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  • WHITE BACKGROUND

    COLOURED BACKGROUND

    Making music easy to make

    FOCUSRITE PLC | ANNUAL REPORT 2016

    Focusrite Plc A

    nnual Report 2

    016

  • Focusrite is a global music and audio products group supplying hardware and software products used by professional and amateur musicians, which enables the high-quality production of music.

    Key strengthsGlobal leadership We have always aimed to produce the best quality product at every price point. The result of this is that we are now the number one audio interface company in the world and we are developing our other ranges such as Novation, RedNet and iOS software to widen that global leadership position.

    Product innovation Product innovation is a cornerstone of our continued growth. We spend approximately 7% of our revenue on research and development introducing between 10 and 20 new products each year.

    Solid growth and profitabilitySince 2009, we have grown our revenue from 9 million to 54 million. Our EBITDA is approximately 19% of revenue and we have been highly cash generative over that period.

    Geographic diversityOur product is sold in around 160 territories and we are increasing our own global footprint with employees now based in the UK, the USA, Germany and Hong Kong.

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    million

    Group revenue

    2016

    2015

    2014

    54.3

    48.041.0

    00.0

    +13.1%54.3mmillion

    Adjusted EBITDA1

    2016

    2015

    2014

    10.2

    9.3 8.2

    00.0

    +10.2%10.2mmillion

    Operating profit

    2016

    2015

    2014

    7.1

    6.35.7

    00.0

    7.1m+13.0%

    Highlights Strategic Report 0125Highlights 01Focusrite at a Glance 02Market Context 03Strategy 04Strategy in Action: Innovate 06Chairmans Statement 08Strategy in Action: Disrupt 10Chief Executives Statement 12Strategy in Action: Make Easy 14Financial Review 16Strategy in Action: Expand 20Principal Risks and Uncertainties 22Corporate Social Responsibility 24

    Governance 2639

    Board of Directors 26Executive Management Team 28Corporate Governance Report 30Directors Report 33Directors Remuneration Report 35Statement of Directors Responsibility 39

    Financial Statements 4079

    Independent Auditors Report to the Members of Focusrite Plc 40

    Consolidated Income Statement 41Consolidated Statement of Comprehensive

    Income 42Consolidated Statement of Financial Position 43Consolidated Statement of Changes

    in Equity 44Consolidated Cash Flow Statement 45Notes to the Financial Statements 46Company Balance Sheet 72Company Statement of Changes in Equity 73Company Cash Flow Statement 74Notes to the Company Accounts 75Company Information and Advisers 79

    By following our mission to make music easy to make we are successfully delivering transparent technology that liberates musicians, allowing them to create, produce, record and distribute their music. In turn, we are creating a profitable, international and sustainable AIM-quoted company.

    Operational highlights Continued growth across all geographies with 16 new products launched this year. Strong performance from Focusrite products with the launch of a new generation

    of the worlds number one audio interface, Scarlett. Entrance into lucrative adjacent price segments with Clarett and Red ranges

    receiving positive channel and consumer reaction. Further strong sales growth of RedNet products, targeted at the live sound and

    broadcast business-to-business markets. Novation strategy executing to plan with new software updates to the Circuit and

    Launchpad Pro products. Launch of highly intuitive Blocs Wave app, making it easier for musicians to create

    their own sounds and songs from scratch on any iOS smartphone or tablet, with over 47,000 downloads to date.

    Strong growth in Rest of World with sales improving by 28.1% and opening of a new dedicated Asia office in Hong Kong to support further growth.

    Launch of new e-commerce websites in the UK and USA. Queens Award for Enterprise for International Trade and named in the Sunday Times

    100 Best Small Companies to Work For for fifth successive year.

    Profit before tax grew 9.9% to 7.1 million (FY15: 6.5 million) Basic earnings per share grew 13.5% to 11.8p (FY15: 10.4p) Adjusted2 diluted earnings per share grew 8.6% to 11.4p (FY15: 10.5p) Net cash of 5.6 million (FY15: 6.2 million) Proposed final dividend increased by 8.3% to 1.3p recommended

    making 1.95p for the year (FY15: 1.8p)

    1 Comprising of earnings adjusted for interest, taxation, depreciation, amortisation and non-underlying items.2 Adjusted for non-underlying items (see note 13).

    Financial Reviewsee p1619

    STRATEGIC REPORT | KEY NUMBERS

    Financial highlights

  • 02 FOCUSRITE PLC | ANNUAL REPORT 2016

    BLACK

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    WHITE BACKGROUND

    COLOURED BACKGROUND

    STRATEGIC REPORT | COMPANY OVERVIEW

    The Groups products are sold in around 160 territories and countries all over the world. Roughly one-third of our business is direct to retailers online and bricks and mortar, one-third is through distributors and the final third through a hybrid approach in the USA, where we provide marketing and sales support to drive demand. We sold 700,000 products to end-users last year. Our suppliers are chiefly Asian and we use third-party logistics support. We employ around 170 people in the UK, USA, Germany and Hong Kong.

    Focusrite at a Glance

    of Group revenue

    2/3

    1/3

    of Group revenue

    The Focusrite division has evolved from selling large studio consoles 25 years ago. It now provides a spectrum of products, from recording equipment to hobbyists all the way to audio networking systems to large organisations such as NBC and Microsoft. The Focusrite brand has always meant legendary sound quality; through innovation we now offer the best value too in a wide range of segments. Weve become the number one producer of audio interfaces in the world.

    Bought by Focusrite in 2005, Novation now represents about a third of our revenue. Making new instruments and software for electronic music, the fastest-growing music creation segment, Novation is disrupting how music is made with its grid controllers, iOS software and new approaches to mobile music making.

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    BLACK

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    Market Context

    Worldwide leader with room to grow

    The Companys Scarlett range is the largest selling range of audio interfaces in the world, with a market share of more than 40%. Our RedNet range of products with Audio over IP connectivity is penetrating new B2B high-end markets in broadcast and live sound. Just in the last year Focusrite launched new Red and Clarett interfaces for professional markets, with Clarett already capturing 14% of the market. A new iOS app, Blocs Wave, is disrupting how mobile music is made and recorded, making it easy for musicians to create on the fly.

    11% share of currently addressable market

    Number one in sales of audio interfaces

    Moved successfully into broadcast and live sound markets with RedNet Audio Networking

    Software

    iTrack

    Scarlett

    Clarett

    Red

    RedNet

    Price

    The ubiquitous LaunchPad range, at the centre of electronic music making, is Novations largest selling instrument: more than 300,000 sold since inception. The new Circuit instrument a mashup of grids and synthesisers lets electronic musicians create tunes in minutes without being encumbered by a computer. The LaunchPad iOS app has been downloaded five million times, moving the Company to the forefront of mobile, easy music making.

    Introduced iOS apps with over five million downloads

    Disrupting how new music is made with grids and synthesisers

    Distributed in 160 countries

    Grids

    Grid Controllers (Launchpad)

    Groove Box (Circuit)

    Keyboards

    Keyboard Controllers (Launchkey)

    Synths (Bass Station II)

    Co

    ntro

    llers

    Sta

    nd

    -alo

    ne

  • 04 FOCUSRITE PLC | ANNUAL REPORT 2016

    STRATEGIC REPORT | OUR KEY OBJECTIVES

    Innovate

    Disrupt

    Focusrites four-pronged strategy relies on our strengths, understands our customers, foresees impending technology and differentiates us from our competitors.

    Strategy

    Music making is going through a profound time of change: its performed, recorded and distributed in new ways. Focusrite is at the forefront of these changes: creating new instruments, disrupting how music is recorded, and helping musicians find new paths to listeners.

    Weve grown quickly while weve invested heavily in research and development to turn out innovative, high-quality and attractive products for musicians and audio professionals. We spend over 6% of revenue on product development and seek to achieve about a third of our revenue from products launched within the last 12 months. The result: in FY16 we launched 16 new products.

    Strategy in actionsee p10-11

    Strategy in actionsee p06-07

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