Midwich Group Plc · LSE:MIDW
Midwich — FY2020 Earnings Presentation
40 slides from Midwich's earnings presentation, March 2021
Slide 1: 2020 Full Year Results
Heading Sub-Heading Date 2020 Full Year Results March 2021 Delivering experiences Beyond expectations DELIVERING EXPERIENCES BEYOND EXPECTATIONS 1
Slide 2: Financial Highlights
Financial Highlights Revenue Growth Organic growth £711.8m 3.7% (14.1)% 2019: £686.2m CFX: 3.3% Gross Margin Adjusted operating profit1 14.3% £16.5m (50.6)% 2019: 16.5% CFX: (50.8)% Adjusted PBT2 Adjusted EPS Adjusted net debt £14.2m (60.7)% £21.0m (54.6)% to 11.20p 2019: £53.3m Notes 1 Adjustments
Slide 3: Long track record of growth
Long track record of growth Fourteen years of revenue growth. Thirteen years of GP% growth 800 20% 712 686 18% 700 16% 600 574 14% Gross margin (%) Revenue (£m) 500 472 12% 400 370 10% 314 291 8% 300 234 202 203 211 6% 200 173 184 157 134 4% 100 2% 0 0% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2
Slide 4: Revenue progression
Revenue progression Underlying 2020 revenue as % 2019 • Underlying sales 7% down in H2 compared with 22% down in H1; 120% • Underlying revenue in November and December above 2019 levels; 110% • Including Starin, revenue since June 2020 >100% of 2019; • Product mix continues to be biased towards lowe
Slide 5: Gross margin impact
Gross margin impact 2019 16.5% Broadly, margin drop may be explained as follows: Volume (1.3%) • Volume: Mix (0.9%) - Lower level of purchases in the year means less ability to gain 2020 14.3% volume purchasing discounts and rebate targets more difficult to achieve in the short term. Manufacturers a
Slide 6: Current position
Current position General Market Conditions • Further lockdowns in late 2020/ early 2021 dented pace of recovery; • Recent timeline for potential opening up of UK (backed by successful vaccine programme) encouraging; • Threats of some potential product shortages caused by chip supply issues; • Global
Slide 7: Market share guidance
Market share guidance Estimated Addressable global market (2019) customer value add plus manufacturer direct Low margin $116.9bn $58.5bn or fulfilment Additional potential upsides from: AV • increase service revenue; • take direct business through the $246.6bn $233.8bn channel; • take some fulfilmen
Slide 8: 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 9: Progress
Progress Specialisation 2019 2020 % 7 8.6 ▪ Continued growth in technical product category 36.5 and relative decline in displays; 39.8 ▪ Decline in displays importance partly due 35.8 37.7 to weakness in UK market and also small US display business; ▪ Other includes volume consumer audio product 17.
Slide 10: Market overview
Market overview Demand Drivers ▪ Saving cost ▪ Environmental considerations ▪ Improving efficiency/effectiveness ▪ Matches user/employee expectations ▪ Gaining competitive advantage Updated Estimated Split of Pro AV Revenue by End User Market 35% • No significant change to assessments made in Interi
Slide 11: Expected market trends
Expected market trends Corporate • COVID-19 has accelerated trends we were seeing already – eg remote working, collaboration technology; • People becoming increasingly keen to get back to offices – but how they use offices may change; • Technology likely to be a major part of these changes – eg comm
Slide 12: Expected revenue trends by end user market
Expected revenue trends by end user market View at Interims Current view v 2019 2020 Full recovery by Corporate (15%) 2021 As expected – maybe a little growth in 2021 Education Double digit Growth accelerates Significant double digit growth 2020, with further growth in 2021 growth in 2021 Hospitalit
Slide 13: Revenue bridge 2020 vs 2019
Revenue bridge 2020 vs 2019 3.7% Revenue growth M&A FX £711.8m 14.1% Organic revenue reduction 17.4% 0.4% 3.7% H1: (22%);H2 (7%) £686.2m Organic (14.1)% 13
Slide 14: UK & Ireland
UK & Ireland 7 • UK&I is our largest single territory. Despite no loss in market share the region felt the most significant impact from COVID-19, but is well positioned for recovery; Offices in UK & Ireland • Margin reduction due to both change in mix, such as the cancellation of live events, and lo
Slide 15: EMEA
EMEA • Despite the initial disruption from the pandemic EMEA recovered strongly during the second half of the year, although the pace of recovery varied by country; • Germany and France saw strong demand for education, remote working and broadcast solutions; • More specialist businesses maintain/inc
Slide 16: North America
North America • Starin Marketing Inc acquired in February 2020; • Revenue of £111.8m with a gross margin of 16.1%; • Integration has progressed ahead of plan; • Low margin fulfilment business 1 (c50% of revenue) exited at the end of the year; • Working capital management has significantly reduced de
Slide 17: Asia Pacific
Asia Pacific • Against a backdrop of strict lockdowns APAC performed strongly, especially in broadcast and streaming solutions; • Lower demand for high value add complex projects impacted margins; • Vantage acquisition integrated and supporting expansion of UC solutions. 60 20.0% 50 16.0% Gross marg
Slide 18: Trading results
Trading results Summary Income Statement Constant Actual • Revenue growth of 3.7% £m 2020 2019 currency change change (Organic reduction of 14.1%); Revenue 711.8 656.2 3.7% 3.3% • Gross margin adversely impacted by Gross profit 101.8 113.1 product and project mix; (10.0)% (10.2)% Margin 14.3% 16.5%
Slide 19: A healthy balance sheet
A healthy balance sheet Balance Sheet £m 2020 2019 • Strong focus on cash management and Non-current assets 89.7 75.5 working capital in 2020; Inventories 84.0 88.7 • Working capital 11.1% of revenue Trade and other receivables 107.1 104.1 (2019: 12.5%); Trade and other payables (111.8) (107.0) • Ad
Slide 20: Robust cash flow
Robust cash flow Cash Flow • Net cash inflow from operations before tax £m 2020 2019 of £44.1m (2019: £27.1m); Adjusted EBITDA 22.7 39.0 • Adjusted EBITDA cash conversion of Decrease/(Increase) in stock 34.9 (5.1) 194%, significantly ahead of long term Decrease/(Increase) in receivables 18.1 (7.7) t
Slide 21: Acquisitions
Acquisitions • Revenue in 2020 £111.8 million, approximately half • Deal signed in December. Legal paperwork from a low margin fulfilment business exited in expected to be completed shortly. Business December; already under effective control; • Business performed to expectations in the difficult • R
Slide 22: Acquisitions
Acquisitions Product Portfolio Technical Support Market share growth Geographic expansion Strategic fit Development of portfolio Focus on high-end Widen product portfolio in Entering new jurisdictions and product mix specialist products & current overseas divisions through acquisition solutions (Nor
Slide 23: ESG – our four pillars
ESG – our four pillars We continue to take our commitment to Environmental and Social Responsibility seriously. ESG is aligned to four key pillars: our local communities; supporting charities close to our hearts; Our People reducing our environmental impact and supporting our people Our People The E
Slide 24: Our 2021 ESG goals
Our 2021 ESG goals Our People The Environment Charity support The Community • Create internal • Every Group • Every office to • Safely welcome environment company to have a have a our teams back teams to champion nominated local community to our offices being greener charity programme • Welcome NMK
Slide 25: Summary and outlook
Summary and outlook COVID-19 impacted financial performance Revenue growth Gross Margin Adj. Op. Profit1 Adj. Net Debt2 3.7% 14.3% (50.6)% £21.0m CFX: 3.3% 2019: 16.5% CFX: (50.8)% 0.9x EBITDA Strong market position Market Acquisitions Good leadership well cash positions integrated generation Positi
Slide 26: Appendices
Appendices 26
Slide 27: 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 Joined Midwich as Finance Joined end July 2018 Extensive retail
Slide 28: Executive Leadership Team
Executive Leadership Team Michael Broadbent Tom Sumner Mark Lowe Lutz Kern Managing Director – Asia Pacific Managing Director - EMEA Managing Director – UK and Regional Director - DACH Ireland Joined as Managing Director in Joined Midwich in 2007 Joined Midwich Business After working in the AV indus
Slide 29: Case Studies - Using AV Technology in a COVID-19 World
Case Studies - Using AV Technology in a COVID-19 World Room occupancy monitoring Sidev has an order to supply a large number of signage players enabled with sense technology. These will collect a live number of detected mobile devices in a set area (up to 80sqm) every 30 seconds to give a real time
Slide 30: Case study – technological innovation in education
Case study – How technological innovation has forced transformation in education. H-Farm Campus digital transformation by Prase • H-FARM Campus is an innovation centre where entrepreneurs, professionals and students collaborate together – covers over 51 hectares, not far from Venice. • Prase was int
Slide 31: Home office of the future | One size won’t fit all
Home office of the future | One size won’t fit all Internal comms roles C-Suite Customer facing This worker typically communicates with This is a solution aimed at workers who typically Customer facing roles encounter a sales colleagues and rarely externally, they occupy their own office in the work
Slide 32: Why Midwich?
Why Midwich? -WHY OUR CUSTOME CHOOSE U ( a 8 Nurturing tong- Training Vertical term relationships and events market focus ‘We help our customers to win and deliver successful projects” & YP Credit/business Working 100% services together trade only 7 LS ZN Market and web Award-winning Personal servic
Slide 33: 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 34: Market Data – AVIXA 2019
Market Data – AVIXA 2019 Global Pro AV Market Size by Region - 2019 Global Pro AV Market Revenues ($m) Total Revenue Geographic Area Share of Global CAGR ($bn) 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 (2019 -2024) Europe 23% 55.9 194.4 201.4 214.4 230.8 246.6 261.1 276.0 291.6 308.3 324.8 5
Slide 35: Market Forecasts – AVIXA July 2020
Market Forecasts – AVIXA July 2020 Key highlights: • Global revenues expected to fall 8% in 2020 before hitting pre-COVID 2019 levels in 2022; • CAGR of 5.8% expected between 2020 and 2025; • APAC expected to grow at 7.4%, compared with 4.7% for Americas and 4.5% for EMEA; • Corporate spend expected
Slide 36: Group results highlights
Group results highlights Year to 31 December 2020 Year to 31 Year to 31 Constant December December Growth % currency 2020 2019 growth % £m £m Revenue 711.8 686.2 3.7% 3.3% Gross Profit 101.8 113.1 (10.0)% (10.2)% Gross profit margin 14.3% 16.5% Adjusted operating profit1 16.5 33.5 (50.6)% (50.8)% Ad
Slide 37: Regional results highlights
Regional results highlights Year to 31 December 2020 Region Revenue Revenue CFX % Org % GP % GP % GP % FY 2020 FY 2019 2020 2019 Change £m £m UK&I 224.4 314.6 (28.7%) (28.7%) 14.0% 17.6% -3.6% EMEA 331.1 321.0 2.2% (0.1%) 13.8% 15.2% -1.4% APAC 44.5 50.6 (10.7%) (11.8%) 15.3% 17.7% -2.4% North Ameri
Slide 38: Reconciliation of statutory to adjusted PBT
Reconciliation of statutory to adjusted PBT Year to 31 December 2020 Year to 31 December 2020 £m Adjusted PBT 14.2 M&A costs (0.5) Share based payments (2.7) Amortisation of acquired intangibles (6.3) Derivative valuation changes (2.3) Deferred consideration / Put&Call valuation changes (3.4) Statut
Slide 39: Modelling considerations for 2020
Modelling considerations 1 for 2020 M&A payments c.£11m in H1 2021 (NMK) Acquisitions Deferred consideration/put&call options £4.9m New ERP amortisation now expected to commence in 2022 ERP amortisation Annual charge c.£0.5m Expected to be £2.5m-£3m before further M&A Interest (adjusted) Effective r
Slide 40: Midwich Group Plc
Midwich Group Plc