The investment case for Focusrite PLC (LON:TUNE) is not so much its trading growth, impressive though that is with 19% pre-tax growth in FY18, but its ability to sustain expansion into the future. Both in category terms, with the professional and app-based products developing their markets, and geographically, with Asia taking over as the fastest growth region, management demonstrates its longer-term aspirations and capabilities. In our view, the inconvenience of US tariffs is likely to be temporary and does not affect long-term value, which we define as 457p per share.
Developing markets for musicmaking
Focusrite continues to expand into and develop markets for musicmaking. Sales in its 160 countries and territories grew 13.7% to £75.1m in FY18 and pre-tax profit grew 19.2% to £11.3m, 5% above our forecast. Five new products were launched in FY18 and the Scarlett interface won the company’s fourth Queen’s award. The highest growth in currency terms was in Rest of the World (RoW), where Asia drove 21% growth despite weakness in Latin America, and Canada is now becoming a marketing focus. The Focusrite Pro B2B marketing group is harnessing new high-profile clients such as NBC for the professional product with specific opportunities in post-production, broadcast, on-air and other verticals, while the Ampify app development arm is intensifying and expanding its product area.
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