Midwich Group Plc · LSE:MIDW
Midwich — H1 2022 Earnings Presentation
44 slides from Midwich's earnings presentation, September 2022
Slide 1: 2022 Half Year Results
Heading 2022 Half DELIVERING EXPERIENCES Year Results Sub-Heading Date BEYOND EXPECTATIONS September 2022 Delivering experiences Beyond expectations 1
Slide 2: Financial Highlights
FINANCIAL HIGHLIGHTS Revenue Growth Organic growth £569m 45.8% 27.9% 2021: £390m CFX: 46.2% 2021: 26% Gross Margin Adjusted PBT1 Adj. PBT margin1 14.9% £19.2m 3.4% 2021: 15.1% 2021: £13.0m 2021: 3.3% Adjusted EPS Interim Dividend 15.42p 4.5p 2021: 10.08p 2021: 3.3p Operating cash conversion2 Adj. ne
Slide 3: Strengths and Defensibility
STRENGTHS AND DEFENSIBILITY Focus on the AV market; Key long-term, value-add relationships with major vendors and customers; High value-add distribution with specialisms and bespoke service offering, acting as a key differentiator; Leading competitive position and established international p
Slide 4: Revenue Bridge 2022
REVENUE BRIDGE 2022 Organic growth well ahead of the market vs H1 2021 £568.6m 46.2% M&A FX +45.8% Organic 27.9% 18.3% (0.4)% Revenue increase (CFX) 27.9% Organic revenue £390.1m increase £711.8m 4
Slide 5: Profitability Trends
PROFITABILITY TRENDS Adjusted PBT Gross Margin 25 Gross margin slightly lower at 14.9% (2021 15.1%) Partial recovery in live events (“in-person” activities) more than offset by aged stock 20 provision movement (which is expected to largely reverse) 15 16.00% £ million 15.30% 15.10% 14.90% 15.00% 10
Slide 6: Current Landscape
CURRENT LANDSCAPE General Market Conditions • Markets are now mostly open; • Many product shortages – although flat panels back to near normal; • Global logistics costs still high, but started to fall; • Corporate market recovering; • Education sector remains strong; • Full recovery in live events a
Slide 7: Long Term Strategy Remains Unchanged
LONG TERM STRATEGY REMAINS UNCHANGED Why? How? Success Measures Specialisation Relevance Portfolio management Growth in technical product sales1 Profitability Acquisition Long term growth in gross margin Defensibility Value add services Geographical Support Acquisition Number of territories Coverage
Slide 8: Progress
PROGRESS Specialisation 2021 2022 • New technical product 8% 5% categories increase this 35% segment significantly; 32% Displays • Displays growth of over Projection Displays 30% and expected 6% Projection decline in projection Technical result in mainstream Other Technical products now only 42% 42%
Slide 9: AVIXA Market Report 2022
AVIXA MARKET REPORT 2022 Macro Pro AV industry trends: Return of in-person activities has resulted in significant demand increase which suppliers are struggling to keep up with General recession risk higher, but “if confidence in gathering in-person is still on the upswing when a recession hits, tha
Slide 10: AVIXA Market Report 2022
AVIXA MARKET REPORT 2022 Our growth in H1: North America – 90%+ EMEA (incl UK&I) – 40%+ (organic 20%+). UK&I 85% - organic 30%+ Midwich growth is materially faster than the market in each region Two of the three regions are now above pre pandemic levels 10
Slide 11: AVIXA Market Report 2022
AVIXA MARKET REPORT 2022 Five year expected growth rates Despite different growth rates, market segments remain in the same order Drop in residential segment as people spend less time at home 11
Slide 12: AVIXA Market Report 2022
AVIXA MARKET REPORT 2022 *The recovery year is the year in which revenues for pro AV exceed the peak values set in 2019 12 12
Slide 13: Market Opportunity
MARKET OPPORTUNITY £ million Global EMEA UK Germany France MENA Italy US APAC 2027 292,500 76,518 7,765 11,028 7,254 11,067 3,965 82,899 112,203 Substantial 2022 219,167 58,168 5,932 8,580 5,659 8,226 3,018 63,906 81,580 2021 172,840 46,256 4,662 6,749 4,458 6,468 2,349 50,542 63,900 addressable mar
Slide 14: UK & Ireland (42% Group Revenue)
UK & IRELAND (42% GROUP REVENUE) 9 • Performance in the UK & Ireland was significantly ahead of H1 2021, with revenue up 86%, including the benefit of acquisitions at the start of the year. • Organic growth of 30.6% reflects market share gains including the benefit from new Offices in vendors and te
Slide 15: EMEA (44% Group Revenue)
EMEA (44% GROUP REVENUE) 14 • EMEA revenue growth of 20.4% (CFX) to £247.9m with growth in every country due to a broad end user market recovery and further market share gains. Live events, corporate Offices in and retail end user markets continue to improve, albeit partially offset by the EMEA norm
Slide 16: Asia Pacific (4% Group Revenue)
ASIA PACIFIC (4% GROUP REVENUE) • The region continued to be impacted by COVID-19 in H1 2022 in ANZ with lockdowns at 7 the beginning of the period and product supply challenges continuing. • Revenue improved by 12.2%, driven by an increase in the mix of lower margin product sales, resulting in a dr
Slide 17: North America (10% Group Revenue)
NORTH AMERICA (10% GROUP REVENUE) • Starin revenue of £56.4m grew by 81.5% (CFX) vs H1 2021 reflecting market share gains from both new vendors and expanded customer relationships. • Gross margin of 14.7% in line with our plan after one off impacts from fulfilment exit in prior periods. • The busine
Slide 18: Strong Revenue and Profit Performance
STRONG REVENUE AND PROFIT • Exceptional revenue growth of 46.2% (CFX) to £569m; PERFORMANCE • Organic growth of 27.9% reflects market share gains in all regions and further recovery Summary Income Statement in end user markets; Constant Actual • Gross margin was broadly in £m currency H1 2022 H1 202
Slide 19: Strong Balance Sheet
STRONG BALANCE SHEET • Acquisitions of DVS and Nimans in Q1 2022; Balance Sheet (30 June) • Increase in working capital reflects the impact of M&A £m 2022 2021 combined with the growth in Non-current assets 151.5 105.4 business activity; Inventories 171.4 117.8 • Adjusted net debt of £112.5m Trade a
Slide 20: Investing in Growth
INVESTING IN GROWTH • Net cash outflow from operations before tax of £7.6m (H1 2021: £5.1m); Cash Flow • In line with normal H1 seasonal £m 2022 2021 working capital patterns Adjusted EBITDA 23.8 16.7 adjusted EBITDA cash Decrease/(Increase) in stock (27.3) (28.7) conversion was -32%. This Decrease/
Slide 21: Acquisitions
ACQUISITIONS January February 2022 2022 Cardiff, UK Manchester, UK • 2019/20 revenue £37.4m • 2020 revenue £114m • Specialist security products distributor • Long established and highly regarded distributor of UC, telecoms, networking and AV • Strength in CCTV, intercom and access technologies contr
Slide 22: Summary and Outlook
SUMMARY AND OUTLOOK Proven historical financial track record Revenue growth 17% CAGR of Good every year since adjusted PBT cash 2005 over 8 years generation Strong market position Market Proven Strong leadership acquisition organic positions model growth Positioned for growth New vendors and Acquisi
Slide 23: Appendices
Heading Sub-Heading Date Delivering experiences Beyond expectations Appendices 23
Slide 24: Experienced Management Team and Board
EXPERIENCED MANAGEMENT TEAM AND BOARD Andrew Herbert Stephen Fenby Stephen Lamb Mike Ashley Hilary Wright Non-Executive Chairman Managing Director Finance Director Non-Executive Director Non-Executive Director Group Finance Director of Domino Joined Midwich as Finance Joined end July 2018 Extensive
Slide 25: Executive Leadership Team
EXECUTIVE LEADERSHIP TEAM Michael Broadbent Tom Sumner Mark Lowe Lutz Kern Managing Director Managing Director – Managing Director – UK and Regional Director - DACH – Asia Pacific EMEA Ireland Joined as Managing Director Joined Midwich in 2007 Joined Midwich Business Management team After working in
Slide 26: End User Markets
END USER MARKETS End User Markets - Estimated Share 35.00% 30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% Source: Midwich estimates 2020 2021 2022 26 26
Slide 27: Long Track Record of Growth
LONG TRACK RECORD OF GROWTH Fifteen years of unbroken revenue growth. GP% growth in fourteen of those years £900 856 20% £800 18% 712 686 16% £700 14% £600 574 12% Gross margin (%) Revenue (£m) £500 472 10% £400 370 8% 314 291 £300 234 6% 202 203 211 173 184 £200 157 4% 134 £100 2% £0 0% 2006 2007 2
Slide 28: Long Term Adjusted PBT Trend
LONG TERM ADJUSTED PBT TREND Gross margin Adjusted PBT - £000 Gross margin improved from 14.3% to 15.3%. 35,000 31,900 Further improvement likely to be influenced by: 31,200 30,000 29,100 - Recovery in higher margin product areas; - Retention rate of lower gross margin business which has grown in pa
Slide 29: AVIXA Market Report 2022
AVIXA MARKET REPORT 2022 Command and control: Control rooms Live events: Hardware and software used to provide turnkey Conferencing and live event AV solutions for collaboration: shows or temporary Hardware and software facilities. Includes rental that enable and staging equipment communication betw
Slide 30: AVIXA Market Report 2022
AVIXA MARKET REPORT 2022 Growth in hybrid learning expecting to slow after the investment made in the last two years Strong surge in live performance 30
Slide 31: AVIXA Market Report 2022
AVIXA MARKET REPORT 2022 Display growth driven particularly by LED (12.4% CAGR) although flat panel displays still expected to grow at the average market rate Expected strong growth in cameras for conferencing or surveillance Definitions: Content management hardware includes servers, media players,
Slide 32: AVIXA Market Report 2022
AVIXA MARKET REPORT 2022 Integration services regaining top spot as demand increases. Demand for integration services is rising as end users resume project work in the core markets. This is shifting revenue back from heavy emphasis on cloud services. Manage services are rising, though with some blur
Slide 33: Royal Albert Hall
CASE STUDY ROYAL ALBERT HALL • Return to live events and increased focus on investing in the experience. • Sound Technology, a Midwich Group company, demonstrated the lights in situation, enabling technicians to live test and see the difference they made. • This new lighting was an opportuniy to inv
Slide 34: IKEA Flagship London Store
CASE STUDY IKEA FLAGSHIP LONDON STORE • Retail now has to be an experience. • IKEA’s goal was to make visiting their stores ‘family friendly’, making it feel like a fun day out. • AV was key to delivering interactive and immersive experiences. • The outcome of investing in AV is that shoppers spend
Slide 35: Tesco Invests Acquisition Success
CASE STUDY TESCO INVESTS ACQUISITION SUCCESS • Midwich acquired DVS, a specialist security distributor in Jan 2022. • Traditional security deal to roll out a solution across multiple Tesco stores. • Displays strategically placed within high value or high volume theft areas for customer awareness. •
Slide 36: Why Midwich?
WHY MIDWICH? WHY OUR CUSTOMERS WHY OUR VENDORS CHOOSE US CHOOSE US Nurturing Training and Vertical Credit/business Working Market focus Efficient Scale and Marketing and long-term events market focus services together logistics flexibility sales support relationships 100% Market and Award-winning Pe
Slide 37: Demand Drivers in the AV Industry
DEMAND DRIVERS IN THE AV INDUSTRY Driver Reason Examples • Touch screen in shopping centre reduces need for help desk staff Reduces people costs • Touch screen ordering in fast food outlet reduces serving staff Cost Saving Reduces waste • Elimination of posters reduces paper waste Saves time • Video
Slide 38: Environmental Social Responsibility
ENVIRONMENTAL SOCIAL RESPONSIBILITY “Supporting the community - pictured are members of the Midwich team based in Diss, Norfolk preparing to contribute to the community with a local litter pick” People images (grab?); page 43 38
Slide 39: Environmental Social Responsibility
ENVIRONMENTAL SOCIAL RESPONSIBILITY We continue to take our commitment to Environmental and Social Responsibility seriously. Community & Our People The Environment Charity Support We continue to take our social responsibilities We continue to support local, national, and seriously, looking after and
Slide 40: Group Results Highlights
GROUP RESULTS HIGHLIGHTS 6 MONTHS ENDED 30 JUNE 2022 6 months to 6 months to Constant 30 June 30 June Growth % currency 2022 2021 growth % £m £m Revenue 568.6 390.1 46% 46% Gross Profit 84.7 59.1 43% 44% Gross profit margin 14.9% 15.1% Adjusted operating 20.2 13.9 45% 45% profit1 Adjusted profit bef
Slide 41: Regional Results Highlights – H1 2022
REGIONAL RESULTS HIGHLIGHTS – H1 2022 Region Revenue Revenue CFX % Org % GP % GP % GP % H1 2022 H1 2021 2022 2021 Change £m £m UK&I 239.3 128.6 86.3 30.6 15.7 15.4 +0.3% EMEA 247.9 210.2 20.4 20.4 14.1 14.5 -0.4% APAC 25.0 22.2 12.2 12.2 15.7 17.7 -2.0% North America 56.4 29.1 81.5 81.5 14.7 17.2 -2
Slide 42: Adjustments to Statutory Results – H1 2022
ADJUSTMENTS TO STATUTORY RESULTS – H1 2022 £m H1 2022 H1 2021 Statutory operating profit/(loss) 12.7 7.6 Acquisition related expenses 0.4 0.3 Share based payments and employer taxes 2.8 2.4 Amortisation of acquired intangibles 4.3 3.6 Adjusted operating profit 20.2 13.9 Statutory profit after tax 7.
Slide 43: Modelling Considerations
MODELLING CONSIDERATIONS 1 Acquisition of minority shares c£2.8m in H2 2022 Acquisitions Deferred consideration for DVS/Nimans result in c£10m of M&A payments in Q1 2023 ERP programme resumed with initial "go live" expected late ERP amortisation 2023 Amortisation of core platform will be c£2.5m per
Slide 44: Heading
Heading Sub-Heading Date Delivering experiences Beyond expectations 44