Midwich Group Regulatory News (MIDW)

11 January 2022

Midwich Group plc

("Midwich" or the "Group")

Acquisition of Majority Stake in Cooper Projects Limited

Midwich Group (AIM: MIDW), a global specialist audio visual distributor to the trade market is pleased to announce it has acquired a controlling stake in Cooper Projects Limited ("the Company"), the parent company of DVS Limited ("DVS"), a UK based distributor of video security products.

Midwich has acquired 65% of the Company's share capital for an initial cash consideration of £8.6 million, followed by an additional fixed and performance linked amount of up to a maximum of £6.4 million twelve months later. The remaining 35% of the Company's share capital will be held by Tim Goodson (Managing Director), Gavin Dunleavy (Commercial Director) and David Davies (Chief Technology Officer) who will continue to run the Company.

Based in Cardiff, DVS was founded in 2003 as a specialist distributor of CCTV and associated video recording technologies, in which it has developed a strong market reputation working primarily with leading global brand HikVision. In recent years, DVS has begun to diversify its portfolio to include complementary technologies, such as access control, intercom, and intruder detection.

DVS provides solutions for trade customers throughout the UK, across key verticals including the corporate, retail and residential markets. An extensive range of value add services are provided to customers, including project design, ongoing technical support, bespoke training as well as access to DVS's proprietary installer programme which enables customers to connect with end-users in their geographic and technology area.

In its latest audited financial statements, which were in respect of the year ended 31 October 2020, the Company generated revenues of £37.4 million and profit before tax of £2.1 million*. Net assets at 31 October 2020 were £7.6 million.

Net debt at completion was around £3.0 million.

Stephen Fenby, Midwich Group Managing Director, commented:

"The acquisition of a controlling interest in DVS gives Midwich access to a significant segment of the AV market in which we currently have little presence, and which is expected to grow at around 8% per annum for the next five years. The knowledge and support of the experienced DVS team should help realise new opportunities for our customers in an increasingly converging technology market. Similarly, we believe that much of DVS's extensive customer base uses or could use our core AV products in their projects. We are very excited at the prospect of supporting Tim, Gavin, David and the rest of the DVS team in accelerating the growth of the business."

Tim Goodson, Managing Director of DVS commented:

"We have ambitious growth plans and combining with Midwich gives us a unique product and support offering to our customer base. The Midwich team quickly grasped the breadth of applications of our technologies and how they could be used by their current customer base. Our technology can be used in many different applications, ranging from complex analytics to help drive sales and customer satisfaction in retail, to heat sensing in order to monitor fire risk, and biometric access control to maintain safety in educational establishments."

Further Details of the Transaction

The deal will be funded from Midwich's existing facilities and is expected to be earnings enhancing in the year to 31 December 2022.

Put and call options are in place whereby Midwich can compulsorily purchase (or management can compulsorily sell to Midwich) the remaining 35% of the Company in three years' time or later, with the capped consideration payable based on pre-agreed formula linked to the financial performance of the Company, up to a maximum of £20 million. The maximum aggregate consideration for the purchase of 100% of the Company is £35 million.

* NB. Profit before tax is stated after acquisition amortization of £1.1 million

About Midwich Group

Midwich is a specialist AV distributor to the trade market, with operations in the UK and Ireland, EMEA, 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, Continental Europe, 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