TIDMTUNE
RNS Number : 0440J
Focusrite PLC
08 December 2022
Strictly Embargoed until 07.00, 8th December 2022
Focusrite plc
("Focusrite" "the Company" or "the Group")
Final Results for the Year Ended 31 August 2022
Focusrite plc (AIM: TUNE), the global music and audio products
company, announces its Final Results for the year ended 31 August
2022.
Financial and operational highlights
FY22 FY21 Change
Revenue (GBP million) 183.7 173.9 +5.6%
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Gross margin % 45.3% 48.4% -3.1ppts
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Adjusted(1) EBITDA(2) (GBP million) 41.7 47.5 -12.2%
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Operating profit (GBP million) 28.7 35.8 -19.8%
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Adjusted(1) operating profit (GBP
million) 34.7 41.4 -16.2%
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Basic earnings per share (p) 42.5 48.8 -12.9%
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Adjusted(1) diluted earnings per
share (p) 52.0 57.5 -9.6%
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Total dividend per share (p) 6.0 5.2 +15.4%
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Net debt/cash(3) (GBP million) (0.3) 17.6 -GBP17.9m
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Revenue growth of 5.6% reflects organic constant currency(4)
decrease of 2.8% more than offset by acquisitions and foreign
exchange translation benefits. Organic growth reflects maintaining
the majority of demand from COVID-19 and the benefit of new
products
o Focusrite and Novation products down by -5.3% to GBP117.8
million (FY21: GBP124.4 million) reflecting strong retention of
sales against COVID-19 period comparators. Growth of 17% compared
to FY20.
o ADAM Audio revenue down by 25% to GBP17.8 million (FY21:
GBP23.9 million) against the prior year due to now resolved supply
issues impacting availability in the first half of the year as
previously highlighted.
o Martin Audio grew by 56% to GBP31.9 million (FY21: GBP20.4
million), surpassing pre-COVID-19 levels with strong growth in live
markets helped by the acquisition of Linea Research.
o Sequential grew by 206% to GBP16.2 million (FY21: GBP5.3
million), reflecting a partial year comparator. Organic constant
currency(3) growth is 18% reflecting successful new product
introductions.
-- Strong growth in our Rest of World region with Europe, Middle
East and Africa and North America broadly stable.
-- Gross margin impacted by the one off duty benefit in the
prior year, an inflationary cost environment, particularly high
freight rates and increased component prices, partially offset by
sales price increases.
-- Acquisition of Linea Research, a long term supplier of Martin
Audio, completed in March 2022 for GBP12.3 million, and rights of
the iconic Oberheim brand completed in May 2022 for GBP4.5
million.
-- Planned strong production levels throughout the year enabled
us to rebuild stock levels prior to the 2022 holiday season,
reflected in a year-end net debt balance (3) of GBP0.3 million
(FY21: net cash GBP17.6 million)
-- Launch of 22 new products across all brands throughout the year.
-- Continued investment in people and systems to deliver on our
strategy to be a Great Place to Work.
-- Final dividend of 4.15p recommended, resulting in 6.0p for
the year, up 15% on prior year.
1 Comprising earnings adjusted for interest, taxation,
depreciation and amortisation.
2 Adjusted for amortisation of acquired intangible assets, sale
of trademark and other adjusting items
3 Net debt/cash defined as cash and cash equivalents, overdrafts
and amounts drawn against the RCF including the costs of arranging
the RCF
4 Organic constant currency growth. This is calculated by
comparing FY22 revenue to FY21 revenue adjusted for FY22 exchange
rates and the impact of acquisitions.
Commenting on the final year results Tim Carroll CEO, said:
" I am immensely proud of the Group's performance this past
year: our leadership teams continue to prove they can meet both
ordinary and extraordinary challenges head on and achieve strong
results. Our content creation brands continue to experience healthy
demand and our live and installed portfolio is back in full swing
with the resurgence of live events. For the current year, our first
quarter trading has finished in line with our expectations. Overall
demand for the Group's portfolio of products has remained
strong.
"We remain mindful of the current significant global economic
and political challenges, as well as the ongoing cost pressures in
the supply chain, but we have worked hard to build back our
inventory position. This provides greater resilience against supply
chain volatility and ensures we are able to meet demand as we head
into the key holiday season in FY23.
"We have also introduced a number of measures to maintain
margins, through pricing actions, refinement of our routes to
market and ongoing review of our production costs. With new product
launches across the product portfolio planned for FY23 and beyond
we remain confident that the Group continues to have significant
organic growth potential within our existing brands. In tandem, the
Group has proven that it has the capability to successfully execute
on its proactive M&A strategy, carefully considering potential
acquisitions that are not only earnings enhancing, but can also add
to our market potential, expand our R&D footprint, and add
scale and dynamism to our business.
"All these factors combined leave us optimistic about our future
prospects . "
Availability of Annual Report and Notice of AGM
The Annual Report and Accounts for the financial year ended 31
August 2022 and notice of the Annual General Meeting ("AGM") of
Focusrite will be posted to shareholders by 4 January 2023 and will
be available on Focusrite's website at www.focusriteplc.com.
Dividend timetable
The final dividend is subject to shareholder approval, which
will be sought at Focusrite's AGM on 3 February 2023.
The timetable for the final dividend is as follows:
3 February 2023 AGM to approve the recommended final dividend
12 January 2023 Ex-dividend Date
13 January 2023 Record Date
17 February 2023 Dividend payment date
- ends -
Enquiries:
Focusrite plc:
Tim Carroll (CEO) +44 1494 462246
Sally McKone (CFO) +44 1494 462246
Investec Bank plc (Nominated Adviser and
Joint Broker) +44 (0) 20 7597 5970
David Flin
Ben Farrow
William Brinkley
Charlotte Young
Peel Hunt LLP (Joint Broker) +44 (0) 20 7418 8900
Paul Gillam
Michael Burke
James Smith
Belvedere Communications
John West +44 (0) 203 008 6866
Llew Angus +44 (0) 203 008 6867
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 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 ten established brands: Focusrite, Focusrite
Pro, Novation, Ampify, ADAM Audio, Martin Audio, Optimal Audio,
Linea Research Sequential and Oberheim.
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 synthesizers 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. Linea designs, develops, manufactures
and sells market innovative professional audio equipment globally.
Sequential designs and manufactures high end analogue synthesizers
under the Sequential and Oberheim brands.
The Company has offices in four continents and a global customer
base with a distribution network covering approximately 240
territories.
Focusrite plc is traded on the AIM market, London Stock
Exchange.
Chairman's Report
Focusrite is unique as being the only global group of branded
businesses in the music technology industry listed on the London
Stock Exchange. It is therefore with great pride that I present
this set of financial results, our eighth as a public company, and
one in which we have once again made substantial progress.
We trace our origins back to 1989, and the foundation of
Focusrite Audio Engineering Ltd., which is still the largest
operating company in the Group. Our business has completely
transformed and evolved since then, and now trades under ten
established brands: Focusrite, Focusrite Pro, Novation, Ampify,
ADAM Audio, Martin Audio, Optimal Audio, Sequential, Oberheim and
Linea Research. Our brands are recognised as category leaders in
the music-making, recording, live performance and electronic
musical instrument industries. We have offices on four continents
and a global customer base with a distribution network covering
approximately 240 territories.
We have achieved success by pursuing our stated mission of
growing both organically and through the acquisition of
complementary brands that address similar market verticals.
Music technology encompasses several strands. Our original and
core business under the Focusrite brand is that of Audio
Interfaces, used by musicians of all abilities, amateur and
professional, to record music using the computer as the medium.
Focusrite has become the leading brand globally in this field.
We have added to Focusrite with musical instruments (Novation,
Sequential and Oberheim synthesisers), loudspeakers for the
recording studio (ADAM Audio) and live performance and
installations (Martin Audio). Martin Audio has created a second
brand, Optimal Audio, for installation in public spaces like bars,
restaurants, and other areas where low operating expertise is
available, but quality performance is expected. In the last year
Martin Audio acquired Linea Research, the supplier of amplifiers to
Martin Audio and a well-established and respected brand in its own
right.
Within months of acquiring Martin Audio in 2019, the world was
hit by COVID-19. With demand for Martin Audio's products impacted
by the pandemic, Martin Audio's management did an outstanding job
of managing costs and refocussing the business on the installation
market where government mandated lockdowns were seen as presenting
an opportunity for venue owners to invest in assets in public
performance spaces and houses of worship and I am pleased to report
that since the lifting of live music restrictions Martin Audio's
business has prospered with demand for festivals and touring
solutions and overall continuing to grow beyond pre-COVID
levels.
Conversely, as many millions were forced into various lockdowns,
Focusrite experienced a substantial uplift in demand globally for
our interface and musical instrument products. As anticipated,
demand and sales volumes for home creation solutions have reduced
from the unprecedented high levels of demand during the peak of the
pandemic but pleasingly remain materially ahead of pre COVID-19
pandemic levels. Many trade sources cite continued strong demand
for streaming services and content creation, giving us confidence
that this strong demand is sustainable.
The Focusrite Scarlett product range continues to be a standout
success. This is a range of inexpensive, easy to set up and use,
audio interfaces used by musicians and others to record digitally,
which is how music is mostly recorded these days. By using our
products, many musicians have rediscovered their passion and
learned to record for the first time at home. Others, most notably
podcasters, producers of content for radio, and voice actors in
television and film who are now also able to work remotely, also
use our technology at home. The change in working practices is now
well established. It is also cost effective and flexible, compared
with having to bring talent into a studio.
When sales of Scarlett rapidly increased during the lockdowns,
our manufacturing partners in Malaysia and China stepped up to the
challenge. Despite some supply chain challenges, notably with
silicon chips, our operations management and our partners deftly
managed the situation to ensure that we consistently met the
demand. This was reflected in exceptional FY20 and FY21
performance. This sustained high level of demand is reflected in
FY22 revenue, which is well above the pre pandemic levels of FY19,
albeit not at those peak levels.
This demand has been further boosted by the successful
acquisition and integration into the Group of Sequential, a classic
American brand of synthesizers which in turn has acquired the
Oberheim brand. Two hugely popular synthesizer brands under one
roof, based in San Francisco, has enabled the company to meet all
our expectations and more, for this acquisition.
After the pandemic boom, FY22 has been a year of restoring
normality and stability. We have paid for our recent acquisitions
with our existing cash reserves and maintained a largely
unleveraged balance sheet. We have rebuilt our inventories, which
were depleted during peak demand, achieved price increases to
support Group margins, which have come under significant pressure,
and since year end are finally seeing cost reductions in shipping.
We are managing other inflationary impacts and have turned in a
Group performance that is still significantly ahead of pre COVID
results.
The outlook remains positive for the Group. We are continuing to
invest in new product development in all our businesses to grow
each of them to deliver increased market share objectives and seize
new market opportunities. We are investing in new brands and
businesses that fit our strategic objectives to build a truly great
family of brands. This is an area where we employ a dedicated
business development manager and to which I personally contribute
through my network of contacts and recognition established over
many decades working in the industry.
In January 2022 I formally stepped down from my executive role;
I am today Non-executive Chairman of the Group, and I remain as
committed as ever to the success of the Group. I am grateful to the
skill and efforts of the entire executive leadership team, the
business leadership teams and all our Group employees, who continue
to be the driving force of our success.
Music will always play a vital role in our lives and despite the
many macro-economic challenges we face, not least the consequences
of the continuing conflict in the Ukraine for which we hope for a
swift and peaceful conclusion, we look forward to a successful
FY23.
Philip Dudderidge
Founder and Non-executive Chairman
CEO Statement
I am pleased to report our results for the financial year ended
31 August 2022. The Group has performed admirably during a period
of unprecedented global challenges, once again delivering revenue
growth and executing on its strategy of both organic growth and
successful acquisitions, adding two new brands to our family:
Oberheim and Linea Research.
FY22 saw some return to normality as the COVID-19 pandemic
subsided and the resultant slow but steady return of the live sound
business. Additionally, demand for content creation solutions
continued to be steady over the year, compared to record high
volumes in 2021 during the peak of worldwide lockdowns. Most
pleasingly demand remains materially higher than at pre COVID-19
levels.
FY22 was not without its challenges, particularly in component
supply issues; high freight costs; war in Europe; heightened signs
of recession and an increased cost of living world-wide. Despite
this the Group has fared well throughout the period, by leveraging
the size and scale of our organisation to deftly negotiate
component and freight costs, and by raising prices across most
brands to partially mitigate margin impact. Importantly, the Group
brought 22 new products to market, continued to invest in our
infrastructure to support a global organisation, and further
refined our routes to market approach.
Our employee base has grown to over 500 strong and is supported
by a distribution network covering over 240 territories. Investing
in our people is paramount to our success and we look wherever
possible to promote from within, whilst also hiring top talent from
around the world, across all divisions and brands.
Our key locations are in the UK (High Wycombe, Hertfordshire and
London), Germany (Berlin), Hong Kong, Mexico, Australia and the US
(Los Angeles, Nashville and San Francisco). Our employee base
consists of an incredible group of passionate individuals, many
accomplished musicians, DJs, audio engineers, live sound
specialists and podcasters in their own right. The Group is
fortunate to have so many employees who use our solutions in real
world applications, bringing their feedback and experiences back
into their work to continually improve our offerings.
Creating a great place to work is one of the core pillars for
our growth strategy. The Group recruits and retains the top talent
in our industry. We continue to invest in our employees with
tactical training, an increased HR footprint, regular reviews,
career advancement opportunities across the brands, biannual
surveys, and consistent communication. This past year, we onboarded
our first Group Head of People as well as a Head of HR for the US
region. From our various employee surveys, we know our employees
highly value Diversity and Inclusion (D&I) awareness, and
champion green initiatives and charitable efforts inside our
industry. The Group has made good strides in advancing all these
causes, positioning itself to be an industry leader on these
fronts.
Our Operations
The Group's portfolio of products is sold in approximately 240
territories across the Globe. We are acutely aware that the
landscape in which customers want to purchase our solutions is ever
evolving, which in turn presents us with new opportunities. Hence,
we continue to refine our routes to market; utilising a combination
of retailers and system integrators (online as well as bricks and
mortar shops), regional distributors, and direct to end user via
our own e-commerce platform and in-app sales.
Last year we sold over 1.5 million physical products and had
over 1.3 million downloads of our various software titles. Across
the Group, we launched 22 new products along with numerous updates
to existing ranges. Our manufacturing approach is multifaceted,
driven by the specific needs of each individual brand, with a
mixture of manufacturing on site and mass production in China and
Malaysia.
Our Markets
The Group's portfolio could be categorised into two, broad
categories:
-- Solutions that enable the creation of content - approx. 83% of FY22 revenue; and
-- Solutions that enable the reproduction of sound - approx. 17% of FY22 revenue
hese two broad categories have distinct customers, routes to
market and product specific technical requirements.
Most of our products across Focusrite, Focusrite Pro, Novation,
Ampify, ADAM, Sequential and Oberheim are focused on Content
Creation. These products are used by a wide range of customers for
creating music and audio content: from absolute beginners,
hobbyists to aspiring and seasoned professionals, many of them
household names.
Martin Audio, Optimal Audio and Linea Research products are
focussed on professional Audio Reproduction. These solutions offer
best in class sound for small bands to the largest professional
tours and festivals, and for permanent installations for bars,
clubs, corporate, houses of worship, theatres and performance
halls.
Each of the individual business units continue to focus on
innovation, ensuring a robust roadmap of refreshes for current
products whilst also introducing completely new solutions. Content
creation and live sound reproduction workflows are constantly
evolving, and the Group aims to lead the industry by spending
considerable effort and resources in our various R&D efforts.
Additionally, the Group has a very proactive stance towards
M&A, carefully considering potential acquisitions that are not
only earnings enhancing, but which can also expand our reach into
existing and new markets, and enhance our R&D capability.
The Group is committed to learning as much as we can from our
customers, actively collecting data during their on-boarding and
user journey as they use our solutions. Additionally, we collate
our own data with industry market sources to ensure that we are
always on top of our customers' needs and buying behaviours.
Greater detail on our markets and customer types is provided
elsewhere in this report.
Operating review
Despite the numerous macroeconomic and global supply chain
issues experienced this year, the Group still delivered top line
growth and made considerable progress in restocking our
distribution channels. We also progressed a number of initiatives
across routes to market, and ESG, and invested in our employees and
IT infrastructure across the Group. This investment, along with
continued heightened freight and component costs in the year,
resulted in an adjusted EBITDA below the record profits achieved in
FY21, but still an admirable performance, given the factors cited
above and well above FY20 and the last pre pandemic year of
FY19.
Revenue for the Group was GBP183.7 million, up 5.6% from the
previous year. Our Content Creation focused brands; finished the
year roughly flat over the previous year, but this was against a
very strong comparable in the previous year driven by the lockdown
boost. ADAM Audio was materially impacted by component shortages
that caused stock-outs on their very popular A Series mid-range
monitors and consequently this impacted the release for the refresh
on this line. This was partially offset by the full year effect and
strong performance from Sequential which joined the Group in FY21.
Looking forward to FY23, we expect to see recovery to more normal
levels of performance at ADAM Audio.
Our Audio Reproduction brands, all witnessed strong growth,
increasing 56% over prior year. This was primarily fuelled by the
return of live events across the globe and the addition of Linea
Research in March.
Purchase of Linea Research
Linea Research manufacturers professional power amplifiers and
digital signal processors and joined the Group in March 2022. The
acquisition has helped secure amplifiers for Martin Audio (which is
a long-standing customer of Linea Research) during this critical
time. This was achieved using the Group's considerable expertise in
sourcing components thereby helping to shore up supply. Since
joining the Group, Linea Research has significantly increased
production to meet market demand that continues to grow, alongside
further integration into the Group and investment in people to fuel
continued growth for the future.
Linea Research significantly increases the total addressable
market for the Group by having our own brand sales of professional
electronics to the professional live and installed sound
sector.
Purchase of Oberheim Brand
Oberheim Electronics was founded in 1969 and rose to prominence
as a synthesizer producer throughout the 1970s. By the mid-80s, it
had risen to prominence and powered the characteristic sound of
hits like Jump by Van Halen, 1999 by Prince, and Flash by Queen,
among many others.
Changing musical tastes combined with delays in introducing new
products resulted in the Oberheim brand all but disappearing by the
late 1980s, but the keyboards continued to be prized by collectors,
with vintage instruments often fetching over $20,000 on the
second-hand market.
Recognising this value and through our relationship with Tom
Oberheim, the Group acquired all the IP and trademarks relating to
Oberheim synthesisers in May 2022. Our strategy is to collaborate
with Tom to bring to life an entire portfolio of Oberheim
instruments, to expand our share of the synthesizer market and to
offer an alternative that appeals beyond the core Sequential
customer base. While it is early days on this journey, the market
interest and positive feedback we have received, particularly
regarding the recent launch of the OBX8 has been extremely
encouraging and we look forward to our revival of this legendary
brand.
Current economic challenges
As the pandemic began to subside, a number of challenges related
to COVID-19 remained throughout the year. Additionally, as the year
progressed new global macro factors have also added complexity and
concern across our industry, like many others. As with previous
years, the Group has met these challenges head on, working
tirelessly to ensure a steady and reliable flow of products to our
channel; protecting the well-being of our employees, and mitigating
the impact of cost inflation on gross margin.
Component availability and pricing, as cited in last year's
report, is an ongoing concern that virtually every manufacturer has
had to deal with. During this past year, demand for silicon and
wafers has continued to increase, causing lead times and pricing to
remain at unprecedented levels. The Group has had to face leads
times as long as 36 months as well as spot buys on the open market
at exaggerated prices. We have benefited from placing early orders
during the onset of COVID-19, resulting in most of the major
components flowing in on a regular basis. However, we have
encountered numerous occasions where shipments have not arrived on
time, requiring us to look at even more elevated spot buys or the
potential of stock outs in our channel. We continue to monitor and
mitigate this issue rigorously, leveraging the size and scale of
the Group's overall component needs to negotiate priority and
better pricing.
Likewise, freight and logistics costs have also continued
throughout last year at unprecedented high pricing levels, although
we have seen reductions since year end. During the second half of
last year, the Group did see some reduction on lead times as well
as pricing, but these still finished the year materially higher
than in previous years. Again, the Group has leveraged our scale to
address this issue, and in addition, has negotiated with a number
of major resellers to collect up their orders directly from China
and thus take on the freight and duty cost themselves.
Beyond working on the above issues as a Group as opposed to
individual brands, we also put through price increases throughout
last year to help offset some of the gross margin impact. These
price increases were calculated by looking at mid to long term
forecasts on costs, price elasticity models for every category, and
discount structures for our channel.
The Group has kept a watchful eye on rising global economic
issues around inflation, cost of living, and the protracted war in
Ukraine. Over the past few years, the Group has invested more into
our IT infrastructure enabling us to monitor the current and
projected future performance of our businesses better and thereby
improving the speed and quality of our decision-making.
Brand overview
Focusrite and Focusrite Pro
Our Focusrite branded family of audio interfaces, Scarlett and
Clarett, offer customers high quality solutions to capture and
process audio. Across this past year, while demand levels were not
as high as during the pandemic periods, demand for our audio
interfaces has remained at steady levels, and materially up over
pre pandemic volumes. Additionally, we have expanded our suite of
FAST plug-ins, offering both perpetual licenses as well as rent to
own schemes.
This past year, we introduced a new Focusrite branded suite of
products focused on Podcasting. Podcasting is now a well
established media form in its own right and with a massive
following. There is a growing number of new podcasts every month,
and in turn growing advertising revenue. To serve these customer's
unique needs, we launched the Vocaster series in June 2022. These
solutions have received rave reviews in both mainstream magazines
such as the New York Times, Macworld and Forbes, as well as with
key influencers and sites dedicated to Podcasting.
The Focusrite Pro suite of solutions provides professional audio
engineers and facilities with the best quality audio in scalable
systems that fit the need for any professional workflow. This
year's performance continued to be impacted by component shortages
leading to a decline in sales over the prior year. We expect supply
to remain constrained in this area over the coming year.
Novation and Ampify
Electronic music, and its many genres, continues to grow and to
democratise the art of music creation. This past year, we
introduced three new products to our controller keyboard line: the
Launchkey88, the FL Studio Mini and FLStudio 37. These new
offerings offer more choices to musicians looking for tight
integration with the world's most popular music creation
software.
Ampify expands the Group's electronic music offerings into free
to download iOS and cross-platform desktop solutions that allow
anyone to experiment with and create high-quality soundtracks. Our
iOS music creation app, Launchpad OS, is one of the most popular
electronic music apps available. Over the past year, both offerings
had 1.28 million downloads, with roughly 192,000 in-App purchases.
Last year, we began monthly and annual subscription services for
both platforms. This year the number of subscribers grew by 44% and
the monthly recurring revenue grew by 51%.
ADAM Audio
ADAM Audio professional studio monitors are known
internationally as one the most accurate and reliable suite of
reference monitors available. 2022 has brought with it much
anticipated product launches for ADAM Audio, most notably, the all
new A Series. The A Series builds on and reinvents our industry
standard AX models, trusted in thousands of studios across the
globe. The A Series has been the largest launch in ADAM Audio's
history, with a successful rollout of all five models and strong
demand. Due to various component shortages and lockdowns during the
first half, the A Series shipped much later than originally
planned, with products not getting into the channel until late in
the second half of the year. This resulted in a period of almost
five months where supply of the old AX series was limited, and the
new A Series was not available. Across all our brands, ADAM Audio
was the most impacted from component issues, but we are pleased to
report that supply and production are now flowing smoothly again.
There is also more on the horizon as its portfolio roadmap has been
reviewed and we aim to fulfill these plans with an expanded R&D
team over the coming year.
Martin Audio
Martin Audio remains and has extended its lead as the UK's
largest manufacturer of professional loudspeakers for both live and
installed sound. Following the pandemic, FY22 was the first year
that live performances returned in full force including some of the
world's largest festivals such as BST Hyde Park and Glastonbury
where Martin Audio graced the main stages once again. Major system
sales of products capable of throwing 30 metres plus followed and
brought a host of new rental partners to the Martin Audio fold.
This was further supported by runaway sales of our flexible TORUS
constant curvature system for throws of 15 - 30 metres, which won
many plaudits and fans throughout the live sound community. Further
refinement to our 3D system design software - Display3 - has been
well received and has enabled rental partners to better understand
the performance of our sound systems.
Installations which provided a bed rock of revenue in FY21
further accelerated in FY22, as much like live sound, people around
the world ventured out in ever bigger numbers to re-experience
venues for hospitality and entertainment. This meant a further
increase in sales of ranges designed for up to 15m throws, most
notably with our popular CDD and ADORN install ranges as well as
fuelling yet further sales of TORUS.
"Supply-chain" was the watch word of the industry in 2022.
Decisions taken during the height of the pandemic around long term
relationships with suppliers contributed to Martin Audio being
better placed than many as demand surged across the industry.
Equally, this year the team has worked proactively to mitigate
supply challenges, and this has helped with a continuity of supply
against a backdrop of elevated demand.
Optimal Audio
Optimal Audio delivered meaningful revenue for the first time
and reaffirmed the belief that the brand has a bright future
targeting commercial audio sectors with electronics and speakers
for throws up to 15 metres. This year the brand signed 50
distribution agreements, and added notable products including more
ceiling and on-wall speakers as well as further enhancing its
WebApp, seen as the key to the success of the eco-system approach
of the brand.
In its first full year of trading Optimal Audio returned a small
profit as we continue to invest in R&D for future growth in the
commercial audio space.
Linea Research
In March of this year Linea Research, a long time supplier of
amplifiers to Martin Audio joined the Focusrite family. Linea
Research has begun to work closely with Martin Audio, to improve
supply chain planning and robustness and to work collaboratively on
new product ideas. Performance in the five months in which Linea
Research has been part of the Group has exceeded expectations.
Sequential
This year concludes the first complete fiscal year with
Sequential as a member of the Group. Sequential products continued
to win awards from the industry, with Music Radar declaring Take 5
as its Best Hardware Synth of 2021, and Prophet-5 picking up the
Award for Technical Achievement in the Musical Instrument Hardware
category at the National Association of Music Merchants TEC Awards
in June 2022.
Demand for analogue synthesizers continues to be strong and
Sequential managed production and component inventory carefully
throughout the year, avoiding any major interruptions to the
continued supply of all existing products, from the entry-level
Take 5 through to its higher-end models.
Tragically, Dave Smith, founder of Sequential and leader of the
engineering team, died unexpectedly in May 2022. We pay tribute to
the immense contributions he made to the art of synthesizer design
and intend to carry his spirit of design innovation into the
future. We offer our heartfelt condolences to his family, friends
and colleagues.
Several members of the product team have stepped into expanded
roles, and the company remains fully equipped to bring new products
to market on time. The Sequential team expanded to 21 full-time
team members, with approximately half of them engaged in research
and development.
In May 2022, the Group added the Oberheim brand to its portfolio
by acquiring all the IP and trademarks owned by Tom Oberheim. We
launched the Oberheim OBX8 keyboard shortly afterwards. The
Oberheim OBX8 was the culmination of a year-long design
collaboration between Tom Oberheim and the Sequential team, and the
acquisition and product together represent the welcome return of
the iconic brand. With this second leading synthesizer brand, the
Group can dramatically expand its market reach and appeal to a
wider range of synthesizer buyers. We are at work on producing a
full product line of Oberheim offerings.
The return of Oberheim was enormously exciting news within the
industry. As Trent Reznor, Academy Award winner and creative force
behind Nine Inch Nails, put it in a Forbes magazine article
covering the revival of Oberheim: "The incredible Oberheim sound
absolutely holds its own in the present." The new OBX8 product
design won over many fans and became an immediate success. Our
production capacity continues to be absorbed with fulfilling the
heavy order interest.
We remain excited about the product roadmap and overall
potential for these two legendary brands and plan multiple new
products to drive growth throughout FY23 and beyond.
Routes to Market
The Group's routes to market strategy is constantly evolving. We
are investing considerable time and resource in order to improve
efficiency and margin in this area. We aim to ensure we are on top
of customer buying behaviours, trends and opportunities in every
region we service.
Our content creation brands utilise a combination of
brick-and-mortar shops, e-tail focused resellers, distributors and
our own direct to end user e-stores. Our audio reproduction channel
includes rental companies, system integrators, distributors, and
sales directly to end customers.
We continue to invest in people and infrastructure in local
regions, allowing us to service our resellers and end users locally
and in their own language. Most regions have their own demand
generation teams, working with local artists and the community to
ensure our products are represented and resonate with
customers.
Regional review
The Group reports regional performance in three groups: North
America, EMEA and Rest of World (comprising APAC and LATAM). Top
line revenue numbers for North America and EMEA were flat year over
year, with ROW growing at 30%.
North America
North America remains our largest region for the Group,
accounting for 41% of total revenue in FY22. This past year, and
coming off very high prior year comparatives, our Content Creation
brands finished at 95% compared to the prior year. Our Audio
Reproduction brands, coming off a very low base from lockdowns, had
a very strong performance at 69% up over prior year. Our North
American operations include sales and marketing, customer support,
finance, and remote employees across product and engineering. Last
year's creation of one unified team in the US has settled in well
and allowed the group to continue to leverage the size and scale of
our brands.
Europe Middle East and Asia (EMEA)
Europe remains our second largest region, comprising 38% of
total revenue in FY22. Eight out of ten of the Group's brands are
headquartered in Europe. As part of our route to market evolution,
all our Content Creation brands now have a centralised sales and
marketing team focused on the EMEA region. This new structure,
formally started on 1 September 2022 will give us one unified team
representing the totality of our Content Creation brands to our
resellers.
We believe this structure will allow us to scale our demand
generation efforts and work closer with our local resellers and
distributors to ensure our brands are front of mind with their
customers. Our Content Creation brands, coming off very high
pandemic level comparisons and facing headwinds caused by the
conflict in Ukraine and concerns about recession, still managed to
turn in a good performance, finishing approximately 10% down when
compared to the prior year. Our Audio Reproduction brands, coming
off a low base during lockdowns, also turned in a strong
performance, finishing the year 103% up on the prior year.
Rest of World (ROW)
The ROW region comprises Asia Pacific (APAC) and Latin America
(LATAM). Overall, ROW represents 21% of the Group's total revenue
in FY22, up 30% compared to the previous year and in line with our
initiatives to grow this region. Our Content Creation brands had a
strong year, finishing the year 38% up versus the prior year. This
was partially due to the continued investment in the region. LATAM
now has a team of eight people across the region for sales,
marketing and support functions. For APAC, this past year saw the
Group go direct in Australia, setting up our own logistics and
warehouse to supply our Content Creation brands directly to the
reseller channel.
Additionally, more localised content and demand generation
efforts proved fruitful in both China and Japan, areas where the
Group will continue to invest. For our Audio Reproduction brands,
ROW finished the year 12% up versus the prior year. This was lower
than the growth in other regions primarily due to ROW's live sound
and installed business coming back much earlier in 2021 than in
other regions.
Summary and Outlook
I am immensely proud of the Group's performance this past year:
our leadership teams continue to prove they can meet both ordinary
and extraordinary challenges head on and achieve strong results.
Whilst there is still much well publicised uncertainty about global
markets, we continue to see the strengths of our brands driving
healthy demand across the entire portfolio. For the current year,
our first quarter trading has finished in line with our
expectations. Overall demand for the Group's portfolio of products
has remained strong.
We remain mindful of the current significant global economic and
political challenges, as well as the ongoing cost pressures in the
supply chain, but we have worked hard to build back our inventory
position. This provides greater resilience against supply chain
volatility and ensures we are able to meet demand as we head into
the key holiday season in FY23.
We have also introduced a number of measures to maintain
margins, through pricing actions and ongoing review of our
production costs. With new product launches across the product
portfolio planned for FY23 and beyond we remain confident that the
Group continues to have significant organic growth potential within
our existing brands. In tandem, the Group has proven that it has
the capability to successfully execute on its proactive M&A
strategy, carefully considering potential acquisitions that are not
only earnings enhancing, but can also add to our market potential,
expand our R&D footprint, and add scale and dynamism to our
business.
All these factors combined leave us optimistic about our future
prospects.
Tim Carroll
Chief Executive Officer
Financial Review
Overview
Overall the Group has had a resilient year, delivering revenue
growth of 5.6%, but the global macro headwinds have resulted in a
decline in adjusted EBITDA of 12.2% and a decline of 9.6% in
adjusted diluted earnings per share (EPS).
Income statement
2022 2022 2022 2021 2021 2021
GBPm GBPm GBPm GBPm GBPm GBPm
-------------------
Adjusted Non-underlying(1) Reported Adjusted Non-underlying Reported
(1)
------------------- --------- ------------------ --------- --------- --------------- ---------
Revenue 183.7 - 183.7 173.9 - 173.9
Cost of sales (100.4) - (100.4) (89.8) - (89.8)
------------------- --------- ------------------ --------- --------- --------------- ---------
Gross profit 83.3 - 83.3 84.1 - 84.1
Administrative
expenses (48.6) (6.0) (54.6) (42.7) (5.6) (48.3)
------------------- --------- ------------------ --------- --------- --------------- ---------
Operating profit 34.7 (6.0) 28.7 41.4 (5.6) 35.8
Net finance
income (expense) 1.9 - 1.9 (0.8) - (0.8)
------------------- --------- ------------------ --------- --------- --------------- ---------
Profit before
tax 36.6 (6.0) 30.6 40.6 (5.6) 35.0
Income tax
expense (6.0) 0.2 (5.8) (6.9) 0.2 (6.7)
------------------- --------- ------------------ --------- --------- --------------- ---------
Profit for
the period 30.6 (5.8) 24.8 33.7 (5.4) 28.3
------------------- --------- ------------------ --------- --------- --------------- ---------
(1) Non underlying costs and income as defined in note 2 and
note 7 to the financial statements.
Revenue
Revenue for the Group grew 5.6% from GBP173.9 million to
GBP183.7 million ; adjusting for acquisitions and constant currency
this is an organic decline of 2.8%. Sequential was acquired at the
end of April 2021 and FY21 included four months of revenue, Linea
Research was acquired in March 2022 and FY22 includes six months of
revenue.
The Euro average exchange rate was EUR1.18 (FY21: EUR1.14).
Sterling has weakened against the US dollar from $1.36 in FY21 to
$1.31 in FY22. This has increased reported revenue but the currency
impact is broadly neutral at a gross profit level as the majority
of cost of sales are also charged in US dollars.
FY21 FY22 FY22
FY22 FY22 FY22 FY21 FY21 Constant Revenue OCC
Revenue Acquisition Organic Revenue Exchange Currency Growth Growth(1)
------------- ------------ ------------ ------------ --------- ----------- ----------- ----------- -----------
Focusrite 97.2 97.2 102.1 1.5 103.6 -4.8% -6.2%
Novation 20.6 20.6 22.3 0.3 22.6 -7.6% -8.9%
ADAM Audio 17.8 17.8 23.8 -0.4 23.4 -25.2% -24.0%
Martin Audio 31.9 (3.1) 28.8 20.4 0.3 20.7 56.4% 39.5%
Sequential 16.2 (10.0) 6.2 5.3 - 5.3 205.7% 17.9%
------------- ------------ ------------ ------------ --------- ----------- ----------- ----------- -----------
Total 183.7 (13.1) 170.6 173.9 1.7 175.6 5.6% -2.8%
------------- ------------ ------------ ------------ --------- ----------- ----------- ----------- -----------
(1) OCC (organic constant currency growth). This is calculated
by comparing FY22 revenue to FY21 revenue adjusted for FY22
exchange rates and the impact of acquisitions.
Revenue growth of 5.6% for the full year has improved since the
half year (HY22: -2.5% reported), with revenue in the second half
of the year growing by 15.5% compared with the second half of FY21.
Revenue in the second half was helped by improved component supply
which was a significant issue in the previous 18 months, a strong
dollar (with 41% of the Group's sales in North America), and the
introduction of new products across several of our brands, in
particular the new A Series in ADAM Audio and OB-X8 in Sequential,
both of which have been launched to critical acclaim.
The Focusrite segment comprises the products used in the
recording and broadcasting of music or voice, the primary ranges
being Scarlett and Clarett, declined by 6.2% on an organic constant
currency basis and 4.8% on an organic basis to GBP97.2 million
(FY21: GBP102.1 million). Revenue for the Novation synthesizer and
controller ranges decreased, on a reported and organic constant
currency basis by 7.55% and 8.9% respectively to GBP20.6 million
(FY21: GBP22.3 million). Both segments are against strong
comparators, particularly during the first half of FY21, and
included sales to rebuild stock in our channel to be ready for the
forthcoming holiday season.
ADAM Audio makes studio monitors of the type used by many of the
Group's customers. Revenue has reduced by 25% in the year (24% on
an organic constant currency basis) to GBP17.8 million ( FY21:
GBP23.8 million ). With the resolution of the problems experienced
in the transition of the A Series range in the first half of the
year, ADAM Audio's revenue strengthened in the second half to
GBP9.4 million from GBP8.4million in the first half, and with the
successful launch of the A series expects to see revenue
improvements in the upcoming year.
Martin Audio has built on the growth seen in the first half of
the year of 44% with full year reported revenue growth of 56% (39%
on an organic constant currency basis reflecting the acquisition of
Linea Research in March 2022) and with revenue of GBP31.9 million
for the year, compared to GBP20.4 million in FY21. The resurgence
in live sound following COVID-19 lockdowns has contributed to this
growth, as has the extension of the Optimal range, now contributing
GBP1 million to Martin Audio's overall sales.
Sequential also had a strong second half with growth of 82%
leading to full year growth of reported revenue of over 200% (18%
on an organic constant currency basis: FY21 includes only 4 months
of sales from Sequential's acquisition in April 2021). The
introduction of the OB-X8 Synthesiser in the final quarter of the
year supported this growth, being the first of the new Oberheim
products, following the acquisition of the Oberheim brand in May
2022.
FY21 FY22 FY22
FY22 FY22 FY22 FY21 FY21 Constant Revenue OCC
Revenue Acquisition Organic Revenue Exchange Currency Growth Growth(1)
------------ ------------ ------------ ------------ --------- ------------ ----------- ----------- -----------
North
America 74.5 (4.8) 69.7 74.6 2.4 77.0 -0.1% -9.4%
EMEA 70.1 (6.8) 63.3 69.3 (1.9) 67.4 1.2% -6.1%
Rest of the
World 39.1 (1.5) 37.6 30.0 1.2 31.2 30.3% 20.5%
------------ ------------ ------------ ------------ --------- ------------ ----------- ----------- -----------
Total 183.7 (13.1) 170.6 173.9 1.7 175.6 5.6% -2.8%
------------ ------------ ------------ ------------ --------- ------------ ----------- ----------- -----------
(1) OCC (organic constant currency growth). This is calculated
by comparing FY22 revenue to FY21 revenue adjusted for FY22
exchange rates and the impact of acquisitions.
North America represents 41% of the Group's revenue and saw
negative 9% organic constant currency revenue decline, against a
particularly strong FY21 COVID tailwind. Due to the strength of the
dollar during the year reported revenue was broadly flat between
years. Compared to FY20 the Group's revenue in this region is still
ahead by 46% on a reported basis. Focusrite brands grew by 6% on a
reported basis in the second half, with channel stock returning to
levels in line with our service expectation, but against strong
full year comparators, resulted in a full year decline of 5%. ADAM
Audio's stock situation was particularly weak in this region, with
reported revenue for the full year lower by 50%. This was more than
offset by the exceptional growth for Martin Audio which grew by 56%
for the full year on a reported basis.
EMEA, which represents 38% of Group revenue, grew marginally by
1.2% (-6.1% on an organic constant currency basis) to GBP70.1
million. This growth was led by Martin Audio, where sales more than
doubled in this region for the year. Both Focusrite and ADAM Audio
reported overall revenue decreases across the year, against strong
comparators.
ROW comprises mainly APAC and LATAM and represents the remaining
21% of Group revenue. Revenue in ROW grew strongly by 30.3% (20.5%
on an organic constant currency basis), with growth across the
majority of our brands. This region was particularly strong for in
APAC, as we continue to strengthen our local presence in these
markets, launching our own distributor in Australia in December
2021, resulting in 55% reported revenue growth for the year for our
Focusrite brands in this region.
Segment profit
Segment profit is disclosed in more detail in note 7 to the
Group's financial statements 'Business Segments'. The revenue is
compared with the directly attributable costs to create a segment
profit. The only major change has been the inclusion of Linea
Research upon acquisition and the inclusion of Focusrite and
Focusrite Pro into one segment, reflecting the way these brands are
now managed
Gross profit
In FY22, the gross margin was 45.3% down from 48.4% in FY21,
which included a one-off benefit from US duty rebates of GBP1.5
million (0.9% points of margin). The remainder of the decline was
principally due to the high freight rates and the increased costs
from component spot buys experienced in the first half of the year
continuing into the second half, with sea freight rates only
recently starting to reduce to closer to pre pandemic levels. Going
forward the Group is mindful of the current inflationary
environment on costs, and whilst we seek to mitigate this through
pricing, as we have done this year, we expect some impact from
promotional pricing over the competitive holiday season, which may
offset some of the benefits from lower freight.
Importantly, the gross margin remains higher than the historic
pre COVID-19 levels of 42.2% in FY19. Since FY19 structural
factors, such as improved routes to market, with more products
being sold either directly to dealers rather than distributors or
directly to the consumer together with focused cost and price
management and, reducing royalties and tariffs, have successfully
more than offset the increased costs of components such that
margins have improved.
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 GBP54.6 million, up from GBP48.4 million last year.
These costs also include depreciation and amortisation of GBP7.0
million (FY21: GBP6.1 million), amortisation of acquired intangible
assets, GBP5.1 million (FY21: GBP4.0 million) and non-underlying
items, GBP0.9 million (FY21: GBP1.6 million), which are discussed
further below. Excluding these items, administrative costs were
GBP41.6 million (FY21: GBP36.6 million), an increase of GBP5.0
million over the prior year.
Acquisitions partially contributed to this increase with the
annualisation of Sequential contributing GBP0.9 million and the
inclusion of Linea Research a further GBP0.4 million. With the
opening of markets travel and marketing costs have increased,
although not to pre COVID levels, as teams adjust to a hybrid way
of working, adding GBP1.5 million of cost this year. In addition,
we have strengthened our IT infrastructure and a central team now
supports all Group companies, with standard approaches to security
and governance, and an agreed roll out plan for our Group ERP
system, Oracle Netsuite.
We continue to invest in our product teams and local sales and
marketing, with distribution now managed by a local team in
Australia, the costs of which have been offset by increased gross
profit in this market.
Adjusted EBITDA
EBITDA is a non-GAAP measure but it is widely recognised in the
financial markets and it is used within the Group, as adjusted for
non underlying items, as a key performance measure and as the basis
for some of the incentivisation of senior management within the
Group. Adjusted EBITDA decreased from GBP47.5 million in FY21 to
GBP41.7 million in FY22. This was primarily as a result of the
factors affecting costs and gross margin as described above.
2022 2022 2022 2021 2021 2021
GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------------------
Adjusted Non-underlying Reported Adjusted Non-underlying Reported
---------------------------------------- --------- --------------- --------- --------- --------------- ---------
Operating profit 34.7 (6.0) 28.7 41.4 (5.6) 35.8
Add - amortisation of intangible assets 4.8 5.1 9.9 4.1 4.0 8.1
Add - depreciation of tangible assets 2.2 2.2 2.0 - 2.0
EBITDA [1] 41.7 (0.9) 40.8 47.5 (1.6) 45.9
---------------------------------------- --------- --------------- --------- --------- --------------- ---------
[1] EBITDA is defined as earnings before tax, interest,
depreciation, and amortisation. Adjusted EBITDA includes items
treated as non-underlying which are explained in note 15.
Depreciation and amortisation
Depreciation of GBP2.2 million (FY21: GBP2.0 million) is charged
on tangible fixed assets on a straight-line basis over the assets'
estimated useful lives. Amortisation on non-acquired intangibles is
mainly charged on capitalised development costs, writing-off the
development cost over the life of the resultant product.
Development costs related to an individual product are written-off
over a periods of between two years to ten years reflecting the
different lifespans of the products across our brands. Normally,
the capitalised development costs are greater than the
amortisation, reflecting the continued investment in product
development in a growing group of companies.
During FY22, capitalised development costs were GBP7.9 million
(FY21: GBP4.9 million), compared with amortisation of GBP3.9
million (FY21: GBP3.5 million). As expected, our development costs
have increased this year as the Group's R&D teams build out the
future product roadmap, investing in the development of the new
products launched during the year and we have begun to capitalise
costs for Sequential, with GBP1.6 million being capitalised from
this brand in the year. In addition, this year we acquired licences
to utilise certain technologies which have added GBP1.7 million to
intangible assets.
Non-underlying items
In FY22 the Group acquired Linea Research with associated
acquisition costs relating to the transaction of GBP0.6 million
(FY21: GBP0.7 million relating to Sequential acquisition). In
addition, as part of the acquisition, the Group has agreed to pay
employee bonuses if agreed gross profit targets to May 2023 are
achieved. It is currently anticipated that these targets will be
achieved and GBP0.1 million of non-underlying costs has been
included for these bonuses, which will continue pro rata in FY23.
Also included is GBP1.1 million (FY21: GBP0.8 million) relating to
a bonus for Sequential employees, based on achieving gross profit
targets to December 2022. These costs have been offset in FY22 by
GBP0.8 million of income relating to the sale of a trademark. In
FY21 a further GBP0.1 million of employee related costs related to
restructuring has also been included in non-underlying costs.
Non-underlying items also include amortisation of the intangible
assets from acquisitions of GBP5.1 million (FY21: GBP4.0 million).
This has increased due to the inclusion of amortisation on the
Sequential and Linea Research brands. See note 7 to the financial
statements.
Foreign exchange and hedging
Sterling has marginally strengthened against the euro between
years, but has weakened more significantly against the US
dollar.
Exchange rates 2022 2021
---------------- ----- -----
Average
USD:GBP 1.31 1.36
EUR:GBP 1.18 1.14
---------------- ----- -----
Year end
USD:GBP 1.16 1.38
EUR:GBP 1.16 1.12
---------------- ----- -----
Sterling has weakened against the average US dollar rate from
$1.36 to $1.31. The US dollar accounts for 41% of Group revenue but
over 80% of cost of sales so this has increased revenue but is
neutral in terms of gross profit.
The Euro comprises approximately a quarter of revenue but little
cost. The Group has continued entering into forward contracts to
convert euro to sterling. The policy adopted by the Group is to
hedge approximately 75% of the euro flows for the current financial
year (year ended August 2022) and approximately 50% of the euro
flows for the following financial year (FY23). In FY22,
approximately three-quarters of euro flows were hedged at EUR1.13,
and the average transaction rate was EUR1.18, thereby creating a
blended exchange rate of approximately EUR1.14. In FY21, the
equivalent hedging contracts were at EUR1.11, again close to the
transactional rate of EUR1.14 and so creating a blended exchange
rate of EUR1.12.
Finance income of GBP2.3 million (FY21: GBPnil million) includes
a large gain from retranslation of US dollar balances within the
Group, which is not expected to re occur.
Corporation tax
In FY22, the corporation tax charge totalled GBP5.7 million on
reported profit before tax of GBP30.5 million, an effective tax
rate of 18.9% (FY21: 19.3%). Adjusting for non-underlying items the
effective tax rate is 16.2% (FY21: 17.0%) on adjusted profit before
tax of GBP36.5 million. Going forward we expect the effective tax
rate to remain broadly in line with the UK corporate tax rate.
Earnings per share
The basic EPS for the year was 42.5 pence, down 12.9% from 48.8
pence in FY21. This decrease is broadly in line with the reduction
in operating profits, partially offset by the exchange gain in
financial income due to an exceptionally strong dollar at year end.
The alternative measure including the dilutive effect of share
options, is the adjusted diluted EPS. This decreased by 9.6% from
57.5 pence in FY21 to 52.0 pence in FY22.
2022 2021 Change
pence pence %
--------------------- ------ ------ --------
Basic 42.5 48.8 (12.9)%
Diluted 42.1 48.2 (12.7)%
Adjusted(1) basic 52.5 58.2 (9.8)%
Adjusted(1) diluted 52.0 57.5 (9.6)%
--------------------- ------ ------ --------
1 Adjusted for amortisation of acquired intangible assets, sale
of trademark and other adjusting items. See reconciliation note 2
to the financial statements
Balance sheet
2022 2021
GBPm GBPm
------------------------------------- ------- -------
Non-current assets 87.5 62.8
Current assets
Inventories 48.3 20.8
Trade and other receivables 28.9 16.3
Cash 12.8 17.3
Current liabilities (including bank
loans) (54.2) (25.6)
Non-current liabilities (18.0) (7.3)
------------------------------------- ------- -------
Net assets 105.3 84.3
------------------------------------- ------- -------
Non-current assets
The non-current assets comprise: goodwill of GBP1 3.7 million,
other intangible assets of GBP 62.0 million and property, plant and
equipment of GBP 10.9 million. The goodwill of GBP 13.7 million
(FY21: GBP10.1 million) relates to acquisitions as follows: GBP0.4
million for Novation purchased in 2004, GBP 4.7 million for ADAM
Audio purchased in July 2019, GBP2.4 million for Martin Audio
purchased in December 2019, GBP 2.8 million for Sequential
purchased in April 2021 and GBP 3.4 million for Linea Research
purchased in March 2022.
The other intangible assets of GBP 62.0 million (FY21: GBP49.1
million ) consist mainly of capitalised research and development
costs and acquired intangible assets relating to product
development and brand. The capitalised development costs have a
carrying value of GBP1 3.1 million (FY21: GBP9.1 million). This
increase of GBP 4.0 million comprises the excess during the year of
capitalised development costs (GBP 7.9 million) over the
amortisation (GBP 3.9 million). The increase represents the ongoing
investment in our product teams across the Group and the
capitalisation of costs in Sequential this year. Approximately 65%
of development costs are capitalised and they are amortised over
the life of the relevant products.
Acquired capitalised development costs had a carrying value of
GBP2 4.2 m illion (FY21: GBP21.0 million) at the end of the year,
and had increased due to the inclusion of Linea Research's
development costs of GBP 5.7 m illion and the retranslation impact
of the Sequential acquired assets of GBP1.0 million less the annual
amortisation charge of GBP3.5 million .
T he remaining intangible assets, totalling GBP 24.8 million
(FY21 : GBP 1 9.1 million), include brands acquired as part of the
acquisitions, to be amortised over ten years for ADAM Audio and 20
years for Martin Audio, 15 years for Sequential and nine years for
Linea Research . In Ma y 2022 this year the Group purchased the
Oberheim brands and trademarks from Tom Oberheim for GBP 4.5 m
illion , with an initial payment of GBP1 million paid in May and
the remainder in annual planned payments to FY2 8 . This replaces
any future royalty payments and provides a home for Tom to work
with our Sequential team to further develop the Oberheim product
range.
Tangible assets have increased this year from GBP3.6 million at
the end of FY21 to GBP10.9 million at the end of FY22 due to the
recognition of two new property leases and the addition of the
property acquired as part of Linea Research. Martin Audio has
renewed its lease on its existing site for a further 10 years and
Focusrite has a planned move to new offices in High Wycombe.
Working capital
At the end of the year, working capital was 19.9 % of revenue
(FY21: 6.6 %). This planned increase arises from the Group
rebuilding stock to historic norms to support customer demand,
particularly ahead of the busy Thanksgiving and Christmas holiday
season in 2022. In addition, the Group is holding higher than
average levels of raw materials to ensure component supply is
secure during FY23. Debtor balances are also high due to strong
sales in the final quarter of the year, but as the Group has
continued to place great emphasis on the timely collection of
debts, this is expected to reduce during FY23. Creditors continue
to be paid on time.
As we move to supply customers through more direct routes to
market this has also led to an increase in inventory being directly
held by the Group rather than by distributors . With the launch of
our distributor in Australia in FY22 , we now hold GBP 2.0 m illion
of stock in this market to supply our customers.
Cash flow
2022 2021
GBPm GBPm
Cash and cash equivalents at beginning of year 17.3 15.0
Foreign exchange movements 0.7 -
Cash and cash equivalents at end of year 12.8 17.3
-------------------------------------------------------------------------------- ------- -----
Net (decrease)/increase in cash and cash equivalents (per Cash Flow Statement) (5.2) 2.3
Change in bank loan (13.2) 11.9
-------------------------------------------------------------------------------- ------- -----
(Decrease)/increase in Net Cash (18.4) 14.2
Add back: equity dividend paid 3.2 2.6
Add back: acquisition of business (net of cash acquired) 10.9 13.9
-------------------------------------------------------------------------------- ------- -----
Free cashflow (4.3) 30.7
Add back: non-underlying items 0.9 0.8
-------------------------------------------------------------------------------- ------- -----
Underlying free cashflow(1) (3.4) 31.5
-------------------------------------------------------------------------------- ------- -----
(1) Defined as cashflow before equity dividends, acquisition of
subsidiary (net of cash acquired) and adjusting items.
In FY22, the net debt balance at the year-end was GBP0. 3
million (FY21: net cash GBP17. 6 million). The Group has a GBP40
million revolving credit facility (RCF) with HSBC and NatWest due
to expire in December 2024. At the year end the Group had drawn
down GBP13 .2 million of the RCF to fund the acquisitions of Linea
Research and the Oberheim brand as well as our working capital
rebuild.
The underlying free cash flow for the full year was a cash
outflow of GBP 3.4 million (FY21: cash inflow of GBP3 1.5 million)
leading to a year end net debt position of GBP0. 3 million (FY21:
net cash GBP17. 6 million). Within this, the movement in working
capital was an outflow of GBP 26.9 million (FY21: inflow of GBP1.7
million) , largely due to improvements in production and supply as
the year progressed enabling a planned rebuild of our inventory
levels. Capital investment this year totalled GBP 1 2.5 m illion
(FY21: GBP 6.6 m illion ), of this GBP 8.4 m illion related to
capitalised R&D reflecting the Group's ongoing commitment to
product development. We expect this level of investment to continue
into FY23 to support the Group's product roadmap. A further GBP1.0
million related to the cash impact of the acquisition of the
Oberheim brand.
Dividend
The Board is proposing a final dividend of 4.15p pence per share
(FY21 final dividend: 3.7 pence), which would result in a total of
6.0p pence per share for the year (FY21: 5.2 pence). This
represents an adjusted earnings dividend cover of 8.7 times (FY21:
11.1 times).
Summary
The Group has once again delivered a robust financial
performance, despite the prevailing global economic headwinds, and
against very strong comparators. Much of the growth achieved during
the COVID period has been maintained , and in some regions has
continued to increase from this new, larger base. As planned, with
production at record levels, FY22 has enabled us to rebuild our
inventory in addition to increasing stock in our various channels,
ready for the FY23 holiday season. In addition, we have added two
new exciting brands to the Focusrite family, as well as delivering
new products across all our existing brands , providing strong
foundations for our future performance. We have a largely
unleveraged balance sheet and are inherently highly cash generative
. We have achieved price increases to support margins , and are
managing other inflationary impacts to help support future
growth.
Sally McKone
Chief Financial Officer
Principal Risks and Uncertainties
Risk management plays an important role in everything we do at
Focusrite and its objective is to add the maximum sustainable value
to all of our activities.
Overview
As with any business, we face risks and uncertainties especially
as the business grows throughout the world. Effective risk
management helps support the successful delivery of our strategic
objectives. We have an established risk management framework to
identify, assess, mitigate and monitor the risks we face as a
business and help deliver a balance between risk and
opportunity.
Risk Appetite
During the year we reviewed and amended our risk appetite and
have set a clear scale for how we categorise and quantify risk. All
business teams are responsible for identifying and assessing their
risks, both current and emerging, and measuring them against the
defined criteria, considering the likelihood of occurrence and the
potential impact to the Group.
Risk Management
A principal risk is a risk or combination of risks that can
seriously affect the performance, future prospects or reputation of
the Group. This includes those risks that would threaten our
business model, future performance, solvency or liquidity and are
aligned to our strategic goals and priorities. Our principal risks
have been determined and reviewed by the General Executive
Committee and wider executive team and approved by the Board.
Risk Culture
The Board sets the risk culture for the business. Each risk has
a single risk owner who is responsible for the monitoring and
mitigation of that risk on an ongoing basis. The principal risks
and their changes are reviewed by the General Executive Committee.
Their involvement ensures that the importance of risk management
flows throughout the Group and risk assessments are included in new
projects, business cases and strategic planning.
Emerging Risks
We seek to identify changes in existing risks, whilst also
ensuring that there is appropriate focus on emerging risks. The
consequences of the COVID-19 pandemic, the war in Ukraine and the
threat of a long-lasting global recession dominate the changing and
emerging risks we face as a business. We continue to monitor
inflationary pressures, the resilience of our supply chain, changes
in both routes to market and the retailer landscape and our ability
to attract, retain and motivate talent not only in order to try and
predict emerging and changing risks but also to ensure that we have
an appropriate mitigation plan in place.
In previous years we viewed climate change as an emerging risk
but now it is a principal risk that is assessed and the
consequences managed through our risk management process.
Current Focus
We monitor and update our principal risks during the year. In
doing so, we assess changing and emerging risks and the progress of
our risk mitigation plans.
We have reduced the risk associated with our intellectual
property following implementation of the Group's brand protection
program . As a result, this is no longer deemed a principal risk.
In addition, the risk of a customer or the systems we rely on to
support them failing is covered by the cyber risk and the new
macro-economic risk categories.
Finally, the principal risk relating to COVID-19 has been
removed, in line with the UK government's roadmap to living with
COVID and as we have embedded the oversight and controls into our
existing processes.
Risks in the Year Ahead
We will continue to embed the risk management approach into
existing processes and ways of working to drive greater integration
of risk management. We will work with risk owners to evolve and
improve our approach to risk management and ability to manage
uncertainties in the external environment.
We will continue to support the integration of the actions
required to meet the requirements of the Task Force on
Climate-Related Financial Disclosures (TCFD) into our risk
management process.
Principal Risks
Our principal risks are those considered by the General
Executive Committee to post the most potential threat to the smooth
operation of the business. The table below (not in priority order)
sets out our principal risks, a summary description of the risk,
the connection with our strategy, and a summary of key controls in
place to mitigate the impact should a risk come to fruition.
Naturally risks change over time and so whilst the list is our
current set of principal risks we see it as a live document. There
will be unknown risks or risks currently assessed as less material,
that may also have an adverse effect on the business in time.
Principal risk/uncertainty * Mitigation
Business strategy development Change v prior year and residual risk
and implementation à * We have worked collaboratively with our contractual
partners through the challenges of the past 12 months
As the world emerges from to strengthen our relationships.
the COVID-19 pandemic,
uncertainty remains and
therefore being able to * We offer credit terms where necessary
implement our acquisition
strategy and our move to
direct to reseller remains
a strategic priority against Impact on the business
a backdrop of strain on * If our products fail to win customers our existing
the channel, in particular brands will weaken which means we may lose and/or not
retailers having financial win new customers.
difficulties.
* This would also lead to reduced margin and pricing
not keeping up with inflation and/or customer trends.
Risk Mitigation
* We are increasing the different customer channels and
markets in which we operate and continually monitor
product performance and customer trends.
------------------------------------------------------------------
Product innovation á Change v prior year and residual risk
The market for the Group's Risk that our products fall out of favour
products remains characterised with our customers if we do not adapt to
by continued evolution changing needs, trends and demands and
in technology, evolving as such
industry standards, frequent we lose market share/revenue, in an increasingly
new competitive product competitive market.
introductions and - particularly
in the post pandemic environment Impact on the business
- changes in customer needs. * We have continued to develop and build our innovative
The Group invests in designing product pipeline across our markets.
and developing products
that customers want to
buy, at appropriate price
points. Failure to meet Risk mitigation
the design, quality and * We undertake continuous consumer and customer
value expectations will feedback into trends and insights in order to predict
quickly see customers turn trends and adapt our product offering accordingly.
away from our products.
------------------------------------------------------------------
Product Supply á Change v prior year and residual risk
* The threat of scarcity of raw materials may result in
Due to the global supply the over purchase of such materials as and when
chain issues, risks to available in order to ensure the availability of
our ability to service materials for production.
customer demand are real
and present.
* The cost increases arising from supply and
transportation challenges remain a risk to the
business.
Impact on the business
* The unavailability of products that are essential for
the Group to operate will have an impact on sales,
cash flows and revenue.
Risk mitigation
* The Group has continued to communicate regularly with
key semi-conductor companies instead of via
distributors and the appointment of a full-time
sourcing manager has helped to ensure the
availability of materials to the Group.
* Where possible, the Group has also continued to make
spot purchases of components in order to ensure their
future availability.
------------------------------------------------------------------
Information security, data Change v prior year and residual risk
privacy, business continuity * Investment in our cyber shields and efforts to
and cyber risks à support and drive employee awareness of phishing
attacks and how to respond appropriately have
The unencumbered availability continued.
and integrity of the Group's
IT systems is ever critical
to successful trading .
Impact on the business
The threat of a cyber security * Disruption to our information systems may have a
breach or an unauthorised significant impact on our sales, cash flows and
or malicious attack is profits.
an ongoing and increasingly
sophisticated risk that
the Group believes would * A cyber security breach could lead to unauthorised
negatively impact its reputation. access to, or loss of, personal and/or sensitive
Similarly, the inadvertent information.
processing of customer
or employee data in a manner
deemed unethical or unlawful
could result in significant Risk Mitigation
financial penalties, remediation * The Group's business continuity plan has been
costs, reputational damage updated.
and/or restrictions on
our ability to operate.
* Regular system and security patching is in
* place including the use of vulnerability scanning to
identify security weakness.
* We also run regular phishing campaigns to raise
awareness and such exercises are supported by
training and guidance.
--
------------------------------------------------------------------
People á Change versus prior year and residual risk
* The appointment of a full time Group Head of People
People are critical to and a dedicated talent manager has seen the number of
the Group's ability to vacancies and time to recruit reduce.
meet the needs of its customers
and end users and achieve
its goals as a business. * See pages 48 and 49 within our Annual Report for our
This requires the retention Great Place to Work strategic pillar
of senior managers and
technical personnel as
well as on our ability
to attract, motivate and Impact on the business
retain highly qualified * We continue to rely on key individuals to contribute
People. to the success of the Group. We need our people to
develop their skills in order to future proof the
Group's business whilst being able to attract, retain
and motive People.
Risk Mitigation
* Employee surveys have been expanded across the Group
and regular pulse surveys help ensure that Focusrite
is a great place to work.
* Sharing people resources across the Group creates
opportunities for career development and promotion
opportunities.
* The Board consider succession planning, remuneration
and the skills, diversity and experience of the
Group's people to ensure there are plans for People's
development.
------------------------------------------------------------------
Macroeconomic/Geopolitical Change versus prior year and residual risk
conditions á * Changing geopolitical situations, in particular the
effect of tensions in various parts of the world,
The effect of the difficult have resulted in greater global volatility.
global macroeconomic situation,
rising cost inflation and
the ongoing impact of the
war in Ukraine is predicted Impact on the business
to heavily impact FY23. * Political dynamics, which are outside of our control,
The broader global political are driving economics which are likely to have a
situation with China is lasting effect on the global economy.
also something that we
monitor given our contract
manufacturing presence
there. Risk mitigation
* We have continued to build scale and diversification
through our enhanced product offerings and expanded
geographic reach
* Regular management reviews monitor financial results,
end markets, alternative product supply arrangements
and competitor behaviour.
------------------------------------------------------------------
Climate Change á Change v prior year and residual risk
* Significant work to prepare for TCFD, in particular,
Climate change is a multi-faceted identifying and modelling the key climate risks and
risk to the business at opportunities has also been undertaken.
many levels. Failure to
deliver on climate change
initiatives, particularly * A number of key brands have switched to the use of
around the reduction in recycled materials.
the use of energy and carbon
within required timescales,
will have short, medium
and long-term climate change Impact on the business
risks to residents, businesses * Reputational impact arising from the failure to
and infrastructure. adequately address societal concerns.
* Reduced availability of raw materials could result in
price rises or interruptions to supply.
* Less sustainable product and supply options impact
our market position
Risk mitigation
* Systems to monitor and reduce the environmental
impact of our operations and ensure compliance with
environmental legislation are in place.
* Managing our operations towards a low-carbon future
e.g. through the use of recycled materials in order
to sustain the longevity and prosperity of the
business.
* Sustainability criteria is embedded throughout the
product design process in order to mitigate risks and
identify opportunities to deliver our Planet
objectives.
* For information on our Planet objectives, see page 53
in our Annual Report.
------------------------------------------------------------------
FORWARD - LOOKING STATEMENTS
Certain statements in this announcement 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 2022
Note 2022 2021
GBP000 GBP000
------------------------------------- ------ ---------- ---------
Revenue 4 183,733 173,935
Cost of Sales (100,453) (89,805)
------------------------------------- ------ ---------- ---------
Gross Profit 83,280 84,130
Administrative Expenses (54,619) (48,356)
------------------------------------- ------ ---------- ---------
Adjusted EBITDA (non-GAAP measure) 41,663 47,548
Depreciation and Amortisation 20,21 (6,991) (6,133)
Adjusting items:
Amortisation of acquired intangible
assets (5,116) (4,013)
Other adjusting items 7 (895) (1,628)
------------------------------------- ------ ---------- ---------
Operating profit 28,661 35,774
Finance income 2,286 48
Finance costs (398) (784)
------------------------------------- ------ ---------- ---------
Profit before tax 30,549 35,038
Income tax expense 8 (5,773) (6,759)
------------------------------------- ------ ---------- ---------
Profit for the period from continuing
operations 24,776 28,279
--------------------------------------------- ---------- ---------
Earnings per share
------------------------------------- ------ ---------- ---------
Basic (pence per share) 10 42.5 48.8
------------------------------------- ------ ---------- ---------
Diluted (pence per share) 10 42.1 48.2
------------------------------------- ------ ---------- ---------
The accompanying notes on pages 30 to 40 form part of these
abbreviated financial statements.
Consolidated Statement of Comprehensive Income
For the year ended 31 August 2022
Note 2022 2021
GBP000 GBP000
------------------------------------------------ ------ -------- -------
Profit for the period (attributable to equity
shareholders) 24,776 28,279
Items that may be subsequently reclassified to the income
statement
Exchange differences on translation of foreign
operations (486) (726)
(Loss)/gain on forward exchange contracts (1,009) 445
Tax on hedging instrument 199 (85)
-------------------------------------------------------- -------- -------
Total comprehensive income for the period 23,480 27,913
-------------------------------------------------------- -------- -------
Consolidated Statement of Financial Position
As at 31 August 2022
Note 2022 2021
GBP000 GBP000
--------------------------------------- ----- --------- ---------
Assets
Non-current assets
Goodwill 13,728 10,054
Other intangible assets 11 61,964 49,066
Property, plant and equipment 10,870 3,646
Deferred tax assets 938 -
--------------------------------------- ----- --------- ---------
Total non-current assets 87,500 62,766
--------------------------------------- ----- --------- ---------
Current assets
Inventories 48,340 20,749
Trade and other receivables 28,520 14,775
Cash and cash equivalents 12,758 17,339
Current tax asset 413 869
Derivative financial instruments - 716
--------------------------------------- ----- --------- ---------
Total current assets 90,031 54,448
--------------------------------------- ----- --------- ---------
Current liabilities
Trade and other payables (36,348) (23,673)
Other liabilities (1,641) (774)
Current tax liabilities (1,066) -
Provisions (1,840) (1,092)
Bank loan (13,054) -
Derivative financial instruments (293) -
Total current liabilities (54,242) (25,539)
--------------------------------------- ----- --------- ---------
Net current assets 35,789 28,909
Total assets less current liabilities 123,289 91,675
--------------------------------------- ----- --------- ---------
Non-current liabilities
Deferred tax (9,130) (5,996)
Other liabilities (8,843) (511)
Provisions - (1,069)
Bank loan - 248
Total non-current liabilities (17,973) (7,328)
--------------------------------------- ----- --------- ---------
Total liabilities (72,215) (32,867)
--------------------------------------- ----- --------- ---------
Net assets 105,316 84,347
--------------------------------------- ----- --------- ---------
Capital and Reserves
Share capital 59 59
Share premium 115 115
Merger reserve 14,595 14,595
Merger difference reserve (13,147) (13,147)
Translation reserve (1,015) (529)
Hedging reserve (293) 716
EBT reserve (1) (1)
Retained earnings 105,003 82,539
--------------------------------------- ----- --------- ---------
Equity attributable to the owners of the
Company 105,316 84,347
---------------------------------------------- --------- ---------
Total Equity 105,316 84,347
--------------------------------------- ----- --------- ---------
The financial statements were approved by the Board of Directors
and authorised for issue on 8 December 2022. They were signed on
its behalf by:
Tim Carroll Sally McKone
Chief Executive Officer Chief Financial Officer
Consolidated Statement of Changes in Equity
For the year ended 31 August 2022
Merger
Share Share Merger difference Translation Hedging EBT Retained
capital premium reserve reserve reserve reserve reserve earnings Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
--------------- --------- --------- --------- ----------- ------------ --------- --------- --------- --------
Balance at 1
September
2020 58 115 14,595 (13,147) 197 220 (1) 54,861 56,898
--------------- --------- --------- --------- ----------- ------------ --------- --------- --------- --------
Profit for the
period - - - - - - - 28,279 28,279
Transfer of
reserve - - - - - 51 - (51) -
Other
comprehensive
income - - - - (726) 445 - (85) (366)
--------------- --------- --------- --------- ----------- ------------ --------- --------- --------- --------
Total
comprehensive
income - - - - (726) 496 - 28,143 27,913
Transactions
with
shareholders 1 - - - - - (1) - -
Share based
payments
deferred
tax deduction - - - - - - - 786 786
Share based
payments
current
tax deduction - - - - - - - 690 690
EBT shares
issued - - - - 1 660 661
Share-based
payments - - - - - - - 632 632
Shares
withheld
to settle tax
obligations - - - - - - - (739) (739)
Premium on
shares
in lieu of
bonuses - - - - - - - 60 60
Dividends paid - - - - - - - (2,554) (2,554)
--------------- --------- --------- --------- ----------- ------------ --------- --------- --------- --------
Balance at 31
August 2021 59 115 14,595 (13,147) (529) 716 (1) 82,539 84,347
--------------- --------- --------- --------- ----------- ------------ --------- --------- --------- --------
Profit for
the period - - - - - - - 24,776 24,776
Other
comprehensive
income - - - - (486) (1,009) - 199 (1,296)
--------------- --------- --------- --------- ----------- ------------ --------- --------- --------- --------
Total
comprehensive
income - - - - (486) (1,009) - 24,975 23,480
Share based
payments
deferred
tax deduction - - - - - - - (1,131) (1,131)
Share based
payments
current
tax deduction - - - - - - - 723 723
EBT shares
issued - - - - - - - 674 674
Share-based
payments - - - - - - - 1,120 1,120
Shares
withheld
to settle tax
obligations - - - - - - - (865) (865)
Premium on
shares in
lieu
of bonuses - - - - - - - 202 202
Dividends paid - - - - - - - (3,234) (3,234)
---------------
Balance at
31 August
2022 59 115 14,595 (13,147) (1,015) (293) (1) 105,003 105,316
--------------- --------- --------- --------- ----------- ------------ --------- --------- --------- --------
Consolidated Cash Flow Statement
For the year ended 31 August 2022
2022 2021
Note GBP000 GBP000
Operating activities
Profit for the financial year 24,77 6 28,279
Income tax expense 8 5,773 6,759
Net interest (1,888) 736
Loss on disposal of PPE 2 4 4
Loss on disposal of intangible assets 10 5 498
Gain on sale of trademark (830) -
Amortisation of intangibles 9,883 8,126
Depreciation of PPE 2,223 2,022
RDEC Credit (369) -
Share-based payments charge 1,313 973
-------------------------------------------- ----- --------- ---------
Operating cashflow before movements
in working capital 41, 010 47,397
(Increase) decrease in trade and other (1 2,316
receivables ) 3,533
(Increase) in inventories (27,591) (1,023)
Increase (decrease) in trade and other
payables 12,988 (773)
-------------------------------------------- ----- --------- ---------
Operating cash flows before interest
and tax 14,091 49,134
Net interest (3 30 ) (311)
( 3,380
Income tax paid ) (9,741)
-------------------------------------------- ----- --------- ---------
Cash generated by operations 10,381 39,082
Net foreign exchange movements (1,918) (566)
-------------------------------------------- ----- --------- ---------
Net cash from operating activities 8,463 38,516
Investing activities
(1,0 45
Purchase of property, plant and equipment ) (1,126)
(3, 095
Purchase of intangible assets ) (591)
( 8,368
Capitalised R&D costs ) (4,894)
Proceeds from disposal of intangible
assets 830 -
Acquisition of business, net of cash
acquired (10,923) (13,948)
-------------------------------------------- ----- --------- ---------
(2 2,601
Net cash used in investing activities ) (20,559)
Financing activities
Proceeds from loans and borrowings 13,228 7,353
Repayments of loans and borrowings - (19,335)
Payment of lease liabilities (1,168) (1,057)
Equity dividends paid (3,234) (2,554)
-------------------------------------------- ----- --------- ---------
Net cash used in financing activities 8,82 6 (15,593)
Net (decrease) increase in cash and ( 5,312
cash equivalents ) 2,364
Cash and cash equivalents at the beginning
of the year 17,339 14,975
Foreign exchange movements 731 -
-------------------------------------------- ----- --------- ---------
Cash and cash equivalents at the end
of the year 12,758 17,339
-------------------------------------------- ----- --------- ---------
Notes to the Final Results
For the year ended 31 August 2022
1. BASIS OF PREPARATION
The financial information set out above does not constitute the
company's statutory accounts for the years ended 31 August 2022 or
2021 but is derived from those accounts. Statutory accounts for
2021 have been delivered to the registrar of companies, and those
for 2022 will be delivered in due course. The auditor has reported
on those accounts; their reports were (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
Going concern assumption
The Board of Directors has a reasonable expectation that the
Company and the Group have adequate resources to continue in
operational existence and meet their liabilities as they fall due
for a period of at least 12 months from the approval of these
financial statements ('the going concern period'). Accordingly, the
financial 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
which is due for renewal in December 2024. The availability of the
revolving credit facility is subject to continued compliance with
certain covenants.
The Directors have prepared projected cash flow forecasts for
the going concern period. These forecasts include a severe but
plausible downside scenario, which includes potential impacts from
risks identified from the business including
-- Loss of or reduction in key revenue streams
-- Recessionary impact of reduction in revenue and margin across
revenue streams.
-- Loss of key distribution contracts
Whilst climate change is considered to bring both risks and
opportunities to the Group, as outlined in our ESG section on pages
46 to 60 in our Annual Report , we do not consider there to be a
significant quantifiable risk in the short term, other than the
potential loss of a distributor due to the increasing likelihood of
extreme weather events, and this is included as one of scenarios.
Component supply is still considered to be a risk, although the
situation is improving. Our first scenario, the loss of key revenue
streams, considers the impact of being unable to supply a major
product group.
The base case covers a period of at least 12 months from the
date of signing and includes demanding but achievable forecast
growth. The forecast has been extracted from the Group's FY23
budget and three-year plan for the period from September 2024 to
August 2026.
Key assumptions include:
-- Future growth assumptions consistent with those recently
achieved by the business and adjusted for the annualisation of
recent acquisitions. Working capital requirements in line with
historic trends
-- Continued investment in research and development in all areas of the Group.
-- Dividends consistent with the Group's dividend policy
-- No additional investment in acquisitions in the forecast period
-- Interest rates in line with those prevailing as at 31 August 2022
-- Foreign exchange rates in line with those prevailing as at 31 August 2022
Throughout the period the forecast cash flow information
indicates that the Group will have sufficient cash reserves and
headroom on the loan facility to continue to meet its liabilities
throughout the forecast period.
The Directors have modelled severe but plausible downside
scenarios of the three risks identified above, including the Group
experiencing all three downsides simultaneously. This model assumes
that purchases of stock would, in time, reduce to reflect reduced
sales, if they occurred. The Group would also respond to a revenue
shortfall by taking reasonable steps to reduce overheads within its
control. In this scenario, a draw down from the loan facility of an
average of GBP30 million for a period of 8 months is expected,
however 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 the maximum of
-2.5x.
Separately, the Directors estimate that if the Group were to
experience a shortfall in revenue of greater than 30% permanently
from the start of the forecast period, debt and leverage could rise
to the upper limits allowed by the banking covenants by June 2023.
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 the severe yet plausible scenario above
is not realistic.
In practice, the Group is still currently experiencing high
levels of consumer registrations and customer demand, and therefore
the revenue levels have been maintained at expected levels since
year end. The Group has continued to invest in stock prior to the
holiday season, with the Group's net debt balance reducing from net
position of GBP0.3 million reported at year end to approximately
net debt of GBP10 million at 5 December 2022, which is expected to
improve following the upcoming 2022 holiday season. As a result the
Directors are confident that the Group and Company will have
sufficient funds to continue to meet their liabilities as they fall
due for at least 12 months from the date of approval of the
financial statements and therefore have prepared the financial
statements on a going concern basis.
2 ALTERNATIVE PERFORMANCE MEASURES ('APMs')
The Group has applied certain alternative performance measures
('APMs') within these financial 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
considers that the presentation of APMs allows for improved insight
to the trading performance of the Group. The Group consider that
the term 'Adjusted' together with an adjusting items category, best
reflects the trading performance of the Group.
Adjusting items are those items that are unusual because of
their size, nature or incidence, and are applied consistently year
on year. 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 acquisition costs, earnout payable to employees of
acquired businesses, profit on sale of trademarks and restructuring
costs.
The following APMs have been used in these financial
results:
-- Organic constant currency growth - this is calculated by
comparing FY22 revenue to FY21 revenue adjusted for FY22 exchange
rates and the impact of acquisitions. As shown in the Financial
Review.
-- Adjusted EBITDA - comprising earnings adjusted for interest,
taxation, depreciation, amortisation and adjusting items. This is
shown on the face of the income statement.
-- Adjusted operating profit - operating profit adjusted for
adjusting items. See reconciliation below
-- Adjusted earnings per share ('EPS') - earnings per share
excluding adjusting items. See reconciliation below
-- Free cash flow - net decrease in cash and cash equivalents
excluding net cash used acquisitions, movements on the bank loan
and dividends paid. See reconciliation below.
-- Underlying free cash flow - as free cash flow but adding back
adjusting items. See reconciliation below
-- Net debt - comprised of cash and cash equivalents, overdrafts
and amounts drawn against the RCF including the costs of arranging
the RCF.
Adjusted Adjusted Diluted
Adjusted Operating Earnings Per
Profit definitions EBITDA Profit Share
--------- ----------- -----------------
Reported:
Operating Profit 28,661 28,661
Profit after tax 24, 776
Add back (deduct)
Underlying depreciation and amortisation 6,991
Amortisation on acquired intangibles 5,116 5,116 5,116
Acquisition costs 565 565 565
Gain on sale of trademark (830) (830) (830)
Earnout in relation to acquisition 1,160 1,160 1,160
Tax on sale of trademark 15 6
Tax on earnout in relation to acquisition (314)
Adjusted 41,662 34,672 30,631
--------- ----------- -----------------
Weighted average number of total
ordinary shares including dilutive
impact 58,917
Adjusted diluted EPS (p) 52.0
-----------------
Free cash Adjusted free
Cashflow definitions flow cash flow
---------- --------------
Net (decrease in cash and
cash equivalents during the
year (5,312) (5,312)
Add back dividends paid 3,234 3,234
Add back cash outflow in
relation to acquisition of
business 10.923 10,923
Change in bank loan (13,228) (13,228)
Add back; adjusting items - 895
Free cashflow/Adjusted free
cashflow (4,383) (3,488)
---------- --------------
Definition of net debt Net debt
---------
Cash and cash equivalents 12,758
Bank loan (13,228)
RCF arrangement fee 174
Net debt ( 296 )
---------
3 acquisition of a subsidiary
On 10 March 2022, the Group completed the acquisition of 100% of
the share capital of Linea Research Holdings Limited (Linea
Research). The total consideration was GBP12.3 million payable on
completion with a further GBP0.5 million to be paid in cash subject
to certain performance conditions being satisfied in the period
ending May 2023. The acquisition was funded by a combination of
existing cash resources and a drawdown of GBP5 million on the
existing revolving credit facility of GBP40 million with HSBC and
Natwest.
A long time supplier and partner to Martin Audio, Linea Research
was formed in 2003 by a team of experienced professional audio
specialists, and they design, develop, manufacture and market
innovative professional audio equipment globally. Their products
include a range of ground-breaking amplifiers, including the world
renowned M Series together with Digital Signal Processors, audio
networking and software products.
The addition of Linea Research bring s a world class development
team to the Group and enables us to further strengthen the product
roadmap for the Audio Reproduction division, with planned
developments across the Martin and Linea ranges.
For the 6 month period between the acquisition and 31 August
2022, Linea contributed revenue of GBP3.1 million and a profit
before tax of GBP0.8 million to the Group. If the acquisition had
occurred on 1 September 2021, management estimates that Linea
Research's revenue would have been GBP6.0 million and profit before
tax for the year would have been GBP1.4 million. In determining
these amounts management has assumed that the fair value
adjustments, determined provisionally, that arose on the date of
acquisition would have been the same if the acquisition had
occurred on 1 September 2021.
Acquisition-related costs
The Group incurred acquisition-related costs of GBP565,000 on
legal fees and due diligence costs. These have been included in
adjusting items to give investors a better understanding of the
costs related to the acquisition of Linea Research. Additionally,
because of their size, nature and the fact that they vary from
acquisition to acquisition, the Group considers it a better
reflection of the trading performance to show these separately.
Identifiable assets acquired and liabilities assumed
The following table summarises the recognised amounts of assets
acquired, and liabilities assumed at the date of acquisition:
Recognised values on acquisition GBP000
------------------------------------------------- --------
Developed technology 3,675
Intellectual property rights and development 1,600
Brand 850
OEM relationships 50
Distributor relationships 50
Order book 275
------------------------------------------------- --------
Intangible assets 6,500
Property, plant and equipment 1,535
Cash 1,354
Working capital 1,505
Acquired deferred tax liability (47)
Deferred tax liability (1,957)
------------------------------------------------- --------
Net identifiable assets and liabilities at fair
value 8,890
Goodwill recognised on acquisition 3,387
Consideration paid 12,277
------------------------------------------------- --------
The deferred tax liability has been estimated by applying the
uplift in asset fair value to the average expected corporate tax
rates over the life of the assets.
Measurement of fair values
The valuation techniques used for measuring the fair value of
material assets acquired were as follows:
Assets acquired Valuation technique
Property, plant and equipment Cost approach
----------------------------------------------
Income approach (multi-period excess earnings
Other intangible assets method "MEEM")
The k ey assumption used is the f orecast
revenues attributable to the existing asset
.
Brand Income approach (relief from royalty method)
The k ey assumption used is the f orecast
revenues attributable to the existing asset
.
----------------------------------------------
Fair values measure on a provisional basis
Linea Research was acquired six months prior to the end of this
reporting period. If new information is obtained within one year of
the date of acquisition about the facts and circumstances that
existed at the date of acquisition that identifies adjustments to
the above amounts or any additional provisions that existed at the
date of acquisition, then the accounting for the acquisition will
be revised.
Goodwill
The goodwill recognised is attributable to:
-- the skills and technical talent of the Linea Research workforce;
-- income growth potential from new products, future
relationships and a proportion of synergies;
-- alignment to the Group's existing customer base; and
-- strong strategic fit.
Intangible assets sensitivity analysis
In assessing the estimated useful life of the intangible assets,
management considered the sensitivity in the forecast sales on the
valuation of the developed technology and brand. The following
table details the sensitivity to a 10% increase and decrease in the
sales forecast and related cost of sales impact this would have on
the valuation of the assets.
Valuation impact
10% sales 10% sales
Asset Cost increase decrease
Developed technology 3,675 845 (845)
Intellectual property rights and
development 1,600 490 (490)
Brand 850 95 (95)
---------------------------------- ------ ---------- ----------
Total 6,125 1,430 (1,430)
---------------------------------- ------ ---------- ----------
In 2021 the Group purchased Sequential LLC for GBP14,595,000,
resulting in acquired intangible assets additions of GBP12,212,000
and goodwill of GBP2,397,000 arising due to this business
combination.
4 Revenue
An analysis of the Group's revenue is as follows:
Year ended 31 August 2022 * Year ended 31 August 2021
----------------------------------------------- -----------------------------------------------
North Rest of North Rest of
America EMEA World Total America EMEA World Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
--------------- ------------- ------- ------------- -------- ------------- ------- ------------- ----------
Focusrite 47,558 30,936 18,692 97,186 49,438 39,038 13,619 102,095
Novation 8,603 8,088 3,892 20,583 9,706 9,242 3,314 22,262
ADAM Audio 3,964 9,036 4,797 17,797 8,073 11,849 3,943 23,865
Martin Audio 8,084 14,176 9,658 31,918 4,787 6,983 8,628 20,398
Sequential 6,300 7,874 2,075 16,249 2,629 2,164 506 5,299
Distribution - - - - - 16 - 16
Total 74,509 70,110 39,114 183,733 74,633 69,292 30,010 173,935
--------------- ------------- ------- ------------- -------- ------------- ------- ------------- ----------
The amount of revenue sold to external customers in the UK was
GBP21,830,000 (2021: GBP19,510,000).
5 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 the Group sells.
Similarly, the results of Novation and Ampify also meet the
aggregation criteria set out in IFRS 8 Segmental Reporting. The
Group's reportable segments under IFRS 8 are therefore as
follows:
Focusrite - Sales of Focusrite and Focusrite Pro branded products
Novation - Sales of Novation or Ampify branded products
ADAM Audio - Sales of ADAM Audio branded products
Martin Audio - Sales of Martin Audio branded products
Sequential - Sales of Sequential branded products
Distribution - Distribution of third-party brands including KRK,
Stanton, Cerwin-Vega,
and sE Electronics (ceased August 2020)
Segment revenues and results
The accounting policies of the reportable segments are the same
as the Group's accounting policies described in note 3 of the full
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 the Group.
Also included within central administration costs is the charge
relating to the share option scheme of GBP1,313,000 for the year
ended 31 August 2021 (2021: GBP973,000).
The following is an analysis of the Group's revenue and results
by reportable segment:
Year ended 31 August
2021
2022 Restated*
GBP'000 GBP'000
-------------------------------------------------------- ----------- -----------
Revenue from external customers
Focusrite 97,186 102,095
Novation 20,58 3 22,262
ADAM Audio 17, 797 23,865
Martin Audio 31,9 18 20,398
Sequential 16,2 49 5,299
Distribution - 16
Total 183,733 173,935
-------------------------------------------------------- ----------- -----------
Segment profit
Focusrite 45,108 50,338
Novation 8,1 32 7,965
ADAM Audio 8,9 41 14,040
Martin Audio 14, 280 9,471
Sequential 6,8 19 2,341
Distribution - (25)
-------------------------------------------------------- ----------- -----------
83,280 84,130
Central distribution costs and administrative expenses (53,724) (46,728)
Adjusting items (note 7) ( 895 ) (1,628)
-------------------------------------------------------- ----------- -----------
Operating profit 2 8,661 35,774
Finance income 2,286 48
Finance costs (398) (784)
-------------------------------------------------------- ----------- -----------
Profit before tax 30,549 35,038
Tax ( 5,773 ) (6,759)
Profit after tax 24,776 28,279
-------------------------------------------------------- ----------- -----------
*From 1 September 2021, "other cost of sales" cost allocations
across intercompany sales have been realigned to better reflect the
allocation of freight and warehousing costs between segments. This
has resulted in changes to segmental profit as previously reported
in the year to 31 August 2021. As required by IFRS 8, comparative
information has been restated as indicated by "restated" in the
Operating segments note. The revision does not result in any
changes to the consolidated income statement, consolidated
statement of financial position or consolidated statement of cash
flows.
The Group's non-current assets, analysed by geographical
location, were as follows:
2022 2021
GBP'000 GBP'000
-------------------------------- -------- --------
Non-current assets
North America 21,311 15,104
Europe, Middle East and Africa 66,189 45,277
Rest of the World - 2,385
Total non-current assets 87,500 62,766
-------------------------------- -------- --------
UK 63,543 43,363
-------------------------------- -------- --------
Information about major customers
Included in revenues shown for FY22 is GBP51.3 million (FY21:
GBP53.2 million) attributed to the Group's largest customer, which
is located in North America. Amounts owed at the year end were
GBP7.9 million (FY21: GBP4.2 million).
6 Profit for the year
Profit for the year has been arrived at after
charging/(crediting):
Year Ended 31 August
2022 2021
Note GBP000 GBP000
----- -----------
Net foreign exchange gains 2,364 333
Loss on disposal of property, plant and
equipment 23 4
Research and development costs 4,178 2,374
Depreciation and impairment of property,
plant & equipment 2,223 2,022
Amortisation of intangibles 11 9,883 8,126
Cost of inventories within cost of sales 94,481 76,488
Staff costs 25,244 22,138
Gain on sale of trademark 7 (830) -
Movement in expected credit loss (26) 1
Share based payments 1,313 973
------------------------------------------ ----- ----------- ----------
7 Adjusting ITEMS
The following adjusting items have been declared in the
period
Year ended 31 August
2022 2021
GBP000 GBP000
Acquisition Costs 565 716
Gain on trademark (830) -
Earnout accrual in relation to acquisition 1,160 788
Restructuring - 124
-------------------------------------------- ----------- ----------
Adjusting items 895 1,628
Amortisation of acquired intangible assets 5,116 4,013
Total adjusting items for adjusted EBITDA 6,011 5,641
-------------------------------------------- ----------- ----------
Acquisition costs in FY22 relate to the acquisition of Linea
Research. The earnout accrual relates to the remaining amount due
on the $4 million classed as employee remuneration rather than
contingent consideration in relation to Sequential, acquired during
FY21, and an amount due in respect of Linea Research of GBP0.1
million. The remaining accrual relating to Sequential is payable
directly to employees and is subject to the achievement of gross
profit targets and their continuing employment with Sequential
until December 2022.
Acquisition costs in FY21 relate solely to the acquisition of
Sequential, restructuring costs relate to the merger of the
US-based subsidiaries into one operating company from 1 September
2021.
8 Tax
Year ended 31 August
2022 2021
GBP000 GBP000
----------- ----------
Corporation tax charges
Over provision in prior year (11) (367)
Current year 6,523 8,099
------------------------------ ----------- ----------
6,512 7,732
Deferred taxation
Over provision in prior year (438) (265)
Current year (301) (708)
------------------------------
5,773 6,759
------------------------------ ----------- ----------
Corporation tax is calculated at 19% (2021: 19%) of the
estimated taxable profit for the year. Taxation for the US and
Germany subsidiaries are 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
2022 2021
GBP000 GBP000
-------------------------------------------------- ----------
Current taxation
Profit before tax on continuing operations 30,549 35,038
---------- -----------
Tax at the UK corporation tax rate of 19% (2021:
19%) 5,804 6,657
Effects of:
Expenses not deductible for tax purposes 168 615
Deferred tax assets recognition - (1,385)
Other differences (49) (28)
Additional UK tax reliefs (140) -
Prior period adjustment (449) (367)
Effect of change in standard rate of deferred
tax 173 1,147
Impact of foreign tax rates 266 120
Tax charge for the year 5,773 6,759
-------------------------------------------------- ---------- -----------
Expenses not deductible relate to the costs of acquiring Linea
Research Holdings Limited and entertainment expenses.
Tax credited directly to equity
In addition to the amount charged to the income statement and
other comprehensive income, the following amounts of tax have been
recognised in equity:
2022 2021
GBP'000 GBP'000
-------------------------------------------- ---------- --------
Share based payment deferred tax deduction (1, 131 ) 786
Share based payment current tax deduction 723 690
-------------------------------------------- ---------- --------
(408) 1,476
-------------------------------------------- ---------- --------
The net corporation tax creditor is GBP653,000 (2021: debtor
GBP869,000). The prior year debtor related to overpayments to tax
authorities throughout the year and has been settled during the
year ended 31 August 2022
An increase in the UK corporation rate from 19% to 25%
(effective 1(st) April 2023) was substantively enacted on 24(th)
May 2021. This will increase the Company's future current tax
charge accordingly. Deferred taxes as at 31(st) August 2022 have
been calculated based on these rates, reflecting the expected
timing of reversal of the related temporary differences.
9 Dividends
The following equity dividends have been declared:
Year to Year to
31 August 2022 31 August 2021
---------------------------------------- ---------------- ----------------
Dividend per qualifying ordinary share 6.0p 5.2p
---------------------------------------- ---------------- ----------------
During the year, the Company paid an interim dividend in respect
of the year ended 31 August 2022 of 1.85 pence per share.
On 8 December 2022, the Directors recommended a final dividend
of 4.15 pence per share (2021: 3.7 pence per share), making a total
of 6.0 pence per share for the year (2021: 5.2 pence per
share).
10 Earnings per share ('EPS')
The calculation of the basic and diluted EPS is based on the
following data:
Year ended 31 August
Earnings 2022 2021
----------- -----------
GBP'000 GBP'000
---------------------------------------------------------------------------------------- ----------- -----------
Profit after tax 24,776 28,279
Adjusting items (note 7) 6,011 5,641
Tax on adjusting items (156) (165)
---------------------------------------------------------------------------------------- ----------- -----------
Total underlying profit for adjusted EPS calculation 30,631 33,755
---------------------------------------------------------------------------------------- ----------- -----------
Year ended 31 August
2021 2020
----------- -----------
Number Number
'000 '000
---------------------------------------------------------------------------------------- ----------- -----------
Number of shares
Weighted average number of ordinary shares for the purposes of basic EPS calculation 58,294 57,993
Effect of dilutive potential ordinary shares:
Share option plans 623 725
Weighted average number of ordinary shares for the purposes of diluted EPS calculation 58,917 58,718
---------------------------------------------------------------------------------------- ----------- -----------
EPS Pence Pence
Basic EPS 42.5 48.8
Diluted EPS 42.1 48.2
Adjusted basic EPS 52.5 58.2
Adjusted diluted EPS 52.0 57.5
---------------------------------------------------------------------------------------- ----------- -----------
The Group presents basic and diluted 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.
At 31 August 2022, the total number of ordinary shares issued
and fully paid was 58,661,639. This included 262,929 (FY21:
554,712) 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 weighted average number of
shares in issue 58,661,639 (58,488,351) less the weighted average
number of shares held by the EBT 367,333 (FY21: 495,323). 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.
The effective tax rate on the items above is much lower than the
Group's overall effective tax rate, as the majority items are not
deductible for corporation tax. The impact of tax on the adjusting
items is shown in note 2 (APMs).
11 OTHER INTANGIBLE ASSETS
Internally Acquired
Intellectual generated development Computer
Property development costs Licences Trademark software Brands Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
----------------------------- ------------- ------------ ------------ --------- ---------- --------- ------- ----------
Cost
At 1 September 2020 580 23,690 19,943 166 826 1,527 14,300 61,032
Additions -
Acquired separately - - - 30 229 330 - 589
Products developed
during
the year 2 4,894 - - - - 4,896
Business c ombinations - - 6,142 - - - 6,070 12,212
Transfers (175) - - - - 175 - -
Disposals - (2,839) - - - (447) - (3,286)
Foreign exchange - - (188) - - - (350) (538)
----------------------------- ------------- ------------ ------------ --------- ---------- --------- ------- ----------
At 31 August 2021 407 25,745 25,897 196 1,055 1,585 20,020 74,905
Additions
Acquired separately - - - 1,684 - 44 4,535 6,263
Products developed
during
the year 21 7,851 - - 385 - - 8,257
Business c ombinations - - 5,650 - - - 850 6,500
Transfers (21) 21 - - - - - -
Disposals - - - - (1) (245) - (246)
Foreign exchange - - 1,032 - - - 913 1,945
-----------------------------
At 31 August 2022 407 33, 617 32,579 1,880 1,439 1,384 26,318 97,624
----------------------------- ------------- ------------ ------------ --------- ---------- --------- ------- ----------
Amortisation
At 1 September 2020 520 15,506 2,152 122 464 826 1,068 20,658
Charge for the year 1 3,463 2,780 41 287 321 1,233 8,126
Transfers (114) - - - - 114 - -
Eliminated on disposal - (2,371) - - - (455) - (2,826)
Foreign exchange - 9 (81) - - 27 (74) (119)
----------------------------- ------------- ------------ ------------ --------- ---------- --------- ------- ----------
At 31 August 2021 407 16,607 4,851 163 751 833 2,227 25,839
Charge for the year 3,938 3,457 61 301 467 1,659 9,883
Eliminated on disposal - - - - (141) - (141)
Foreign exchange - 17 39 - - - 23 79
-----------------------------
At 31 August 2022 407 20,562 8,347 224 1,052 1,159 3,909 35,660
----------------------------- ------------- ------------ ------------ --------- ---------- --------- ------- ----------
Carrying amount
-----------------------------
At 31 August 2022 - 13,055 24,232 1,656 387 225 22,409 61,964
----------------------------- ------------- ------------ ------------ --------- ---------- --------- ------- ----------
At 31 August 2021 - 9,138 21,046 33 304 752 17,793 49,066
-----------------------------
At 31 August 2020 60 8,184 17,791 44 362 701 13,232 40,374
----------------------------- ------------- ------------ ------------ --------- ---------- --------- ------- --------
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