20 July 2021

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 2021 ("H1 2021").

The trading momentum seen in the second half of 2020 has continued, with Group revenue for H1 2021 expected to be around £390 million, an increase of 29% on H1 2020, albeit this does represent a weak comparator due to the onset of the pandemic in Q2.  Organic growth was approximately 25%. 

The 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 has seen improvements in product mix and in rebates received, although 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 H1 2021 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 increased 25%, helped particularly by the contribution from new vendors launched in late 2020 and H1 2021, such as Barco Clickshare and BirdDog.  The 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.

Outlook

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

Midwich will announce its half year results for the six months ended 30 June 2021 on 7 September 2021.

*The Group considers that 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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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 500 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 1,000 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