Global specialist audiovisual distributer to the trade market Midwich (MIDW:AIM) has maintained growth momentum in the first half to 30 June, despite tough comparatives, with revenue up 7.5% and adjusted pre-tax profit climbing 14% to over £21.5 million.

In the first half of 2022 the company booked organic revenue growth of 28% and overall revenue growth of 46% boosted by acquisitions.

The positive update was enough to satisfy investors with the shares gaining 2% to 420p, roughly where they were trading at the start of the year.

Continued recovery in live events was partly offset by weaker education and corporate markets particularly in the UK and Ireland.

Organic revenue growth was 2.2% with the rest coming from acquisitions.

Gross margin increased to the highest since 2019 reaching 16.3%, significantly above the 14.9% achieved in 2022, driven by higher-margin sales from live events markets.

WHAT IS THE OUTLOOK?

Looking ahead, the board said it expected the momentum seen in the first half to continue for the rest of the year barring a ‘significant’ deterioration in general economic conditions.

Full-year trading is expected to be in line with expectations before the positive contribution from three acquisitions completed post the period end.

Following on from the acquisition of specialist value-add Canadian AV distributor SF Marketing in June, the group has made two further bolt-on acquisitions in the US and UK for a total outlay of around £16 million net of cash acquired.

EXPERT VIEWS 

Berenberg described the trading update as a ‘highly credible’ performance with ‘another strong period of trading’ for the group.

The bank increased its pre-tax profit and earnings per share estimates by 2% and 4% for 2023 and 2024 respectively to reflect contributions from the latest acquisitions. ‘As management executes against the rest of its deal pipeline, we anticipate further upgrades over the coming months’ the bank said.

Analyst Indraneel Arampatta at Megabuyte commented: ‘Midwich’s trading updates have always provided useful international context, so we’re particularly interested in the comparative weakness of the UK market, especially around the slower corporate / education performance.

‘The positive is that Midwich’s international strategy helps provide cushioning with strength in other areas, but we wonder how UK-centric AV integrators, resellers and service providers will navigate such challenges.’

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