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Published on July 20th, 2021 | by The GC Team


Midwich to finish year “comfortably ahead” of analyst expectations

Audio visual distributor Midwich is expecting Group revenue for the six months ended 30th June 2021 to be up 29% to around £390 million compared to the same period last year and revenue and profit for the full year to be comfortably ahead of the top end of analyst expectations.

In a pre-close trading statement, the business said the trading momentum seen in the second half of 2020 has continued, although the H1 2021 figure represents a weak comparator due to the onset of the pandemic in the second quarter of last year.  Organic growth was approximately 25%. 

Overall gross margin was around 15.2%, 0.7% higher than in H1 2020 and 0.9% higher than for 2020 as a whole. 

The Group saw improvements in product mix and in rebates received, although it believes that further gross margin improvements should be deliverable once lockdowns are eased further and the live events, entertainment and hospitality markets return more fully.

Adjusted profit before tax for the first half of this year is expected to be around £13 million, compared with £3.2 million in the first half of 2020.

Trading in EMEA showed the greatest improvement, with revenues up 65% year on year, and net profit substantially higher.  Recent acquisitions eLink and NMK made strong positive contributions to the results, but nonetheless organic revenue and profit improved in almost all businesses, particularly those in Germany and France.

Performance in the UK & Ireland improved significantly after the easing of the severe lockdowns earlier in the period.  Revenues rose 25%, helped particularly by the contribution from new vendors launched in late 2020 and the first half of 2021. Gross margin percentage was flat compared with H1 2020, although this represented a continued improvement on the post-Covid period. 

The live events, entertainment and hospitality markets have remained subdued, but it is anticipated that further easing of restrictions should enable these markets to return towards normality, thus improving sales and margins in the UK&I business.

Trading in North America improved steadily in H1, with strong margins being helped particularly by the release of provisions in respect of aged stock sold in the period.  As expected, trading in the APAC region was relatively flat compared with the prior year.

Cash generation was in line with the Board’s expectations, with the increase in net debt of around £40 million being a combination of M&A spend and working capital increases due to normal seasonality and the significant growth in the business.  Leverage remains comfortably within the Group’s covenants.

In its future outlook, the Board expects the momentum seen in H1 2021 to continue throughout the remainder of the year if lockdown restrictions within the Group’s key markets continue to ease. As a result, revenue and profit for the full year will be comfortably ahead of the top end of analyst expectations*.

*The Group considers the range of analyst expectations for revenue and adjusted PBT in respect of 2021 to be £742.5 million to £791.6 million and £21.3 million to £23.2 million respectively.

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