and cash equivalents 8,568 (567)
Cash and cash equivalents at beginning of year 5,606 6,173
Cash and cash equivalents at end of year 14,174 5,606
---------------------------------------------------------- ----- -------------------- --------
Notes to the Final Results
For the year ended 31 August 2017
These condensed preliminary financial statements of the Company
and its subsidiaries ("the Group") for the year ended 31 August
2017 have been prepared using accounting policies consistent with
International Financial Reporting Standards (IFRSs).
The information contained within this announcement has been
extracted from the audited financial statements which have been
prepared in accordance with IFRS as adopted by the European Union
('adopted IFRS'), and with those parts of the Companies Act 2006
applicable to companies reporting under adopted IFRS. They have
been prepared using the historical cost convention except where the
measurement of balances at fair value is required.
The Directors believe that the Group is well placed to manage
its business risks successfully despite the current uncertainties
within the global economy. The Group has considerable financial
resources, ongoing revenue streams and a broad spread of customers.
As a consequence of these factors and having reviewed the forecasts
for the coming year, the Directors have a reasonable expectation
that the Group has adequate resources to continue in operational
existence for the foreseeable future. Thus, they continue to adopt
the going concern basis of accounting in preparing these financial
statements.
The statutory accounts for the year ended 31 August 2016 have
been reported on by the Company's auditors and delivered to the
Registrar of Companies. The statutory accounts for the year ended
31 August 2017 will be delivered to the Registrar of Companies
following the Company's Annual General Meeting. The auditors have
reported on those accounts; their report was unqualified, did not
include references to any matter which the auditors drew attention
by way of emphasis without qualifying their report and did not
contain statements under section 498(2) or (3) of the Companies Act
2006.
Availability of audited accounts:
Copies of the 31 August 2017 audited accounts will be will be
available on 21 November 2017 on the Company's website
(www.focusriteplc.com/investors) for the purposes of AIM rule 26
and will be posted to shareholders in due course.
1 Revenue
An analysis of the Group's revenue is as follows:
Year ended 31 August
2017 2016
--------------------------------
GBP'000 GBP'000
-------------------------------- ------------- -------------
Continuing operations
USA 27,990 21,382
Europe, Middle East and Africa 25,153 22,582
Rest of the World 12,912 10,337
Consolidated revenue 66,055 54,301
---------------------------------- ------------- -------------
2 Business segments
Information reported to the Board of Directors for the purposes
of resource allocation and assessment of segment performance is
focused on the main product groups which Focusrite sells. The
Group's reportable segments under IFRS 8 are therefore as
follows:
Focusrite - Sales of Focusrite or Focusrite Pro branded products
Novation - Sales of Novation or Ampify branded products
Distribution - Distribution of third-party brands including KRK,
Ableton, Stanton, Cerwin-Vega, Cakewalk and sE Electronics
Segment revenues and results
The following is an analysis of the Group's revenue and results
by reportable segment:
The accounting policies of the reportable segments are the same
as the Group's accounting policies described in note 3 within the
Annual Report. Segment profit represents the profit earned by each
segment without allocation of the share of central administration
costs including Directors' salaries, investment revenue and finance
costs, and income tax expense. This is the measure reported to the
Board of Directors for the purpose of resource allocation and
assessment of segment performance.
Central administration costs comprise principally the
employment-related costs and other overheads incurred by Focusrite
and its USA subsidiary, net of inter-Company commission income.
Also included within central administration costs is the charge
relating to the share option scheme of GBP145,000 for the year
ended 31 August 2017 (2016: GBP120,000).
Year ended 31 August
2017 2016
GBP'000 GBP'000
------------------------------------------------------------------------------------ -------------- --------------
Revenue from external customers
Focusrite 44,552 37,563
Novation 18,862 13,683
Distribution 2,641 3,055
Total 66,055 54,301
------------------------------------------------------------------------------------ -------------- --------------
Segment profit
Focusrite 20,221 17,159
Novation 9,198 6,743
Distribution 711 917
------------------------------------------------------------------------------------ -------------- --------------
30,130 24,819
Central distribution costs and administrative expenses before non-underlying items (20,660) (17,142)
Adjusted operating profit before non-underlying items 9,470 7,677
Non-underlying items - (537)
------------------------------------------------------------------------------------ -------------- --------------
Operating profit 9,470 7,140
Finance income 86 325
Finance costs (44) (339)
------------------------------------------------------------------------------------ -------------- --------------
Profit before tax 9,512 7,126
Tax (959) (870)
Profit after tax 8,553 6,256
------------------------------------------------------------------------------------ -------------- --------------
The Group's non-current assets, analysed by geographical
location were as follows:
2017 2016
GBP'000 GBP'000
-------------------------------- --------------- ---------------
Non-current assets
USA 52 60
Europe, Middle East and Africa 5,676 5,602
Rest of the World 604 705
Total non-current assets 6,332 6,367
-------------------------------- --------------- ---------------
Information about major customers
Included in revenues shown for 2017 is GBP28.0 million (2016:
GBP21.4 million) attributed to the Group's largest customer.
Amounts owed at the end of the year were GBP6.8 million (2016:
GBP5.2 million).
3 Profit for the year
Profit for the year has been arrived at after
charging/(crediting):
Year ended 31 August
2017 2016
Note GBP000 GBP000
-------------------------------------------------------------- ------ ------------------ -----------------
Net foreign exchange gains (84) (96)
Research and development costs 1,120 779
Non-underlying costs - 537
Depreciation and impairment of property, plant and equipment 689 521
Profit on disposal of property, plant and equipment (8) -
Amortisation of intangibles 2,950 2,051
Operating lease rental expense 306 183
Cost of inventories recognised as an expense 35,493 27,955
Staff costs 8,731 7,505
Impairment loss recognised on trade receivables (3) 4
Change in fair value of financial instruments - 223
Share-based payments charge to profit and loss 145 120
---------------------------------------------------------------------- ------------------ -----------------
4 Non-underlying items
During the year ended 31 August 2016, the Group incurred one-off
litigation costs relating to intellectual property and distribution
contracts, totalling GBP0.5 million, which were charged to the
income statement. This is stated net of a receipt of GBP0.25
million on a legacy dispute, which had previously been written
off.
There are no non-underlying items for the year ended 31 August
2017.
5 Tax
Year ended 31 August
2017 2016
GBP'000 GBP'000
Corporation tax charges:
Over provision in prior year (13) (231)
Current year 983 1,000
------------------------------ --------------------- -----------------------
970 769
Deferred taxation
Current year (11) 101
------------------------------ --------------------- -----------------------
959 870
------------------------------ --------------------- -----------------------
Corporation tax is calculated at 19.58% (2016: 20.00%) of the
estimated taxable profit for the year. Taxation for the USA
subsidiary is calculated at the rates prevailing in the respective
jurisdiction.
The tax charge for each year can be reconciled to the profit per
the income statement as follows:
Year ended 31 August
2017 2016
GBP'000 GBP'000
------------------------------------------------------------- ----------- ----------
Current taxation
Profit before tax on continuing operations 9,512 7,126
------------------------------------------------------------- ----------- ----------
Tax at the UK corporation tax rate of 19.58% (2016: 20.00%) 1,862 1,425
Effects of:
Expenses not deductible for tax purposes 20 480
Income not taxable for tax purposes - (1)
R&D tax credit (773) (706)
Overseas tax - (8)
Prior period adjustment - current tax (113) (231)
Prior period adjustment - deferred tax (18) (12)
Effect of change in standard rate of deferred tax (19) -
Share options expense deductible - current tax - (25)
Share options expense deductible - deferred tax - (52)
Current tax charge for period 959 870
------------------------------------------------------------- ----------- ----------
The Finance Act 2016, which included legislation reducing the
main rate of corporation tax from 20% to 19% from 1(st) April 2017
and to 17% from 1(st) April 2020, was enacted on 15(th) September
2016. The deferred tax liability at 31 August 2017 has been
calculated based on these rates.
6 Dividends
The following equity dividends have been declared:
Year to Year to
31 August 2017 31 August 2016
---------------------------------------- ---------------- ----------------
Dividend per qualifying ordinary share 2.70p 1.95p
---------------------------------------- ---------------- ----------------
During the year, the Company paid an interim dividend in respect
of the year ended 31 August 2017 of 0.75 pence per share.
On 21 November 2017, the Directors recommended a final dividend
of 1.95 pence per share (2016: 1.3 pence per share), making a total
of 2.7 pence per share for the year (2016: 1.95 pence per
share).
7 Earnings per share
Reported EPS
The calculation of the basic and diluted EPS is based on the
following data:
Year ended 31 August
Earnings 2017 2016
------------------ ------------------
GBP'000 GBP'000
------------------------------------------------------------------------------ ------------------ ------------------
Earnings for the purposes of basic and diluted EPS being net profit for the
period 8,553 6,256
------------------------------------------------------------------------------ ------------------ ------------------
Year ended 31 August
2017 2016
------------------ ------------------
Number Number
'000 '000
------------------------------------------------------------------------------ ------------------ ------------------
Number of shares
Weighted average number of ordinary shares for the purposes of basic EPS
calculation 55,432 53,207
Effect of dilutive potential ordinary shares:
EMI Scheme and unapproved share option plan 2,357 5,297
Weighted average number of ordinary shares for the purposes of diluted EPS
calculation 57,789 58,504
------------------------------------------------------------------------------ ------------------ ------------------
EPS Pence Pence
Basic EPS 15.4 11.8
------------------------------------------------------------------------------ ------------------ ------------------
Diluted EPS 14.8 10.7
------------------------------------------------------------------------------ ------------------ ------------------
At 31 August 2017, the total number of ordinary shares issued
and fully paid was 58,075,000. This included 2,546,845 (2016:
4,494,504) shares held by the 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 total number of shares in
issue (58,075,000) less the number of shares held by the EBT
(2,546,845). 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.
Adjusted EPS
Year ended 31 August
Earnings 2017 2016
------------------ -------------------
GBP'000 GBP'000
----------------------------------------------------------------------------- ------------------ -------------------
Profit for the financial period 8,553 6,256
Non-underlying items - 537
Tax on non-underlying items - (107)
Total underlying profit for adjusted EPS calculation 8,553 6,686
----------------------------------------------------------------------------- ------------------ -------------------
Year ended 31 August
2017 2016
------------------ -------------------
Number Number
'000 '000
----------------------------------------------------------------------------- ------------------ -------------------
Number of shares
Weighted average number of ordinary shares for the purposes of basic EPS
calculation 55,432 53,207
Effect of dilutive potential ordinary shares:
EMI Scheme and unapproved share option plan 2,357 5,297
Weighted average number of ordinary shares for the purposes of diluted EPS
calculation 57,789 58,504
----------------------------------------------------------------------------- ------------------ -------------------
EPS Pence Pence
Adjusted basic EPS 15.4 12.6
----------------------------------------------------------------------------- ------------------ -------------------
Adjusted diluted EPS 14.8 11.4
----------------------------------------------------------------------------- ------------------ -------------------
This information is provided by RNS
The company news service from the London Stock Exchange
END
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