Midwich delivers record revenue performance, profits fall

(Sharecast News) - Specialist audio visual distributor Midwich reported a record revenue performance in its full-year results on Tuesday, as its turnover improved 3.7% year-on-year to £711.8m, despite the challenges arising from the Covid-19 pandemic.

The AIM-traded firm said its group revenues improved consistently from April, meaning that its organic revenue decline of 22% in the first half of 2020 narrowed to a 7% decline in the second half.

Its gross margin was impacted by Covid-19 disruption, but the board said it was expected to recover over time.

Midwich said its adjusted profit before tax reduced to £14.2m from £31.2m, as a "direct result" of Covid-19 disruption, as its adjusted earnings per share decreased to 11.2p, from 28.5p in 2019.

The board said it had been an "exceptional year" of operating cash conversion at 194.4% of adjusted EBITDA, adding that the company had a "strong" balance sheet, with year-end adjusted net debt-to-EBITDA of 0.9x, compared to 1.4x in the prior year.

On the operational front, Midwich described a "resilient" performance, with the recovery in the second half exceeding the board's initial expectations at the onset of the pandemic.

Acquisitions made in 2019 and 2020 had been fully integrated and were delivering a positive contribution, as the company entered the "strategically important" North American market through the acquisition of Starin Marketing.

It also established specialist unified communications capabilities, as well as the addition of numerous new vendors.

Midwich undertook a successful equity placing and refinancing to fund the Starin acquisition during the year, with the directors saying the firm continued to have a "strong" acquisition pipeline across a number of regions and technologies.

Since the end of 2020, the company completed the acquisition of a majority stake in NMK Electronics - a value-added distributor of audio visual products based in the United Arab Emirates and Qatar - marking its entry into the Middle East.

Trading since the year-end had been in line with management expectations, the board said.

"We delivered a robust performance in the year, thanks to our proven business model and our position as a true value add distributor in the global audio visual market," said managing director Stephen Fenby.

"We announced our entry into the US, the world's largest audio visual market, in February 2020 and post period end, entered the Middle East, giving us true global scale."

Fenby said that, while the company had experienced a slowdown in some of its sectors, it had also witnessed improved performances in others, with its results in the second half of 2020 exceeding the board's expectations.

"We are well placed through our diversified geographical and multi-sector footprint, combined with long-term vendor relationships, to continue to deliver growth and take advantage of market opportunities, both organically and through acquisition."

At 1036 GMT, shares in Midwich Group were down 0.11% at 461p.