Midwich Group (MIDW) H1 2025 earnings summary

Executive summary

• Revenue declined 2.7% year-over-year on a constant currency basis to £620 million, with organic revenue down 3.5%, and H1 2025 revenue fell 4.3% to £620.3m, mainly due to German market softness.

• Adjusted operating profit fell 23.4% to £16.6 million, and adjusted profit before tax dropped 44.1% to £9.6m.

• Challenging market conditions persisted, especially in mainstream products and Germany, with price erosion and soft demand.

• Cost base was reduced, including a 5% headcount reduction, £2 million overhead savings, and £3.1m in exceptional costs for restructuring.

• Cash generation remained strong, with cash flow conversion at 60% in H1 and expectations of 70-80% for the full year.

Financial highlights

• Gross margin was 17.7%, slightly down from H1 2024, with adjusted operating margin at 2.7%.

• Adjusted EPS declined 38% to 6.91p; statutory basic EPS was a loss of 2.42p.

• Interim dividend of 1.75p declared, reflecting a revised 25% payout ratio and new policy of four times full-year cover.

• Adjusted net debt at period end was £148.2m, with leverage at 2.5x adjusted EBITDA, expected to fall to 2.2-2.3x by year-end.

• Adjusted cash flow from operations was £13.3m, with adjusted cash flow conversion at 60.1%.

Outlook and guidance

• Second half started positively, with seasonal demand peaks expected to improve net margins and organic sales growth anticipated.

• Full-year outlook remains unchanged, with expectations for margin and profit improvement in H2.

• Macroeconomic conditions, especially in Germany, France, and the US, expected to remain challenging.

• Leverage expected to fall to 2.2-2.3x by year-end.

• M&A activity paused but expected to recommence soon, with a healthy pipeline.