REG - Midwich Group PLC - Pre-close Trading Statement

MidwichAnnouncement

18/07/2023 07:00

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RNS Number : 2885G  Midwich Group PLC  18 July 2023

18 July 2023

 

Midwich Group PLC

("Midwich" or "the Group")

 

Pre-close Trading Statement

 

Midwich Group (AIM: MIDW), a global specialist audio visual distributor to the
trade market, is pleased to provide a trading update for the six months ended
30 June 2023 ("H1 2023").

Overall trading was strong in H1 2023, with record first half revenues and
adjusted profit before tax.

Revenue is expected to be in excess of £610 million, an increase of over 7.5%
versus H1 2022 (5.1% growth on a constant currency basis). Organic revenue
growth on a constant currency basis was 2.2% versus H1 2022. Continued
recovery in the live events market was partly offset by slower corporate and
education markets, particularly in the UK & Ireland.

The overall gross margin was around 16.3%, which is significantly higher than
the 14.9% achieved in H1 2022 and the highest since the previous record in
2019. The mix of sales was the main factor in this strong growth, driven by
higher margin sales into the live events market.

Adjusted EBIT was around £26 million, an increase of over 25.0% versus H1
2022. The EBIT margin was around 4.3% of sales (H1 2022: 3.6%).

Adjusted profit before tax for H1 2023 is expected to be over £21.5 million,
compared with £19.2 million in the first half of 2022, an increase of over
14.0%.

Trading in EMEA was strong, with revenue around 14.0% higher than in H1 2022
(around 10.0% on a constant currency basis). The EMEA audio businesses
performed very well leading to strong improvements in gross and adjusted
operating margins in the region.

Revenue in the UK & Ireland was marginally below H1 2022, but strong gross
margins and overheads management led to a significant increase in operating
profits in the region.

Cash generation was better than the Board's expectations.  Adjusted net debt*
increased by around £7 million from the prior year end to £103m, as a
result of M&A spend and normal working capital seasonality, less the
balance of the £50 million equity issue completed in June 2023.  At 1.5x
adjusted net debt over adjusted EBITDA** at the period end, leverage remains
comfortably within the Group's covenants.

Acquisitions

In June 2023, the Group acquired SF Marketing, a specialist value-add AV
distributor in Canada, adding 1,500 new customers and strengthening
relationships with key tier-1 vendors in the audio and visual markets.

Post the period end, and in line with the stated use of proceeds of the equity
issue in June 2023, the Group has acquired Toolfarm.com, Inc and Digital Media
Promos, Inc (trading as 76 Media) in the US, and HHB Communications Holdings
Limited in the UK. The aggregate cash spent (net of cash acquired) on these
three transactions was around £16 million.

Outlook

With order books remaining healthy, unless general economic conditions
deteriorate significantly, the Board expects the momentum seen in H1 2023 to
continue throughout the remainder of the year.  As a result, the Board
continues to expect trading performance for the full year to be in line with
its previous expectations before the positive contribution from the three
acquisitions completed in July.

Midwich will announce its half year results for the six months ended 30 June
2023 on 5 September 2023.

* Adjusted net debt is borrowings less cash and cash equivalents and excludes
IFRS 16 lease liabilities

** Adjusted EBITDA represents operating profit before acquisition related
expenses, share based payments and associated employer taxes, depreciation and
amortisation and includes a proforma contribution twelve month contribution
from acquisitions

 

For further information:

 

 Midwich Group plc                                       Tel: +44 (0) 13 7964 9200

 Stephen Fenby, Managing Director

 Stephen Lamb, Finance Director

 Investec Bank plc (NOMAD and Joint Broker to Midwich)   Tel: +44 (0) 20 7597 5970

 Carlton Nelson

 Ben Griffiths

 Berenberg (Joint Broker to Midwich)                     Tel: +44 (0) 20 3207 7800

 Ben Wright

 Richard Andrews

                                                         Tel: +44 (0) 20 3727 1000

 FTI Consulting

 Alex Beagley

 Tom Hufton

 Rafaella de Freitas

 

About Midwich Group

 

Midwich is a specialist AV distributor to the trade market, with operations
in EMEA, the UK and Ireland, Asia Pacific and North America. The Group's
long-standing relationships with over 600 vendors, including blue-chip
organisations, support a comprehensive product portfolio across major audio
visual categories such as large format displays, projectors, digital signage
and professional audio. The Group operates as the sole or largest in-country
distributor for a number of its vendors in their respective product sets.

 

The Directors attribute this position to the Group's technical expertise,
extensive product knowledge and strong customer service offering built up over
a number of years. The Group has a large and diverse base of over 20,000
customers, most of which are professional AV integrators and IT resellers
serving sectors such as corporate, education, retail, residential and
hospitality. Although the Group does not sell directly to end users, it
believes that the majority of its products are used by commercial and
educational establishments rather than consumers.

 

Initially a UK only distributor, the Group now has around 1,800 employees
across the UK and Ireland, EMEA, Asia Pacific and North America. A core
component of the Group's growth strategy is further expansion of its
international operations and footprint into strategically targeted
jurisdictions.

 

For further information, please visit www.midwichgroupplc.com
(http://www.midwichgroupplc.com/)

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