Midwich Group Plc · LSE:MIDW
Midwich — H1 2024 Earnings Presentation
47 slides from Midwich's earnings presentation, Sep 3, 2024
Slide 1: 2024 Half Year Results
2024 Half Year Results September 2024 midwichgroupplc.com
Slide 2: Strategic and operational overview
01/ Strategic and operational overview Stephen Fenby, Managing Director 2
Slide 3: H1 2024: Robust performance in a challenging market
2024 Half Year Results 3 H1 2024: Robust performance in a challenging market • Midwich delivered record H1 revenue and gross margins, despite continued challenging macro conditions. • Strong performance in technical product areas which now make up 2/3’s of Group revenue, reflecting Group’s strategy
Slide 4: Robust performance with record gross margins
2024 Half Year Results 4 Robust performance with record gross margins 2024 H1 revenue and gross margin 2024 H1 operating profit and cash generation Global revenue £646m Adj. operating profit (cc) -15% Total growth (cc) +8% Adj. operating margin 3.4% (down 0.9%) Organic growth -1% Operating cash conv
Slide 5: Current landscape
2024 Half Year Results 5 Current landscape General Market Conditions • Although generally challenging economic conditions continue to impact our markets, we are seeing some initial signs of improvement for H2; • UK&I and Australian markets remain challenging, with some impact in US and mainland Euro
Slide 6: Our purpose and key differentiators
2024 Half Year Results 6 Our purpose and key differentiators Why Midwich? We exist to help our customers win and then deliver successful projects, and our manufacturers to reach a broad market Deep vendor relationships Broad, long, close, symbiotic, unique We are exclusive or #1 distributor in 80% o
Slide 7: Market data
2024 Half Year Results 7 Market data The technology distribution market (IT and AV products) LFD remains a significant part of our product as a whole was challenging in 2023 and is expected to portfolio and has seen price erosion in show little growth overall in 2024 Europe in the last 9 months - wh
Slide 8: Market data
2024 Half Year Results 8 Market data Global growth for 2023 (actual) and 2024 (forecast) by segment shows strength in live events/ entertainment segments: Core Control Traditional AV IT/AV overlap Event tech Direct Tech/ mainstream Technical Technical 2023 growth 4.50% 1.60% 6.90% 11% 2024 growth 3.
Slide 9: Market data
2024 Half Year Results 9 Market data In the countries in which we operate, we have a high and generally growing share of the business of our top 20 vendors: Over 40% market share with 6 most of our top 20 vendors 5 4 Number 3 2 1 0 No 0-10 10-20 20-30 30-40 40-50 50-60 60-70 70-80 80-90 90-100 detai
Slide 10: Financial review
02/ Financial review Stephen Lamb, Group Finance Director 10
Slide 11: Income statement
• Record revenue of £646m, up by 7.5% at CFX. • Organic sales marginally down in a Income statement challenging market. • Highest ever gross margin at 17.3%; ahead of prior year by 100bps reflecting technical mix benefit. Constant Actual £m currency • Temporary reduction in adj. operating H1 2024 H1
Slide 12: Balance sheet and net debt
• Non-current assets increased due to seven acquisitions in the twelve months to June 2024. • Strong working capital management, with Balance sheet and net debt working capital as a percentage of last twelve months’ revenue below prior year. • Adjusted net debt of £132.3m (£102.1m at June Balance Sh
Slide 13: EMEA (43% Group revenue)
EMEA (43% GROUP REVENUE) • The EMEA region comprises our businesses in France, Germany, Switzerland, Benelux, Norway, Italy, 19 Offices Iberia, and the Middle East. Revenue, on a constant currency basis, was in line with H1 2023. Organic sales declined by 2.9% reflecting a reduction in mainstream pr
Slide 14: UK & Ireland (36% Group revenue)
UK & Ireland (36% GROUP REVENUE) 14 Offices • The UK&I market demand continued to be subdued in the period with revenue flat on prior year. • The Group has its highest market share in this region and the challenging backdrop resulted in a degree of oversupply, and associated discounting which result
Slide 15: North America (18% Group revenue)
North America (18% GROUP REVENUE) 4 Offices • Revenue in North America increased by 69.0% reflecting both a full contribution from SFM in Canada (Acquired in June 2023), and further market share gains in the United States. • Organic revenue growth of 16.8% was driven by demand for unified communicat
Slide 16: APAC (4% Group revenue)
APAC (4% GROUP REVENUE) 6 Offices • Revenue in Asia Pacific was down 4.1% on the prior year. New brands, added in the last twelve months, are now beginning to build momentum in the region, with a return to growth in the second quarter of the year. Demand for larger projects also showed signs of impr
Slide 17: M&A overview and our investment case
03/ M&A overview and our investment case Stephen Fenby, Group Managing Director 17
Slide 18: M&A strategy and results
Key M&A criteria; 18 • Strong reputation M&A strategy and results • • Technical skills Vendor and customer portfolio M&A has been part of our strategy since 2006. We acquire • Culture and ethos businesses in order to either access new geographical markets, or to add new technical product areas into
Slide 19: Our investment proposition
2024 Half Year Results 19 Our investment proposition Midwich has a market leading position A proven track record and strong financial • We are the leading global Pro AV value-added position distributor • Long track record of consistent and resilient • In a $325bn global market that’s expected to gro
Slide 20: Key Drivers for long-term growth
2024 Half Year Results 20 Key Drivers for long-term growth Organic revenue Enhanced by M&A Gross margin Manage our cost progression base • Structural market • Fragmented market, growth (AVIXA c5-6% with many • Continue to grow • Operational leverage per annum) opportunities technical mix from scale
Slide 21: Appendices
04/ Appendices 21
Slide 22: Group at a glance
2024 Half Year Results 22 43 27 Showroom/demo Offices & Showrooms £1.3B Turnover 2023 facilities c.1,900 Staff members Group at 24,000+ a glance Accounts served in 2023 Our expertise and specialist focus connect technology and people around the globe. What makes us different is our knowledgeable tea
Slide 23: Delivering against our long-term strategy
2024 Half Year Results 23 Delivering against our long-term strategy Specialisation Geographical Coverage Scale Relevance Support Efficiency Profitability Global projects Profitability Defensibility Share of wallet Cross selling Our strategy delivers: Long term, strong, predictable and defensible EPS
Slide 24: What makes AV special?
What makes AV special? AV turns the AV can make almost every business perform better. digital into reality Our technology helps drive improved performance, for example in… Corporate Retail Transport More effective meetings, Education Making roads and Higher quality and more More effective meetings b
Slide 25: We have significant market opportunity
2024 Half Year Results 25 We have significant market opportunity Substantial addressable market Opportunity to grow remains significant Note: Assumes £1=$1.22 in 2022 and 2027 and £1-= $1.37 in 2021 Addressable market is an estimate Possible additions not taken into Targeting addressable market 2027
Slide 26: The Pro AV value chain
2024 Half Year Results 26 The Pro AV value chain
Slide 27: Demand drivers in the AV Industry
2024 Half Year Results 27 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 pape
Slide 28: Why Midwich Group?
2024 Half Year Results 28 Why Midwich Group? WHY OUR CUSTOMERS CHOOSE US WHY OUR VENDORS 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
Slide 29: End user market mix
• Impact of acquisitions – inclusion of Nimans in 2022 leads to significant increase in importance of corporate. End user market mix • Our expanded UC portfolio and continued roll out across the Group also increased importance of corporate market. • Other acquisitions more weighted to broadcast and
Slide 30: Strong customer and vendor relationships (2023)
2024 Half Year Results 30 Strong customer and vendor relationships (2023) • Largest supplier accounts for 11% of sales; • Reduced vendor concentration dilutes risk; Vendors • Top 10 vendors account for 48% sales and top 40 account for • Significant gains from winning and growing new 80%; vendors; •
Slide 31: Specialisation across the Group
Mainstream LED Audio UC Broadcast Lighting Security Dry Hire Technical Video Specialisation UK & I Netherlands across the Northern Belgium Europe Norway Group DACH/ Eastern Europe Germany Switzerland Austria As you can see, the Group operates in major France geographic markets with local specialists
Slide 32: Consistent market outperformance
2024 Half Year Results 32 Consistent market outperformance Gross margin % Revenue £m 32
Slide 33: Evolution of product and geographic mix
2024 Half Year Results 33 Evolution of product and geographic mix Specialisation 2016 6% 5% 2023 • Reduced vendor concentration dilutes risk; of the Increased specialisation 14% business • Significant gains from over winning andtime growing new 26% 43% vendors; Technical product categories 21% conti
Slide 34: Strong track record (2023 data)
2024 Half Year Results 34 Strong track record (2023 data) Strong revenue growth Increased technical product mix Revenue (£m) by product type 5-year CAGR: CAGR 38% Total +18% Organic +7% CAGR 5% Gross margin development EPS (p) development Operating cash generation 5-year CAGR: +7% 5-year operating c
Slide 35: Proven acquisition capability
28 35 PERFORMANCE 28 acquisitions Proven acquisition capability since IPO As you can see, the Group operates in major geographic markets with local specialists covering a multitude of technology categories. 2016 2017 2018 2019 2020 2021 2022 2023 2024 Holdan Earpro New Media Mobile Pro Starin Market
Slide 36: Creating value case study - NMK
2024 Half Year Results 36 Creating value case study - NMK Acquired 1 January 2021 Acquisition plan included development programme. Key support from Midwich Group: • Investment in experience centre • Financed Saudi business • Senior finance secondment • Supported recruitment of 63 people • Helped to
Slide 37: Future development and performance drivers
2024 Half Year Results 37 Future development and performance drivers Strategic focus areas: Performance Predictability Continue to expand technical product drivers: • Business diversity balances risk • Strength in depth of skills capabilities; • Portfolio management skills (incl onboarding) • Long-t
Slide 38: Strengths and defensibility
2024 Half Year Results 38 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 e
Slide 39: Capital allocation
• Adjusted return on capital^ 2023: 17.5% Capital allocation • Despite significant M&A investment towards the end of Disciplined capital allocation, with a focus on long-term returns the year ^Adjusted return on capital employed is a Midwich Group alternative performance measurement
Slide 40: Group trading summary H1 2024
2024 Half Year Results 40 Group trading summary H1 2024 6 months to 30 6 months to 30 Constant June 2024 June 2023 Growth % currency £m £m growth % Revenue 646.1 610.4 6% 8% (-1% organic) Gross Profit 111.8 99.6 12% 14% Gross profit margin 17.3% 16.3% Adjusted operating profit1 22.0 26.4 -17% -15% 3
Slide 41: Regional summary
2024 Half Year Results 41 Regional summary Region Revenue Revenue CFX % Org % GP % H1 GP % H1 GP % H1 2024 £m H1 2023 £m 2024 2023 Change UK&I 233.1 234.0 - (4%) 17.0% 17.7% -0.7ppts EMEA 274.6 281.3 - (3%) 16.7% 15.5% +1.2ppts APAC 23.3 25.2 (4%) (4%) 15.8% 17.5% -1.7ppts North America 115.1 69.9 6
Slide 42: Movement in adj. net debt
2024 Half Year Results 42 Movement in adj. net debt £27.1m (£23.5m) £3.6m 13% (£7.4m) (£5.0m) (£5.3m) (£11.5m) (£20.2m) (£4.0m) (£49.7m)
Slide 43: Modelling considerations
2024 Half Year Results 43 Modelling considerations Acquisitions Payments related to past M&A expected to be £10.5m in H2 2024, with c£12m in 2025 and £8m in 2026. These figures include the recent acquisition of DHL. ERP amortisation ERP programme in testing with initial "go live" now expected in H2
Slide 44: Reconciliation to statutory profits
2024 Half Year Results 44 Reconciliation to statutory profits £m H1 2024 H1 2023 Statutory operating profit/(loss) 12.8 18.6 Acquisition related expenses 0.3 0.3 Exceptional costs 0.5 - Share based payments and employer taxes 2.6 2.7 Amortisation of acquired intangibles 5.8 4.8 Adjusted operating pr
Slide 45: Sustainability strategy
09 Commitments Commitments • Setting an end date for the use of gas and oil • Work with industry bodies and leading in all of our facilities experts on channel sustainability Sustainability • Shifting a material percentage of our • Continue to involve ourselves with purchased electricity to long-sta
Slide 46: Group management team
2024 Half Year Results 46 Group management team Stephen Fenby Stephen Lamb Tom Sumner Mark Lowe Managing Director Finance Director Chief Strategy Officer Chief Commercial Officer Mathieu Payet Stuart Mizon Joe Thompson Phil Bligh Managing Director - EMEA Group Commercial Director Corporate Strategy
Slide 47: Midwich Group contact details
Midwich Group +44 (0)20 5555 9999 Vinces Road info@midwichgroup.com Diss, Norfolk IP22 4YT midwichgroupplc.com