Midwich Group (MIDW) H2 2024 earnings summary

Executive summary

• Record revenues of GBP 1.317 billion and highest ever gross margin at 17.8% achieved despite challenging market conditions and significant price erosion in mainstream products, especially in education and corporate sectors.

• Strategic focus on higher-margin technical product areas drove growth, with technical sales up 6.8% and mainstream sales down 8.9%.

• Four acquisitions completed and integrated in 2024, supporting expansion in technical capabilities and geographic reach.

• Cost mitigation measures implemented, targeting annual savings of GBP 5 million, with H2 actions delivering c.£5m annualised savings.

• Dividend of 13p per share, covered 2x by adjusted EPS; leverage increased to 2.0x adj. EBITDA due to acquisition spend.

Financial highlights

• Revenue reached GBP 1.317 billion, up 3.5% year-over-year on a constant currency basis; underlying revenue down 1.4%.

• Adjusted operating profit was GBP 48.3 million, down 17.4% year-over-year; adjusted operating margin fell to 3.7%.

• Gross profit was GBP 234.3 million, up 5.5%; gross margin increased by 0.3% to 17.8%, reflecting a shift to higher-margin technical products.

• Operating cash conversion was strong at 97% of adjusted EBITDA.

• Adjusted profit before tax was GBP 38.3 million, down 22%; adjusted EPS was 26.24p, down 30%.

Outlook and guidance

• Short-term trading conditions are not expected to improve materially; performance for the full year is expected to be weighted towards the second half.

• No further M&A deals currently in progress, but a pipeline of potential transactions is maintained.

• Deferred M&A payments of GBP 15.5 million expected in 2025, mostly in H1.

• Long-term strategy targets annual EPS growth of 10% over five years.

• Cash conversion guidance remains 70-80%; adjusted tax rate expected at 26-27% from 2025.