Midwich flags robust half-year of trading

Audio-visual distributor Midwich Group reported a robust first-half trading performance on Tuesday, reaching new milestones in revenue and adjusted profit before tax.

The AIM-traded firm said revenues for the six months ended 30 June were expected to top £610m, making for an increase of over 7.5% compared to the first half of 2022, or a 5.1% growth on a constant currency basis.

Organic revenue growth, measured on a constant currency basis, achieved a solid 2.2% growth compared to the same period last year.

The recovery in the live events market contributed to the positive outcome, although the corporate and education markets, especially in the UK and Ireland, experienced slower growth.

Midwich reported an improvement in gross margin to 16.3% - a significant increase from the 14.9% achieved in the first-half of 2022, and the highest margin since 2019.

The board put the boost in gross margin down to the sales mix, driven by higher-margin sales in the live events market.

Adjusted earnings before interest and taxes (EBIT) showed substantial growth, reaching around £26m, rising more than 25% compared to the first half of last year.

The EBIT margin stood at around 4.3% of sales, surpassing the 3.6% margin achieved in the same period last year.

Additionally, adjusted profit before tax for the half-year was projected to exceed £21.5m, making for a growth rate of over 14% in comparison to the first half of 2022.

Midwich Group also demonstrated positive cash generation, surpassing the board’s expectations.

Adjusted net debt expanded by around £7m from the previous year-end, reaching £103m.

That was primarily due to mergers and acquisitions (M&A) expenditure and typical working capital seasonality, partially offset by the balance of the £50m equity issue completed in June.

With a leverage ratio of 1.5 times adjusted net debt over adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA), the company said it remained comfortably within its covenants.

“With order books remaining healthy, unless general economic conditions deteriorate significantly, the board expects the momentum seen in the first half of 2023 to continue throughout the remainder of the year,” the Midwich board said in its statement.

“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 said it would announce its half-year results for the six months ended 30 June on 5 September.

At 0901 BST, shares in Midwich Group were up 1.94% at 420p.

Reporting by Josh White for Sharecast.com.