Midwich reports highest-ever gross profit margin

(Sharecast News) - Audio-visual specialist distributor Midwich Group reported a revenue increase of 7.1% in its full-year results on Tuesday, to £1.29bn, up from £1.2bn in 2022. The AIM-traded firm said that growth reflected a strong organic performance, and the integration of seven acquisitions made throughout the year, despite a challenging global market environment.

Revenue growth adjusted for constant exchange rates stood at 6.8%, with organic growth contributing 0.8%.

Midwich said it achieved its highest-ever gross profit margin of 16.8%, a substantial improvement from the prior year's 15.3%.

That increase was put down to stronger sales of technical products, while adjusted operating profit jumped 16.6% to £59.6m, or 16.8% on a constant currency basis.

The group also improved its financial health by reducing net debt-to-adjusted EBITDA to 1.1 times - a figure comfortably within the board's preferred range.

Midwich proposed a final dividend of 11p per share, bringing the full-year dividend to 16.5p, up from 15p in 2022.

Operational highlights for the year included strong growth in technical product sales, particularly in the audio segment, aligning with Midwich's strategic focus on increasing specialisation.

The group also made a strategic entry into the Canadian pro audio market with the acquisition of SF Marketing, and completed six additional acquisitions, including prodyTel.

A successful equity placing of £50m in June further bolstered the company's acquisition fund.

Since its initial public offering in 2016, Midwich said it had maintained a compound annual growth rate of 20% in revenue and 18% in adjusted operating profit.

Looking ahead, it was optimistic with a robust acquisition pipeline across various key geographies and technologies.

"The group had another strong year, both operationally and financially, improving all key metrics in a highly challenging market," said managing director Stephen Fenby.

"Our performance reflects the fundamental strength of the business, our customer and vendor relationships, our geographic and technical solution diversity and, most of all, the skills and dedication of our team.

"Despite lower demand for mainstream products, stronger technical product sales led to our highest ever gross margin percentage."

Fenby said a strong increase in adjusted operating profit of 17% helped the company to achieve adjusted profit before tax in excess of £50m for the first time.

"Although still early into the new financial year, and being mindful of the continued challenging general economic conditions, we remain confident that 2024 will see yet another year of growth in excess of the overall market."

At 1122 GMT, shares in Midwich Group were up 1.9% at 402.5p.

Reporting by Josh White for Sharecast.com.