Slide 1: Results for the year ending 31 August 2018
Results for the year ending 31 August 2018 November 2018 1
Slide 2: Disclaimer
Disclaimer The content of this document (the “Presentation”) has not been approved by an authorised person within the meaning of the Financial Services and Markets Act 2000 (“FSMA”), as amended. Reliance on this document for the purpose of engaging in any investment activity may expose an individual
Slide 3: Agenda
Agenda Introduction and Highlights Brand Alignment Product Sectors Markets Financial Review Growth Strategy Tim Carroll Jeremy Wilson Conclusions Chief Executive Chief Financial Officer Officer 3
Slide 4: Introduction
Introduction 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. Founded in 1989 Four
Slide 5: Highlights for the year ended 31 August 2018
Highlights for the year ended 31 August 2018 Revenue £m 80.0 o Revenue up 13.7% (15% at constant 70.0 75.1 exchange rates) 60.0 66.1 50.0 o EBITDA1 up 18.1% to £15.5 million 54.3 40.0 48.0 41.0 30.0 36.1 o Cash up from £14.2m at FY17 to 20.0 25.3 £22.8 million at FY18 20.2 10.0 13.9 9.1 - o Final di
Slide 6: Brand alignment
Brand alignment New Creator Passionate Maker Market size: $200m-300m Market size: $200m-250m • Very likely to have little or no previous musical knowledge • May or may not play traditional instruments • Demands an immediate, joyful experience • Little or no songwriting experience • Demands ease, acc
Slide 7: Brand alignment
Brand alignment Serious Aspiring Producer The Master/Facility Market size: $75m-100m Market size: $100m-200m • More than just a hobby • Highly skilled musician or audio engineer • Strong demands on gear/technology to achieve • Depends on technology to do the job and make a living professional-level
Slide 8: Product sectors: Focusrite
Product sectors: Focusrite RedNet: Enterprise, Live, Broadcast, Education. Networked Audio over IP $3,000 upwards Red: Creative Professional, Music, Post $2,000 to $3,500 Clarett: Intermediate / Professional user $400 to $1,200 Scarlett: Mass market interface. Home user $100 to $500 8
Slide 9: Product sectors: Focusrite
Product sectors: Focusrite Focusrite FY18 FY17 Growth £m £m % Revenue 52.2 44.6 17.2 o Scarlett, Clarett and RedNet all grew in absolute terms. o Scarlett continues to sell strongly (sales up 15%) and remains the number one audio interface in the world. o Clarett sales up driven by launch of our USB
Slide 10: Product sectors: Novation
Product sectors: Novation Portfolio designed for creation of Electronic Music Controllers: Physical interfaces to control music creation software Standalone: Function on their own as sound generating devices Software: iOS apps that allow creation of music on iPhones/iPads CONTROLLERS Grid controller
Slide 11: Product sectors: Novation
Product sectors: Novation Novation FY18 FY17 Growth £m £m % Revenue 20.1 18.9 6.4 o Launchpad and Synthesisers grew, leading to business segment growth of 6.4%. o Launchpad range up 3%. o Wider market acceptance by increasingly mainstream audiences. o Christmas holiday strong. o Synthesisers up 46%
Slide 12: Product sectors: Distribution
Product sectors: Distribution Distribution FY18 FY17 Growth £m £m % Revenue 2.9 2.6 8.4 o Add-on products within music-making industry but UK only and small overall. o Mostly KRK monitors. Ageing range. o Also sE microphones: Range of studio quality microphones suited for vocal and instrument record
Slide 13: Financial highlights for the year ended 31 August 2018
Financial highlights for the year ended 31 August 2018 o Group revenue up by 13.7% to £75.1 million (FY17: £66.1 million) o EBITDA1 up by 18.1% to £15.5 million (FY17: £13.1 million) o Operating profit up by 26.1% to £11.9 million (FY17: £9.5 million) o Adjusted2 operating profit up by 22.6% to £11.
Slide 14: FY18: Regional performance
FY18: Regional performance Segmental Revenue FY18 FY17 Growth £m £m % FY18 North America 32.7 29.7 10.2 Europe, Middle East and Africa 29.7 25.2 18.1 ROW Rest of World 12.7 11.2 13.3 17% North Consolidated revenue 75.1 66.1 13.7 America 43% EMEA o North America: up 10.2% to £32.7m 40% o Constant FX
Slide 15: Income Statement
Income Statement FY18 FY17 Growth £ million £ million % o Revenue up 13.7% Revenue 75.1 66.1 13.7 o Constant FX growth 15% Cost of sales -43.4 -39.7 o All major territories increasing Gross profit 31.7 26.4 20.2 Operating expenses before non-underlying o Gross margin 42.2% (FY17: 39.9%) items -20.1
Slide 16: Balance Sheet
Balance Sheet FY18 FY17 o Intangible fixed assets include £4.6m of £ million £ million capitalised R&D and £1.4m of goodwill & other Intangible assets 6.0 5.0 intangibles Tangible assets 1.3 1.3 o R&D expenditure c6% of revenue Total non current assets 7.3 6.3 o Typically capitalise c70% and write o
Slide 17: Cash flow
Cash flow FY18 FY17 o Small working capital increase (cash outflow). £ million £ million o Working capital 18.2% of revenue EBITDA 15.5 13.1 (improving from 19.1% last year). Movement in working capital -0.2 0.6 Operating cash flow 15.3 13.7 Interest paid -0.0 -0.0 o Investing £4.5m, (FY17: £3.6m) T
Slide 18: Summary and current trading
Summary and current trading o Revenue up 13.7% with growth in all brands and all major territories. o EBITDA1 up by 18.1% to £15.5 million (FY17: £13.1 million). o Strong cash generation: Cash up from £14.2 million at FY17 to £22.8 million. o Final dividend of 2.3 pence, resulting in 3.3 pence for t
Slide 19: Focusrite Growth Strategy
Focusrite Growth Strategy Grow core customer base Focusrite is passionately committed to providing best-in-class solutions at every strategic price point. We look to retain our existing users and gain additional core customers by providing highly differentiated solutions that enable success. Lifetim
Slide 20: Grow our customer base
Grow our customer base o Continued innovation in our core markets o Hardware and software solutions focused on removing barriers to creativity and allowing everyone from beginners through professionals to create the best quality audio possible o Disruptive technologies that make our customers’ creat
Slide 21: Lifetime value of our Customers
Lifetime value of our Customers Add-on software and content Focus on a connected experience across our entire portfolio Participation in more of the traditional value chain “The reason behind using RedNet is that it’s simple. It just works every day… There’s such an elegant simplicity to the s
Slide 22: Expand into new markets
Expand into new markets Latin America initiatives o Hire full-time employees in Mexico and Brazil o Localise our website, marketing collateral and e- commerce stores; first for Spanish and later for Portuguese o Partner with a well-known e-commerce entity in Latin America for fulfilment: handling lo
Slide 23: Conclusions
Conclusions o A great year, operationally and financially o Growth in both major segments and all reported regions o Cash up and dividend increased o Strategy clear o Strategy supported by investment, especially in sales, marketing, customer support and software development 23
Slide 24: Additional Information
Additional Information November 2018 24
Slide 25: Product sectors: Focusrite hardware products launched
Product sectors: Focusrite 5 hardware products launched o o o o o 25
Slide 26: Enriching Lives Through Music
Enriching Lives Through Music 30