M&A activity leads Midwich Group to growth in H1

Distributor’s sales soared in North America by almost 70 per cent

Specialist audio visual (AV) distributor Midwich Group today posted a revenue bump in its interim results for the six months ended 30 June 2024 owing to its acquisitive activity.

Revenues grew 5.8 per cent to £646.1m and 7.5 per cent at constant currency.

Acquired businesses contributed 8.7 per cent growth (at constant currency) with organic revenues down 1.2 per cent despite market share gains.

The distie's most recent acquisition was its deal with professional audio and technical solutions products distributor prodyTel Distribution.

Midwich also saw significant improvement in gross margins to 17.3 per cent from 16.3 per cent in the prior year, driven by continued shift in sales mix towards technical products, in line with the group's strategy.

Technical product revenue grew more than 13 per cent, reflecting a mix of both organic growth and the impact of acquisitions, with technical products now almost two thirds of Midwich's revenue.

This included strong performances in the technical video, audio, LED and rental categories driven by end user investments in live events and entertainment.

"The AV market at the end of 2023, and through the first half of 2024, was affected by a degree of oversupply of mainstream products and associated discounting," said Midwich Group managing director Stephen Fenby.

"Demand in corporate and education markets remained subdued, although this was largely offset by ongoing strength in the live event and entertainment sectors. This change in mix is reflected in both a further increase in the mix of technical video and audio products sold by the Group and the higher gross margins."

Meanwhile, the distie had a very solid performance in North America where sales were up 69 per cent, organic revenue up 16.8 per cent and it achieved record gross margins of 19.7 per cent.

Midwich acquired California-based technical services provider The Farm in January, a sales representative to manufacturers acting as the exclusive value added sales agent on behalf of its vendor partners, primarily in the audio and technical video segments.

H2 outlook

After a positive start to the second half, with a return to growth in July, the board continues to expect organic sales growth in H2 2024.

The group said it has now made substantial progress with its overhead reduction programme, which is expected to be largely complete in the current financial year and deliver estimated annualised savings of over £5m from early FY25.

On 31 July 2024, it acquired the remaining 70 per cent stake in Dry Hire Lighting Limited, a supplier to the UK live events market.

Management also continues to pursue selective bolt-on acquisition opportunities across a number of regions.

Midwich explained that, while the board expects macroeconomic conditions to remain challenging in certain markets for the remainder of this year, there have been early signs of the market stabilising, reflected in positive trading in the first two months of the second half.

As a result of this, and the continued focus on the group's long-term strategy, the board continues to expect trading performance for the full year to be in line with its previous expectations.

"Whilst it is prudent to assume macroeconomic conditions in certain markets, such as the UK & Ireland, will likely remain challenging for the remainder of 2024, we have seen some signs of the market stabilising in recent weeks, with market survey data indicating a recovery in pricing in the second half of the year," Fenby added.