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Midwich shows strength in H1

Channel player issues a trading update indicating the progress it made during the first six months of the year

Audio visual distributor Midwich has kept the momentum it saw in 2020 going, with investors being prepared for a decent set of half-year numbers.

The channel player issued a pre-close trading statement that will have given investors some cheer ahead of the detailed analysis of the firm’s first-half numbers for the six months ended June.

Midwich indicated that group revenue for H1 2021 should come in about 29% up on the same period last year at £390m. Organic growth accounted for 25%, and adjusted pre-tax profits are expected to be around £13m, up considerably from the £3.2m in H1 2020.

The company has also made efforts to improve gross margin, which at 15.2% was 0.7% higher than in H1 2020 and 0.9% higher than for 2020 as a whole. Enhancements have been made to the product mix and in rebates received, and there should be more to come once key customer verticals are back to normal.

Improving market conditions across the UK and Ireland helped to increase revenue by 25% and trading also improved across EMEA, with revenues up 65% in that region. Some of that came from moves made to expand Midwich’s portfolio, with the distie signing up a number of new vendors in the period, including Barco Clickshare and BirdDog.

Its UK growth came against a background of live venues and events being severely restricted, and the trading statement hinted at expectations that this situation would change: “The live events, entertainment and hospitality markets have remained subdued, but it is anticipated that further easing of restrictions should enable these markets to return towards normality, thus improving sales and margins in the UK&I business.”

The company’s performance in APAC was flat and in North America, the business did improve over the course of H1, with improving margins.

The distributor also gave some future guidance, making it clear that as life started to return to a more normal footing, the business would benefit further.

“If lockdown restrictions within the group’s key markets continue to ease, the board expects the momentum seen in H1 2021 to continue throughout the remainder of the year,” it said. “As a result, the board now expects that revenue and profit for the full year will be comfortably ahead of the top end of analyst expectations.”

Market watcher Berenberg upgraded its estimates for the distributor’s full year, sounding an upbeat note about the firm’s prospects.

“We still believe that there is room for further potential upside,” it said. “Midwich has worked incredibly hard during the pandemic to broaden its exposure to the recovery in audio-visual markets following Covid-19 – expanding its market share, signing new vendor agreements and targeting selective acquisitions. All of these efforts are now paying off, but – as the broader economic recovery is still in its early stages – there may be further growth and margin improvements to come.”

Midwich will release its full first-half numbers on 7 September.

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