TIDMMIDW
RNS Number : 3450L
Midwich Group PLC
05 September 2023
5 September 2023
Midwich Group plc
("Midwich", the "Company" or the "Group")
Interim results for the six months ended 30 June 2023
Strong performance despite market challenges; full year
expectations unchanged
Midwich Group (AIM: MIDW), a global specialist audio visual
distributor to the trade market, today announces its Interim
Results for the six months ended 30 June 2023 ("H1 2023").
Statutory financial highlights
Six months ended
30 June 2023 30 June 2022 Growth
GBPm GBPm %
Revenue 610.4 568.6 7.4%
Gross profit 99.6 84.7 17.5%
Gross profit % 16.3% 14.9%
Operating profit 18.6 12.7 46.5%
Profit/(loss) before
tax 15.6 10.4 50.5%
Profit/(loss) after
tax 11.6 7.6 52.9%
Reported EPS - pence 12.14 7.93 53.1%
Adjusted financial highlights
Six months ended
30 June 2023 30 June 2022 Growth Growth at constant
GBPm GBPm % currency %
Revenue 610.4 568.6 7.4% 5.1%
Gross profit 99.6 84.7 17.5% 15.2%
Gross profit % 16.3% 14.9%
Adjusted operating
profit (1) 26.4 20.2 30.9% 27.9%
Adjusted operating
profit % 4.3% 3.6%
Adjusted profit
before tax (1) 21.8 19.2 13.4% 10.5%
Adjusted profit
after tax (1) 16.1 14.4 11.6%
Adjusted EPS - pence
(1) 16.93 15.42 9.8%
Interim dividend
per share - pence 5.5 4.5 22.2%
(1) Definitions of the alternative performance measures are set
out in Note 2
Financial highlights
-- Revenue increased 7.4% (5.1% at constant currency) to GBP610.4m
with organic growth of 2.3%.
-- Significant improvement in gross margins to 16.3% from 14.9%
in the prior year.
-- Adjusted operating profit growth of 30.9% to GBP26.4m (H1
2022: GBP20.2m).
-- Operating cash conversion at 27% inflow; ahead of Board expectations
and reflecting typical seasonal investments in working capital
(H1 2022: 32% outflow).
-- Successful equity placing in June 2023 raised over GBP50m
to support the Group's M&A strategy.
-- Adjusted net debt of GBP102.1m at period end with leverage
(^) at 1.5x following the fundraise and the acquisition of
S.F. Marketing, Inc. ("SFM") in Canada.
-- Interim dividend declared of 5.5 pence per share, an increase
of 22% (Interim 2022: 4.5p).
Operational highlights
-- Against a backdrop of continued challenging market conditions
in a number of key markets, the Group's diverse product and
geographic portfolio resulted in revenue growth of 7.4% and
further market share gains with many of the Group's key vendors.
-- Favourable product mix resulted in significant improvements
in gross margins.
-- In June 2023, the Group acquired SFM, a specialist value-add
AV distributor in Canada, adding 1,500 new customers and strengthening
relationships with key tier-1 vendors in the audio and visual
markets.
-- Management continues to see a strong acquisition pipeline,
across a number of regions.
Post period trading and outlook
-- Post the period end, and in line with the stated use of proceeds
of the equity issue in June 2023, the Group has completed
five acquisitions: Toolfarm.com, Inc and Digital Media Promos,
Inc (trading as 76 Media) in the US, HHB Communications Holdings
Limited and Pulse Cinemas Holdings Limited in the UK, and
Video Digital Soluciones S.L. in Spain. The aggregate cash
spent (net of cash acquired) on these transactions was GBP18m.
-- With order books remaining healthy despite the broader challenging
market conditions, the Board expects the momentum seen in
H1 2023 to continue throughout the remainder of the year.
As a result, the Board continues to expect trading performance
for the full year to be in line with its previous expectations.
(^) RCF covenant is 3x Adjusted net debt/adjusted EBITDA. For
these purposes Adjusted EBITDA includes proforma EBITDA for
acquisitions acquired in the last 12 months.
Stephen Fenby, Managing Director of Midwich Group plc,
commented:
"Our performance in H1 2023 was strong, with the Group
delivering revenue growth of 7.4% and adjusted operating profit
improving by 30.9% compared with H1 2022, despite continued
challenging market conditions in a number of key markets.
Particularly notable was the significant improvement in our gross
profit percentage, moving from 14.9% in H1 2022 to 16.3% in H1 2023
and our adjusted operating profit percentage which increased from
3.6% to 4.3%. Higher interest charges impacted our adjusted profit
before tax, which nonetheless still increased by 13.4% to GBP21.8
million in the period.
Slower than expected corporate and education markets were more
than compensated for by strength in the live event and
entertainment sectors. The change in mix attributable to the
significant growth of technical video and audio products resulted
in a favourable product margin mix.
The EMEA region performed particularly well, with strong
improvements in organic revenue, gross margin and adjusted
operating profit. Although general macro-economic conditions are
widely expected to remain challenging over the coming months, the
Group continues to be well placed to identify and benefit from
organic and inorganic business development opportunities. I believe
our demonstrable track record of performing well despite
challenging broader economic conditions is a testament to the
quality of our business and our ability to grow market share
profitably. Furthermore, our order books remain strong and as a
result the Board's expectations for the full year remain
unchanged."
There will be a meeting and webinar for sell-side analysts and
investors at 9:30am today, 5 September 2023, the details of which
can be obtained from FTI Consulting: midwich@fticonsulting.com.
For further information:
Midwich Group plc
Stephen Fenby, Managing Director
Stephen Lamb, Finance Director +44 (0) 1379 649200
Investec Bank plc (NOMAD and Joint Broker
to Midwich) +44 (0) 20 7597
Carlton Nelson / Ben Griffiths 5970
Berenberg (Joint Broker to Midwich) +44 (0) 20 3207
Ben Wright / Richard Andrews 7800
FTI Consulting
Alex Beagley / Tom Hufton / Rafaella de +44 (0) 20 3727
Freitas 1000
About Midwich Group
Midwich is a specialist AV distributor to the trade market, with
operations in EMEA, the UK and Ireland, Asia Pacific and North
America. The Group's long-standing relationships with over 600
vendors, including blue-chip organisations, support a comprehensive
product portfolio across major audio visual categories such as
large format displays, projectors, digital signage and professional
audio. The Group operates as the sole or largest in-country
distributor for a number of its vendors in their respective product
sets.
The Directors attribute this position to the Group's technical
expertise, extensive product knowledge and strong customer service
offering built up over a number of years. The Group has a large and
diverse base of over 20,000 customers, most of which are
professional AV integrators and IT resellers serving sectors such
as corporate, education, retail, residential and hospitality.
Although the Group does not sell directly to end users, it believes
that the majority of its products are used by commercial and
educational establishments rather than consumers.
Initially a UK only distributor, the Group now has around 1,800
employees across the UK and Ireland, EMEA, Asia Pacific and North
America. A core component of the Group's growth strategy is further
expansion of its international operations and footprint into
strategically targeted jurisdictions.
For further information, please visit
www.midwichgroupplc.com
Managing Director's Report
Overview
The Group continued to make progress in H1 2023, despite
continued challenging market and macro-economic conditions in a
number of key markets leading to some softness in mainstream
product demand. In line with our long-term strategy, we achieved
strong sales growth in higher margin technical products, with the
result that both gross and operating margins increased
significantly and adjusted operating profit increased by 30.9% in
the period compared with H1 2022.
Maintaining a consistent high service level to our customers and
vendors remains a key focus for the Group, so we remain a long-term
trusted partner. We continue to work hard to provide exceptional
service and have also increased our market share with many of the
Group's key vendors in the period. Our focus on developing our
offering in the AV market continues to be beneficial for our
customers and vendors alike.
Working capital management continues to be a key focus for the
Group with a positive operating cash flow in the period despite the
normal seasonal investment in working capital. We expect operating
cash generation for the full year to be in line with our long-term
trend of 70-80% of adjusted EBITDA.
Trading performance
Revenue in H1 2023 grew by 7.4% (5.1% on a constant currency
basis) to reach GBP610.4 million. Organic growth was 2.3%. Compared
with H1 2022, revenue growth was strong in EMEA (+13.5%) and North
America (+23.9%), but declined by 2.2% in the UK & Ireland.
Based on independent market data, we believe that the decline in
our UK & Ireland revenue is significantly less than the overall
market decline in that territory.
The gross margin percentage was 1.4 percentage points higher
than in H1 2022, with improvements seen in all territories except
North America. The increase was a combination of stronger sales of
higher margin product areas - particularly in pro audio where
improved availability of product led to increased sales. With
product being more readily available, inventory levels have been
more stable, and we saw a relatively small change in the aged
inventory provision in the period.
Investments in headcount, made primarily in 2022, led to an
increase in overheads, although this was more than covered by the
improvement in gross profit. As a result, the adjusted operating
profit margin improved from 3.6% in H1 2022 to 4.3% in H1 2023.
Products
Overall revenue from the two mainstream product areas (displays
and projection) declined by around 4%, with a decrease in display
sales being partially offset by an increase in projection revenue.
These mainstream categories now account for an aggregate of 38% of
Group revenue as we continue to diversify into specialist areas.
The gross margin on mainstream categories increased slightly.
Revenue in the specialist product areas of technical video,
audio and lighting grew strongly, with pro audio recording the
largest at 52% growth on the prior year. The overall margin on
these categories also improved strongly.
As expected, revenues in the broadcast segment fell as the
strong demand for home broadcast equipment seen through lockdowns
returned to normal levels.
The Board believes that the current market conditions, highlight
more than ever, the need for manufacturers to use a high-quality
specialist distributor, such as Midwich. We continue to have
significant success with the roll out of brand relationships
acquired over the last few years, together with the expansion of
existing relationships into new territories in EMEA.
Customers
The Group's focus has always been on seeking to provide our
customers with consistently high levels of service and support.
Although our customer base tends to be adaptable and resilient, we
are aware that softer demand in some areas, combined with higher
interest rates, have caused some challenges. We continue to use our
distribution expertise and value add advice to support our
customers through these challenges and to accommodate the needs of
the channel.
Strategy
The Group's strategy remains clearly focused on markets and
product areas where it can leverage its value-add services,
technical expertise, and sales and marketing skills. Services,
expertise and geographies are developed either in-house or through
acquisitions.
Using its market knowledge and skills, the Group provides its
vendors with support to build and execute plans to grow market
share. The Group supports its customers to win and then deliver
successful projects.
Historically, the Group has successfully used acquisitions to
enter new geographical markets and to add both expertise and new
product areas. Once acquired and integrated, businesses are
supported to grow organically and increase profitable market share.
The Group continues to pursue a strong pipeline of opportunities,
either self-sourced or, increasingly, through approaches by
business owners who wish to join a strong AV focused group.
The Group has continued to deliver successfully on this
strategy, completing six strategically aligned acquisitions to date
in 2023 with a strong pipeline of further opportunities.
The Board continues to focus on strengthening the Group's
product offering, technical expertise and geographical reach.
Acquisitions
The Group completed one acquisition during H1 2023.
In June 2023, the Group completed the acquisition of S.F.
Marketing, Inc. ("SFM"), a specialist value-add AV distributor
based in Canada.
Founded in 1978 and based in Montreal, SFM is a leading
value-add distributor of professional AV, with heritage in the
professional audio market. It has 146 employees and over 1,500
customers. The business has grown through long standing
relationships with tier-1 brands and developing a reputation for
offering exceptional levels of service, which remains a key focus
of the business's strategy.
SFM is the Group's second investment in the strategically
important North American region, following the acquisition of
Starin in 2020. SFM also represents Midwich's first physical
presence in Canada, which represents 2.6% of the global AV market,
with the Canadian market expected to grow at a CAGR of 5.4% over
the next 5 years to $11.9bn in 2027. The initial consideration,
plus acquired net debt, for SFM was GBP24.1m.
In July 2023, post the period-end, the Group made five further
acquisitions, each of which add expertise and new product areas to
existing territories.
Starin, the US arm of the Group, expanded its broadcast
technology offering with the acquisitions of Toolfarm.com, Inc and
Digital Media Promos, Inc (trading as 76 Media).
Toolfarm.com, distributes video software products and plugins,
with a particular focus on 3D and motion graphics, whilst 76 Media
is a value-add distributor of high-end video storage and media
asset management hardware to the US market.
In the UK&I, the Group completed the acquisition of HHB
Communications Holdings Limited ("HHB"), a leading supplier of
specialist professional audio equipment, content creation products,
and music technology. Founded in 1976 and with 55 employees, HHB
has built a name for itself in the broadcasting, media and
entertainment market and has supported many notable postproduction
facilities, film, gaming, recording studios, and broadcasters with
its products used by the likes of Warner Brothers, BBC, Sky and
Pinewood Studios.
Representing manufacturers such as RØDE, Genelec, and AVID from
its three London locations, HHB joining the Group further develops
Midwich's offering in these strategically important markets.
Also in the UK&I, the Group acquired Pulse Cinemas Holdings
Limited trading as Pulse Cinemas. Founded in 2003, Pulse Cinemas is
a home cinema distributor with an established reputation for
delivering beautiful cinema spaces with class-leading luxury
brands. Pulse Cinemas enhances the UK&I business' custom
installation offering and also brings state-of-the-art home cinema
demonstration facilities.
In Spain, Midwich Iberia acquired Video Digital Soluciones S.L.
trading as Video Digital. Video Digital is a Barcelona-based
distributor of pro AV equipment in Spain and Portugal with a strong
position in the broadcast market, working with a range of leading
manufacturers, including Blackmagic Design.
These acquisitions bring new technologies, customers and vendor
relationships, further delivering on the Group's strategy to grow
earnings both organically and through selective acquisitions of
strong, complementary businesses.
The acquisition pipeline remains healthy, and the management
team continue to review attractive opportunities in a number of
markets and regions.
Outlook
Despite some softness in the AV market so far in 2023, according
to research published by industry trade body AVIXA in July 2023,
the global AV market is expected to grow at an annualised rate of
5.8% in the five years to 2028.
The Board concurs that the wider AV industry is well positioned
for long-term growth and believes that the Group is very well
placed to take advantage of growth opportunities. In particular,
the Group's ongoing focus on more specialist areas of the market
should help to sustain higher gross margins and drive incremental
profit opportunities.
The Board believes that the Group's major markets will remain
challenging across the remainder of 2023. However, order books
remain steady and underpin the Board's confidence in the Group's
outlook for the current year and beyond.
Trading since the end of H1 has been in line with the Board's
expectations for the full year.
Regional highlights
Six months ended
30 June 30 June Total growth Growth Organic
2023 2022 % at constant growth
GBPm GBPm currency %
%
Revenue
UK & Ireland 234.0 239.3 (2.2%) (2.3%) (6.0%)
EMEA 281.3 247.9 13.5% 9.5% 9.5%
Asia Pacific 25.2 25.0 0.9% 2.3% 2.3%
North America 69.9 56.4 23.9% 18.7% 5.4%
Total Global 610.4 568.6 7.4% 5.1% 2.3%
Gross profit
margin
UK & Ireland 17.7% 15.7% 2.0 ppts
EMEA 15.5% 14.1% 1.4 ppts
Asia Pacific 17.5% 15.7% 1.8 ppts
North America 14.5% 14.7% (0.2) ppts
Total Global 16.3% 14.9% 1.4 ppts
Adjusted operating
profit(1)
UK & Ireland 13.9 10.8 29.0% 28.6%
EMEA 12.5 8.7 44.3% 39.0%
Asia Pacific 0.1 0.2 (33.1%) (21.9%)
North America 3.0 3.1 (4.9%) (8.7%)
Group costs (3.1) (2.6)
Total Global 26.4 20.2 30.9% 27.9%
Adjusted finance
costs (4.6) (1.0)
Adjusted profit
before tax(1) 21.8 19.2 13.4% 10.5%
(1) Definitions of the alternative performance measures are set
out in Note 2
All percentages referenced in this section below are at constant
currency unless otherwise stated.
UK & Ireland
After an exceptionally strong H1 2022, which saw some post
Covid-19 expenditure catch up and associated revenue growth of
86.3%, revenue in the UK & Ireland (UK&I) was marginally
below the prior year. This reflected a slower market for mainstream
products, which is attributed to delayed expenditure by corporate
and education end users. Both have been affected by additional cost
pressures, whilst the education sector has also been impacted by
labour disputes and uncertainty over future wage bills. There was
small contribution from the full year effect of acquisitions
completed at the start of 2022.
Based on industry data, combined with our own analysis of
customer and vendor activity, we believe that we have increased or
maintained market share in the UK&I and we remain confident
that the pro AV market will continue to grow faster than GDP in the
medium term.
The UK&I achieved an exceptional increase in gross profit
margin percentage to 17.7% (H1 2022: 15.7%) reflecting positive
product mix with further growth in technical products and the
continued recovery in higher margin markets such as live events,
entertainment and hospitality.
Adjusted operating profit increased by 28.6% (H1 2022: 119.7%)
in the UK&I to GBP13.9m (H1 2022: GBP10.8m).
EMEA
EMEA achieved further market share gains in the period with
growth of 9.5% (H1 2022: 20.4%) to GBP281.3m (H1 2022: GBP247.9m).
Whilst Germany, EMEA's largest market, experienced similar market
softness to that seen in the UK, there was good growth in all other
territories with very strong demand for technical solutions,
including pro audio and live event solutions, resulting in
exceptional growth in Southern Europe and the Middle East.
Gross profit margins improved to 15.5% (H1 2022: 14.1%) as a
result of favourable product mix and the benefit of product supply
issues now being largely overcome.
Adjusted operating profit in EMEA at GBP12.5m (H1 2022: GBP8.7m)
was up 39.0% on the prior year due to the combined benefit of
revenue growth, the increase in gross margin and operating leverage
in our technical businesses.
Asia Pacific
Revenue in Asia Pacific was up 2.3% on the prior year (H1 2022:
12.2%). There was good growth in mainstream product demand, whilst
broadcast sales returned to normal after a period of strong demand
during the pandemic. Whilst we continue to see a higher level of
enquiries for larger projects, this part of the market has yet to
return to pre-pandemic levels.
The Asia Pacific gross profit margin of 17.5% was 1.8 percentage
points above H1 2022, reflecting increased technical product
mix.
Adjusted operating profit in Asia Pacific was GBP0.1m (H1 2022:
GBP0.2m).
North America
Organic revenue at Starin increased by 5.4% reflecting continue
demand for unified communications solutions. Starin continues to
deliver gross margins which we understand are ahead of the wider
North American market at 14.5% (H1 2022: 14.7%).
Total revenue growth in US dollars was 18.7% (H1 2022: 81.5%)
reflecting the initial contribution from the SFM acquisition at the
beginning of June 2023, whilst exchange rate benefits increased
reported growth to 23.9% (H1 2022: 94.0%). This currency trend is
expected to reverse in the second half of the year.
Adjusted operating profit in North America was slighly below the
prior year at GBP3.0m (H1 2022: GBP3.1m) reflecting further
investment in sales and business management staff in order to
support future growth.
Group costs
Group costs for the half year were GBP3.1m (H1 2022: GBP2.6m).
The increase reflects investment in Group support staff and
inflation.
Operating profit
Adjusted operating profit for the period at GBP26.4m (H1 2022
GBP20.2m) is stated before the impact of acquisition related
expenses of GBP0.3m (H1 2022: GBP0.4m), share based payments and
associated employer taxes of GBP2.8m (H1 2022: GBP2.8m) and
amortisation of acquired intangibles of GBP4.8m (H1 2022: GBP4.3m).
The reported operating profit for the period was GBP18.6m (H1 2022:
GBP12.7m).
Movement in foreign exchange
Compared to the prior year, Sterling weakened against the Euro
and the US Dollar. These movements increased our reported revenue
and adjusted operating profit in H1 by 2.3% and 3.1% respectively.
Following a significant devaluation in Sterling in H2 2022 market
expectations are for GBP to be stronger in the second half, when
compared to the prior year. Based on these expectations the
reported current gains in the first half are expected to fully
reverse in H2 2023. Note, the Group makes most of its sales and
purchases in local currency; this provides a natural hedge for
transactional activity.
Finance costs
Adjusted finance costs for the period were an expense of GBP4.6m
(H1 2022: GBP1.0m) with the increase reflecting the higher interest
rate environment whilst the prior year benefitted from a credit of
GBP0.6m for fair value movements on foreign exchange
derivatives.
Reported finance costs were GBP3.0m (H1 2022: GBP2.3m). The
adjustments to finance costs include fair value movements in
derivatives and foreign exchange movement on borrowings for
acquisitions of (GBP1.5m) (H1 2022: (GBP0.2m)), valuation changes
in deferred and contingent considerations of GBP0.3m (H1 2022:
GBP0.4m), and movements in put option liabilities over
non-controlling interests of (GBP0.4m) (H1 2022: GBP1.1m).
Taxation
The reported tax charge for the period was GBP4.0m (H1 2022:
GBP2.8m). The adjusted effective tax rate was 26.1%; (H1 2022:
24.9%) calculated based on the adjusted tax charge divided by
adjusted profit before tax. The increase in effective tax rate is
attributable to higher tax rates in the UK and the change in
geographic mix.
Cash flows and net debt
The Group had an adjusted net cash inflow from operations before
tax of GBP8.2m for the period (H1 2022: GBP7.6m outflow). The first
half is traditionally more working capital intensive when compared
with the full year due to the seasonality of demand, especially in
the education sector. Overall working capital levels, as a
percentage of annualised revenue, were consistent with the same
period in the prior year. The Board is comfortable that the Group's
long-term average annual cash conversion rate (70-80%) remains
sustainable.
Gross capital spend on tangible assets was GBP2.4m (H1 2022:
GBP3.4m) and included investment in rental assets in UK&I. An
investment of GBP5.9m in intangible fixed assets (H1 2022: GBP2.0m)
was predominantly in relation to the Group's new ERP solution.
Adjusted net debt (excluding leases liabilities), was GBP102.1m
at 30 June 2023 (GBP112.5m at 30 June 2022), equivalent to 1.5x
adjusted EBITDA.
The adoption of IFRS 16 in 2019 resulted in an increase in
recognised lease liabilities (predominantly for office, showroom
and warehouse facilities). Lease liabilities excluded from adjusted
net debt totalled GBP22.8m at 30 June 2023 (GBP23.0m 30 June 2022).
Total net debt was GBP124.9m at 30 June 2023 (GBP135.5m at 30 June
2022).
On the 8(th) June 2023 the Group successfully completed an
equity placing of 11,764,705 shares, together with the completion
of a retail offer of 294,233 shares, at a price per share of 425p.
The total net proceeds of GBP50m were used to finance the
acquisition of SF Marketing and to repay Group borrowings to
provide further headroom to fund other pipeline acquisitions. In
the first half, adjusted net debt was impacted by net payments
totalling GBP29.5m (H1 2022: GBP23.5m) in respect of acquisitions,
deferred consideration and the purchase of minority shareholdings
in the period.
In January 2023, the Group increased its revolving credit
facility to GBP175m (GBP80m at 31 December 2022) to finance future
acquisitions. This facility is supported by six banks, is for a 4
1/2 year term, and has an adjusted net debt to adjusted EBITDA
covenant ratio of 3 times and an adjusted interest cover covenant
of 4 times adjusted EBITDA. The EBITDA covenant is calculated on a
historical twelve-month basis and includes the full benefit of the
prior year's earnings of any businesses acquired. Other borrowing
facilities are to provide working capital financing. The Group has
access to total facilities of c.GBP300m.
The Group has various instruments to hedge certain exchange rate
and interest rate exposures. These include borrowing in local
currency to finance acquisitions and financial instruments to fix
part of the Group's interest charges. These instruments are marked
to market at the end of each reporting period, with the change in
valuation recognised in the income statement. Given any amounts
recognised generally arise from market movements, and accordingly
bear no direct relation to the Group's underlying performance, any
gains or losses have been excluded from adjusted profit
measures.
Dividend
The Board is pleased to declare an interim dividend of 5.5 pence
per share (H1 2022: 4.5p), an increase of 22%. This will be paid on
27(th) October 2023 to those shareholders on the Company's register
as at 22(nd) September 2023. The last day to elect for dividend
reinvestment ("DRIP") is 6(th) October 2023.
The Board believes in a progressive dividend policy to reflect
the Group's strong earnings and cash flow while maintaining an
appropriate level of dividend cover to allow for investment in
longer-term growth.
Stephen Fenby
Managing Director
Unaudited consolidated income statement for the 6 months ended
30 June 2023
Note 30 June 30 June 31 December 2022
2023 2022
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
Revenue 610,442 568,566 1,204,049
Cost of sales (510,868) (483,829) (1,020,335)
---------- ---------- -----------------
Gross profit 99,574 84,737 183,714
Distribution costs (61,126) (52,327) (109,042)
Administrative expenses (23,411) (22,535) (45,592)
Other operating income 3,514 2,784 5,973
---------- ---------- -----------------
Operating profit 18,551 12,659 35,053
Adjusted operating profit 26,424 20,187 51,108
Costs of acquisitions (306) (377) (435)
Share based payments (2,385) (2,548) (6,031)
Employer taxes on share based payments (370) (252) (176)
Amortisation of brands, customer and supplier relationships (4,812) (4,351) (9,413)
------------------------------------------------------------- ----- ---------- ---------- -----------------
18,551 12,659 35,053
Finance income 63 91 95
Finance costs 5 (3,018) (2,386) (10,232)
---------- ---------- -----------------
Profit before taxation 15,596 10,364 24,916
Taxation (4,037) (2,802) (8,061)
---------- ---------- -----------------
Profit after taxation 11,559 7,562 16,855
========== ========== =================
Profit for the financial period/year attributable to:
The Company's equity shareholders 10,959 6,996 15,293
Non-controlling interests 600 566 1,562
---------- ---------- -----------------
11,559 7,562 16,855
========== ========== =================
Basic earnings per share 3 12.14p 7.93p 17.32p
Diluted earnings per share 3 11.76p 7.69p 16.74p
Unaudited consolidated statement of comprehensive income for 6
months ended 30 June 2023
30 June 30 June 31 December
2023 2022 2022
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
Profit for the period/financial year 11,559 7,562 16,855
Other comprehensive income
Items that will not be reclassified subsequently
to profit or loss:
Actuarial gains and (losses) on retirement
benefit obligations - - 588
Items that will be reclassified subsequently
to profit or loss:
Foreign exchange gains/(losses) on consolidation (6,307) 5,895 8,282
---------- ---------- ------------
Other comprehensive income for the financial
period/year, net of tax (6,307) 5,895 8,870
Total comprehensive income for the period/financial
year 5,252 13,457 25,725
========== ========== ============
Attributable to:
Owners of the Parent Company 5,015 12,259 23,419
Non-controlling interests 237 1,198 2,306
5,252 13,457 25,725
========== ========== ============
Unaudited consolidated statement of financial position as at 30
June 2023
Note 30 June 30 June 31 December
2023 2022 2022
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
Assets
Non-current assets
Goodwill 38,443 35,430 35,765
Intangible assets 86,095 76,877 76,002
Right of use assets 20,955 20,993 21,559
Property, plant and equipment 15,890 14,636 14,961
Deferred tax assets 3,092 3,571 2,567
---------- ---------- ------------
164,475 151,507 150,854
Current assets
Inventories 168,262 171,446 159,823
Trade and other receivables 236,967 216,792 218,612
Derivative financial instruments 4,033 2,956 4,630
Cash and cash equivalents 20,095 17,380 25,855
---------- ---------- ------------
429,357 408,574 408,920
Current liabilities
Trade and other payables (220,621) (231,718) (225,899)
Derivative financial instruments (176) - (1,483)
Put option liabilities over non-controlling
interests (9,301) (3,042) -
Deferred and contingent considerations (9,642) (527) (9,275)
Borrowings and financial liabilities (65,531) (61,145) (44,955)
Current tax (2,685) (3,651) (3,541)
---------- ---------- ------------
(307,956) (300,083) (285,153)
Net current assets 121,401 108,491 123,767
---------- ---------- ------------
Total assets less current liabilities 285,876 259,998 274,621
Non-current liabilities
Trade and other payables (1,694) (1,694) (1,872)
Put option liabilities over non-controlling
interests (6,231) (12,113) (15,975)
Deferred and contingent considerations - (16,922) (8,157)
Borrowings and financial liabilities (79,481) (91,731) (100,324)
Deferred tax liabilities (12,563) (10,510) (10,576)
Other provisions (3,635) (3,770) (3,583)
---------- ---------- ------------
(103,604) (136,740) (140,487)
Net assets 182,272 123,258 134,134
========== ========== ============
Equity
Share capital 6 1,033 889 889
Share premium 116,959 67,047 67,047
Share based payment reserve 10,404 10,118 12,025
Investment in own shares 6 (20) (7) (5)
Retained earnings 51,448 39,516 46,023
Translation reserve (588) 3,081 5,356
Put option reserve (10,799) (13,684) (10,799)
Capital redemption reserve 50 50 50
Other reserve 150 150 150
---------- ---------- ------------
Equity attributable to owners of
Parent Company 168,637 107,160 120,736
Non-controlling interests 13,635 16,098 13,398
Total equity 182,272 123,258 134,134
========== ========== ============
Unaudited consolidated statement of changes in equity for 6
months ended 30 June 2023
For the period ended 30 June 2023
Equity
Investment attributable
Share Share in own Retained Other to owners of Non-controlling
capital premium shares earnings reserves the Parent interests Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
(note 6 ) (note 7 )
Balance at 1
January 2023 889 67,047 (5) 46,023 6,782 120,736 13,398 134,134
Profit for the
period - - - 10,959 - 10,959 600 11,559
Other
comprehensive
income - - - - (5,944) (5,944) (363) (6,307)
---------------- --------
Total
comprehensive
income for
the year - - - 10,959 (5,944) 5,015 237 5,252
Shares issued
(note 6 ) 144 49,912 (23) - - 50,033 - 50,033
Share based
payments - - - - 2,357 2,357 - 2,357
Deferred tax
on share
based
payments - - - - (124) (124) - (124)
Share options
exercised - - 8 3,854 (3,854) 8 - 8
Dividends paid
(note 14 ) - - - (9,388) - (9,388) - (9,388)
Balance at 30
June 2023
(unaudited) 1,033 116,959 (20) 51,448 (783) 168,637 13,635 182,272
========== ========= =========== ========== ========== ============= ================ ========
For the period ended 30 June 2022
Equity
Investment attributable
Share Share in own Retained Other to owners of Non-controlling
capital premium shares earnings reserves the Parent interests Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
(note 6 ) (note 7 )
Balance at 1
January 2022 887 67,047 (5) 39,078 (1,887) 105,120 9,276 114,396
Profit for the
period - - - 6,996 - 6,996 566 7,562
Other
comprehensive
income - - - - 5,263 5,263 632 5,895
---------------- --------
Total
comprehensive
income for the
year - - - 6,996 5,263 12,259 1,198 13,457
Shares issued
(note 6 ) 2 - (2) - - - - -
Share based
payments - - - - 2,535 2,535 - 2,535
Deferred tax on
share based
payments - - - - (220) (220) - (220)
Share options
exercised - - - 76 (76) - - -
Acquisition of
subsidiaries
(note 8 ) - - - - (6,933) (6,933) 6,933 -
Dividends paid
(note 14 ) - - - (6,910) - (6,910) - (6,910)
Acquisition of
non-controlling
interest (note
9 ) - - - 276 1,033 1,309 (1,309) -
---------- -------- ----------- --------- ---------- ------------- ---------------- --------
Balance at 30
June 2022
(unaudited) 889 67,047 (7) 39,516 (285) 107,160 16,098 123,258
========== ======== =========== ========= ========== ============= ================ ========
For the year ended 31 December 2022 (audited)
Equity
Investment attributable
Share Share in own Retained Other to owners of Non-controlling
capital premium shares earnings reserves the Parent interests Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
(note 6 ) (note 7 )
Balance at 1
January 2022 887 67,047 (5) 39,078 (1,887) 105,120 9,276 114,396
Profit for the
year - - - 15,293 - 15,293 1,562 16,855
Other
comprehensive
income - - - 588 7,538 8,126 744 8,870
---------------- ---------
Total
comprehensive
income for the
year - - - 15,881 7,538 23,419 2,306 25,725
Shares issued
(note 6 ) 2 - (2) - - - - -
Share based
payments - - - - 6,006 6,006 - 6,006
Deferred tax on
share based
payments - - - - (1,093) (1,093) - (1,093)
Share options
exercised - - 2 766 (767) 1 - 1
Acquisition of
subsidiaries
(note 8 ) - - - - (6,933) (6,933) 6,933 -
Dividends paid
(note 14 ) - - - (10,901) - (10,901) - (10,901)
Acquisition of
non-controlling
interest (note
9 ) - - - 1,199 3,918 5,117 (5,117) -
Balance at 31
December 2022 889 67,047 (5) 46,023 6,782 120,736 13,398 134,134
========== ======== =========== ========= ========== ============= ================ =========
Unaudited consolidated cashflow statement for 6 months ended 30
June 2023
30 June 30 June 31 December
2023 2022 2022
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
Cash flows from operating activities
Profit before tax 15,596 10,364 24,916
Depreciation 3,817 3,429 7,039
Amortisation 5,067 4,530 9,807
(Gain)/loss on disposal of assets (65) 3 141
Share based payments 2,357 2,535 6,006
Foreign exchange (gains)/losses (3,529) 1,405 3,827
Finance income (63) (91) (95)
Finance costs 3,018 2,386 10,232
---------- ---------- ------------
Profit from operations before changes
in working capital 26,198 24,561 61,873
(Increase)/decrease in inventories 2,353 (27,293) (15,670)
Increase in trade and other receivables (9,138) (68,834) (70,654)
Increase/(decrease) in trade and other
payables (15,094) 65,019 59,779
---------- ---------- ------------
Cash inflow/(outflow) from operations 4,319 (6,547) 35,328
Income tax paid (6,134) (3,714) (9,142)
---------- ---------- ------------
Net cash inflow/(outflow) from operating
activities (1,814) (10,261) 26,186
Cash flows from investing activities
Acquisition of businesses net of cash
acquired (20,215) (22,372) (22,372)
Purchase of intangible assets (5,945) (2,018) (5,760)
Purchase of plant and equipment (2,442) (3,434) (5,328)
Proceeds on disposal of plant and equipment 226 27 140
Interest received 63 91 95
---------- ---------- ------------
Net cash outflow from investing activities (28,313) (27,706) (33,225)
Cash from financing activities
Gross proceeds on issue of shares 51,250 - -
Costs associated with shares issued (1,217) - -
Proceeds on exercise of share options 8 - 1
Deferred and contingent considerations
paid (9,300) - (198)
Acquisition of non-controlling interest - (1,063) (3,974)
Dividends paid (9,388) (6,910) (10,901)
Invoice financing inflows 2,948 11,714 14,282
Proceeds from borrowings 1,525 32,685 31,304
Repayment of loans (16,436) (2,866) (4,947)
Interest paid (4,240) (1,713) (5,217)
Interest on leases (419) (230) (602)
Capital element of lease payments (2,235) (3,848) (4,126)
---------- ---------- ------------
Net cash inflow from financing activities 12,496 27,769 15,622
Net decrease in cash and cash equivalents (17,632) (10,198) 8,583
Cash and cash equivalents at beginning
of period/year 20,938 11,639 11,639
Effects of exchange rate changes (409) 491 716
Cash and cash equivalents at end of
period/year 2,897 1,932 20,938
========== ========== ============
Comprising:
Cash at bank 20,095 17,380 25,855
Bank overdrafts (17,198) (15,448) (4,917)
2,897 1,932 20,938
========= ========= ========
Notes to the interim consolidated financial information
1. General information
The interim financial information for the period to 30 June 2023
is unaudited and does not constitute statutory financial statements
within the meaning of Section 434 of the Companies Act 2006.
The interim consolidated financial information does not include
all the information required for statutory financial statements in
accordance with UK adopted International Accounting Standards
("IAS"), and should therefore be read in conjunction with the
consolidated financial statements for the year ended 31 December
2022.
2. Accounting policies
Basis of preparation
The interim financial information in this report has been
prepared on the basis of the accounting policies set out in the
audited financial statements for the year ended 31 December 2022.
The audited financial statements for the year ended 31 December
2022 were prepared in accordance with UK adopted International
Accounting Standards ("IAS") in conformity with the requirements of
the Companies Act 2006.
The directors have adopted the going concern basis in preparing
the financial information. In assessing whether the going concern
assumption is appropriate, the directors have taken into account
all relevant available information about the foreseeable
future.
The statutory accounts for the year ended 31 December 2022, have
been delivered to the Registrar of Companies. The auditors reported
on these accounts; their report was unqualified; did not contain a
statement under section 498(2) or 498(3) of the Companies Act 2006,
and did not include reference to any matters to which the auditor
drew attention by way of emphasis.
Use of alternative performance measures
The Group has defined certain measures that it uses to
understand and manage performance. These measures are not defined
under IAS and they may not be directly comparable with other
companies' adjusted measures. These non-GAAP measures are not
intended to be a substitute for any IAS measures of performance,
but management has included them as they consider them to be key
measures used within the business for assessing the underlying
performance.
Growth at constant currency: This measure shows the year on year
change in performance after eliminating the impact of foreign
exchange movement, which is outside of management's control.
Organic growth: This is defined as growth at constant currency
growth excluding acquisitions until the first anniversary of their
consolidation.
Adjusted operating profit: Adjusted operating profit is
disclosed to indicate the Group's underlying profitability. It is
defined as profit before acquisition related expenses, share based
payments and associated employer taxes and amortisation of brand,
customer and supplier relationship intangible assets. Share based
payments are adjusted to the provide transparency over the
costs.
Adjusted EBITDA: This represents operating profit before
acquisition related expenses, share based payments and associated
employer taxes, depreciation and amortisation.
Adjusted profit before tax: This is profit before tax adjusted
for acquisition related expenses, share based payments and
associated employer taxes, amortisation of brand, customer and
supplier relationship intangible assets, changes in deferred or
contingent considerations and put option liabilities over
non-controlling interests, foreign exchange gains or losses on
borrowings for acquisitions, fair value movements on derivatives
for borrowings, and financing fair value remeasurements.
Adjusted profit after tax: This is profit after tax adjusted for
acquisition related expenses, share based payments and associated
employer taxes, amortisation of brand, customer and supplier
relationship intangible assets, changes in deferred or contingent
considerations and put option liabilities over non-controlling
interests, foreign exchange gains or losses on borrowings for
acquisitions, fair value movements on derivatives for borrowings,
and financing fair value remeasurements and the tax thereon.
Adjusted EPS: Adjusted EPS is EPS calculated using the basis of
adjusted profit after tax instead of profit after tax after
deducting adjustments to profit after tax due to non-controlling
interests.
Adjusted net debt: Net debt is borrowings less cash and cash
equivalents. Adjusted net debt excludes leases.
Adjusted net debt: Adjusted EBITDA: This is calculated as per
the Group's RCF debt facility covenant and includes the benefit of
proforma annualised earnings for acquisitions completed in the last
12 months.
3. Earnings per share
Basic earnings per share is calculated by dividing the profit
after tax attributable to equity shareholders of the Company by the
weighted average number of shares outstanding during the year.
Shares outstanding is the total shares issued less the own shares
held in employee benefit trusts. Diluted earnings per share is
calculated by dividing the profit after tax attributable to equity
shareholders of the Company by the weighted average number of
shares in issue during the year adjusted for the effects of all
dilutive potential Ordinary Shares.
The Group's earnings per share and diluted earnings per share,
are as follows:
June June December
2023 2022 2022
Profit attributable to equity holders of
the Parent Company (GBP'000) 10,959 6,996 15,293
Weighted average number of shares outstanding 90,242,805 88,224,914 88,299,098
Dilutive (potential dilutive) effect of
share options 2,974,694 2,701,810 3,064,305
----------- ----------- -----------
Weighted average number of ordinary shares
for the purposes of diluted earnings per
share 93,217,499 90,926,724 91,363,403
=========== =========== ===========
Basic earnings per share 12.14p 7.93p 17.32p
=========== =========== ===========
Diluted earnings per share 11.76p 7.69p 16.74p
=========== =========== ===========
4. Segmental reporting
EMEA North Other
UK & Asia America Total
Ireland Pacific GBP'000 GBP'000
30 June 2023 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------- ---------- -------------- ----------- ----------- ---------------- ------------
Revenue 234,022 281,284 25,252 69,884 - 610,442
Gross profit 41,450 43,580 4,427 10,117 - 99,574
Gross profit % 17.7% 15.5% 17.5% 14.5% - 16.3%
Adjusted operating profit 13,909 12,583 101 2,957 (3,126) 26,424
Cost of acquisitions - - - - (306) (306)
Share based payments (947) (733) (158) (48) (499) (2,385)
Employer taxes on share
based payments (112) (168) (12) (5) (74) (371)
Amortisation of brand,
customer and supplier
relationships (2,142) (1,780) (136) (753) - (4,812)
Operating profit 10,708 9,902 (205) 2,151 (4,005) 18,550
--------------------------- ---------- -------------- ----------- ----------- ---------------- ------------
Net interest expense (2,955)
------------
Profit before tax 15,595
============
Other segmental information
EMEA North
UK & Asia America Other Total
Ireland Pacific GBP'000
June 2023 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Segment assets 246,154 241,682 23,532 81,069 1,395 593,832
Segment liabilities (187,844) (170,034) (19,600) (32,691) (1,391) (411,560)
--------------------------- ---------- -------------- ----------- ----------- ---------------- ------------
Segment net assets 58,310 71,648 3,932 48,378 4 182,272
Depreciation 1,501 1,665 275 375 - 3,817
Amortisation 2,248 1,812 144 863 - 5,067
UK International Total
Other segmental information GBP'000 GBP'000 GBP'000
--------------------------------------------------- --------------- ----------- ---------------- ------------
Non-current assets 73,239 91,236 164,475
Deferred tax assets 1,806 1,286 3,092
Non-current assets excluding deferred
tax 71,433 89,950 161,383
EMEA North Other
UK & Asia America Total
Ireland Pacific GBP'000 GBP'000
30 June 2022 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------- ---------- -------------- ----------- ----------- ---------------- ------------
Revenue 239,270 247,882 25,017 56,396 - 568,565
Gross profit 37,635 34,864 3,932 8,307 - 84,738
Gross profit % 15.7% 14.1% 15.7% 14.7% - 14.9%
Adjusted operating profit 10,781 8,723 151 3,109 (2,578) 20,186
Cost of acquisitions - - - - (377) (377)
Share based payments (993) (811) (201) (34) (508) (2,548)
Employer taxes on share
based payments (83) (91) (5) (2) (72) (252)
Amortisation of brand,
customer and supplier
relationships (1,899) (1,664) (139) (650) - (4,351)
Operating profit 7,806 6,158 (193) 2,423 (3,534) 12,658
--------------------------- ---------- -------------- ----------- ----------- ---------------- ------------
Net interest expense (2,295)
------------
Profit before tax 10,363
============
Other segmental information
EMEA North
UK & Asia America Other Total
Ireland Pacific GBP'000
June 2022 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Segment assets 244,504 234,593 23,714 55,930 1,340 560,081
Segment liabilities (211,363) (177,710) (19,351) (27,561) (838) (436,823)
--------------------------- ---------- -------------- ----------- ----------- ---------------- ------------
Segment net assets 33,141 56,883 4,363 28,369 502 123,528
Depreciation 1,313 1,625 256 235 - 3,429
Amortisation 1,941 1,695 146 747 - 4,530
UK International Total
Other segmental information GBP'000 GBP'000 GBP'000
--------------------------------------------------- --------------- ----------- ---------------- ------------
Non-current assets 67,310 84,197 151,507
Deferred tax assets 2,244 1,327 3,571
Non-current assets excluding deferred
tax 65,066 82,870 147,936
UK EMEA Asia North Other Total
& Ireland Pacific America
31 December 2022 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------------- ------------- ------------ --------- ------------- ----------- --------------
Revenue 492,203 534,962 53,763 123,121 - 1,204,049
Gross profit 79,104 78,014 9,312 17,284 - 183,714
Gross profit % 16.1% 14.6% 17.3% 14.0% - 15.3%
Adjusted operating profit 26,500 22,718 1,378 6,437 (5,925) 51,108
Costs of acquisitions - - - - (435) (435)
Share based payments (2,260) (1,911) (469) (96) (1,295) (6,031)
Employer taxes on share based
payments (56) (57) 3 (4) (62) (176)
Amortisation of brands, customer
and supplier relationships (4,201) (3,566) (282) (1,364) - (9,413)
Operating profit 19,983 17,184 630 4,973 (7,717) 35,053
----------------------------------------- ------------- ------------ --------- ------------- ----------- --------------
Interest (10,137)
--------------
Profit before tax 24,916
==============
EMEA
UK Asia North Other Total
& Ireland Pacific America
December 2022 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Segment assets 235,716 245,321 27,024 51,002 711 559,774
Segment liabilities (196,934) (187,802) (19,013) (20,985) (906) (425,640)
----------------------------------------- ------------- ------------ --------- ------------- ----------- --------------
Segment net assets 38,782 57,519 8,011 30,017 (195) 134,134
Depreciation 2,731 3,294 443 571 - 7,039
Amortisation 4,290 3,652 297 1,568 - 9,807
UK International Total
Other segmental information GBP'000 GBP'000 GBP'000
---------------------------------------------------------------- --------------- -------- ---------------- --------
Non-current assets 68,547 82,307 150,854
Deferred tax asset 1,051 1,516 2,567
Non-current assets excluding deferred
tax 67,496 80,791 148,287
5. Finance costs
June June December
2023 2022 2022
GBP'000 GBP'000 GBP'000
Interest on overdraft and invoice discounting 1,413 765 2,221
Interest on leases 419 230 602
Interest on loans 2,756 740 2,470
Fair value movements on foreign exchange derivatives 141 (644) 733
Other interest costs 2 2 26
Fair value movements on derivatives for borrowings (763) (1,613) (2,888)
Foreign exchange (gains)/losses on borrowings
for acquisitions (751) 1,390 1,694
Interest, foreign exchange and other finance
costs of deferred and contingent considerations 243 382 508
Interest, foreign exchange and other finance
costs of put option liabilities (442) 1,134 4,866
3,018 2,386 10,232
======== ======== =========
6. Share capital
The total allotted share capital of the Parent Company is:
Allotted, issued and fully paid
June 2023 June 2022 December 2022
Classed as equity: Number GBP'000 Number GBP'000 Number GBP'000
Issued and fully paid
ordinary shares of
GBP0.01 each
Opening balance 88,879,912 889 88,735,612 887 88,735,612 887
Shares issued 14,371,414 144 144,300 2 144,300 2
Closing balance 103,251,326 1,033 88,879,912 889 88,879,912 889
============ ======== =========== ======== =========== ========
During the period Midwich Group plc issued 2,312,476 shares
(2022: 144,300) into an employee benefit trust and 12,058,938
shares for total proceeds less issue cost of GBP50,033k.
Own shares held in employee benefit trusts
June 2023 June 2022 December 2022
Number GBP'000 Number GBP'000 Number GBP'000
Issued and fully paid
ordinary shares of
GBP0.01 each
Opening balance 501,460 5 518,300 5 518,300 5
Shares issued 2,312,476 23 144,300 2 144,300 2
Exercise of share options (833,092) (8) (18,140) - (161,140) (2)
Closing balance 1,980,844 20 644,460 7 501,460 5
========== ======== ========= ======== ========== ========
A reconciliation of LTIP option movements during the current and
comparative period, and the year to 31 December 2022 is as
follows:
Six months Six months Twelve
to June to June months
2023 2022 to December
2022
Outstanding at 1 January 4,115,317 3,284,374 3,284,374
Granted - 1,004,141 1,004,141
Lapsed (10,200) (43,058) (89,458)
Exercised (827,992) (14,240) (83,740)
Outstanding at period end 3,277,125 4,231,217 4,115,317
=========== =========== =============
A reconciliation of SIP option movements during the current and
comparative period, and the year to 31 December 2022 is as
follows:
Six months Six months Twelve
to June to June months
2023 2022 to December
2022
Outstanding at 1 January 280,800 267,900 267,900
Granted 111,300 106,800 106,800
Lapsed (3,300) (8,700) (16,500)
Exercised (5,100) (3,900) (77,400)
Outstanding at period end 383,700 362,100 280,800
=========== =========== =============
7. Other reserves
Movement in other reserves for the year ended 30 June 2023
(Unaudited)
Share based Translation Put option Capital Other reserve Total
payment reserve reserve reserve redemption
reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1
January 2023 12,025 5,356 (10,799) 50 150 6,782
Other
comprehensive
income - (5,944) - - - (5,944)
---------------- ---------------- ----------------- ---------------- ------------- -------
Total
comprehensive
income for
the period - (5,944) - - - (5,944)
Share based
payments 2,357 - - - - 2,357
Deferred tax
on share
based
payments (124) - - - - (124)
Share options
exercised (3,854) - - - - (3,854)
Balance at 30
June 2023 10,404 (588) (10,799) 50 150 (783)
================ ================ ================= ================ ============= =======
Movement in other reserves for the year ended 30 June 2022
(Unaudited)
Share based Translation Put option Capital Other reserve Total
payment reserve reserve reserve redemption
reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1
January 2022 7,879 (2,182) (7,784) 50 150 (1,887)
Other
comprehensive
income - 5,263 - - - 5,263
--------------- ---------------- ---------------- ---------------- ------------- -------
Total
comprehensive
income for the
period - 5,263 - - - 5,263
Share based
payments 2,535 - - - - 2,535
Deferred tax on
share based
payments (220) - - - - (220)
Share options
exercised (76) - - - - (76)
Acquisition of
subsidiaries
(note 8 ) - - (6,933) - - (6,933)
Acquisition of
non-controlling
interest (note
9 ) - - 1,033 - - 1,033
--------------- ---------------- ---------------- ---------------- ------------- -------
Balance at 30
June 2022 10,118 3,081 (13,684) 50 150 (285)
=============== ================ ================ ================ ============= =======
Movement in other reserves for the year ended 31 December 2022
(Audited)
Share based Translation Put option Capital Other reserve Total
payment reserve reserve reserve redemption
reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1
January 2022 7,879 (2,182) (7,784) 50 150 (1,887)
Other
comprehensive
income - 7,538 - - - 7,538
--------------- ---------------- ---------------- ---------------- ------------- -------
Total
comprehensive
income for the
year - 7,538 - - - 7,538
Share based
payments 6,006 - - - - 6,006
Deferred tax on
share based
payments (1,093) - - - - (1,093)
Share options
exercised (767) - - - - (767)
Acquisition of
subsidiary
(note 8 ) - - (6,933) - - (6,933)
Acquisition of
non-controlling
interest (note
9 ) - - 3,918 - - 3,918
Balance at 31
December 2022 12,025 5,356 (10,799) 50 150 6,782
=============== ================ ================ ================ ============= =======
8. Business combinations
Acquisitions were completed by the Group during the current and
comparative periods to increase scale, broaden its addressable
market and widen the product offering.
Subsidiaries acquired
Acquisition Principal activity Date of Proportion Fair value
acquisition acquired of consideration
(%) GBP'000
Distribution of audio
SF Marketing visual products to trade
Inc (SFM) customers 7 June 2023 100% 20,983
Distribution of audio
Cooper Projects visual products to trade 7 January
Limited (DVS) customers 2022 65% 12,877
Distribution of audio
Nimans Limited visual products to trade 7 February
(Nimans) customers 2022 100% 27,271
2023 acquisitions
Fair value of consideration transferred 2023
SFM
GBP'000
Cash 19,633
Deferred consideration 1,350
-------
Total 20,983
=======
Acquisition costs of GBP306k in relation to the acquisitions of
SFM and other acquisitions not completed by the period end were
expensed to the income statement during the period ended 30 June
2023.
Fair value of acquisitions 2023
SFM
GBP'000
Non-current assets
Goodwill 3,569
Intangible assets - brands 1,686
Intangible assets - customer relationships 2,486
Intangible assets - supplier relationships 6,901
Intangible assets - patents and software 284
Right of use assets 972
Plant and equipment 686
Deferred tax 411
--------
16,995
Current assets
Inventories 10,792
Trade and other receivables 9,217
Derivative financial instruments 21
Cash and cash equivalents 118
--------
20,148
Current liabilities
Trade and other payables (9,690)
Borrowings and financial liabilities (700)
--------
(10,390)
Non-current liabilities
Borrowings and financial liabilities (2,781)
Deferred tax (2,989)
--------
(5,770)
Non-controlling interests -
--------
Fair value of net assets acquired attributable to equity shareholders of the Parent Company 20,983
========
Goodwill acquired in 2023 relates to the workforce, synergies
and sales know how. Goodwill arising on the SFM acquisition has
been allocated to the North America segment.
Net cash outflow on acquisition of subsidiaries 2023
SFM
GBP'000
Consideration paid in cash 19,633
Plus: cash and cash equivalent overdraft balances acquired 582
Net cash outflow 20,215
=======
Plus: borrowings acquired 3,841
-------
Net debt outflow 24,056
=======
2022 acquisitions
Fair value of consideration transferred 2022
DVS Nimans
GBP'000 GBP'000
Cash 8,580 16,500
Deferred consideration 4,297 10,771
------- -------
Total 12,877 27,271
======= =======
Acquisition costs of GBP377k in relation to the acquisitions of
DVS and Niman were expensed to the income statement during the
period ended 30 June 2022.
Fair value of acquisitions 2022
DVS Nimans
GBP'000 GBP'000
Non-current assets
Goodwill 5,055 8,388
Intangible assets - brands 1,288 2,950
Intangible assets - customer relationships 799 4,809
Intangible assets - supplier relationships 5,948 8,591
Intangible assets - patents and software 103 -
Right of use assets 314 1,610
Property, plant and equipment 242 510
------- --------
13,749 26,858
Current assets
Inventories 6,513 11,815
Trade and other receivables 7,842 15,861
Current tax - 18
Cash and cash equivalents 643 2,065
------- --------
14,998 29,759
Current liabilities
Trade and other payables (2,298) (22,308)
Borrowings and financial liabilities (4,147) (255)
Current tax (142) -
------- --------
(6,587) (22,563)
Non-current liabilities
Borrowings and financial liabilities (228) (2,059)
Provisions (65) (832)
Deferred tax (2,057) (3,892)
------- --------
(2,350) (6,783)
Non-controlling interests (6,933) -
------- --------
Fair value of net assets acquired attributable to equity shareholders of the Parent Company 12,877 27,271
======= ========
Goodwill acquired in 2022 relates to the workforce, synergies
and sales know how. Goodwill arising on both acquisitions has been
allocated to the United Kingdom and Ireland segment.
Net cash outflow on acquisition of subsidiaries 2022
DVS Nimans
GBP'000 GBP'000
Consideration paid in cash 8,580 16,500
Less: cash and cash equivalent balances acquired (643) (2,065)
Net cash outflow 7,937 14,435
======= =======
Plus: borrowings acquired 4,375 2,314
------- -------
Net debt outflow 12,312 16,749
======= =======
9. Acquisition of non-controlling interest
During the period to 30 June 2022 the Group acquired the
remaining 11.5% non-controlling interest in Earpro SA, which had a
value of GBP1,309k, for a consideration of GBP1,063k. GBP1,033k of
the put option reserve was transferred to retained earnings when
this element of the put option was extinguished. During the
remainder of 2022 the Group acquired the remaining 20.0%
non-controlling interest in Prase Engineering SpA, which had a
value of GBP3,808k, for a consideration of GBP2,912k. GBP2,885k of
the put option reserve was transferred to retained earnings when
this element of the put option was extinguished.
10. Currency impact
The Group reports in Pounds Sterling (GBP) but has significant
revenues and costs as well as assets and liabilities that are
denominated in Euros (EUR), Dollars (USD) and Australian Dollars
(AUD). The table below sets out the exchange rates in the current
and prior periods.
Six months Six months At 30 At 30 At 31
to 30 June to 30 June June 2023 June 2022 December
2023 2022 2022
Average Average
EUR/GBP 1.144 1.185 1.165 1.162 1.128
AUD/GBP 1.841 1.808 1.910 1.766 1.771
NZD/GBP 1.987 1.959 2.075 1.953 1.897
USD/GBP 1.236 1.297 1.271 1.214 1.204
CHF/GBP 1.128 1.216 1.137 1.163 1.111
NOK/GBP 12.925 11.815 13.619 12.000 11.846
AED/GBP 4.540 4.769 4.667 4.466 4.435
QAR/GBP 4.500 4.726 4.626 4.426 4.396
The following tables illustrate the effect of changes in foreign
exchange rates in the EUR, AUD, NZD, USD, CHF, NOK, AED, and QAR
relative to the GBP on the profit before tax and net assets. The
amounts are calculated retrospectively by applying the current
period exchange rates to the prior period results so that the
current period exchange rates are applied consistently across both
periods. Changing the comparative result illustrates the effect of
changes in foreign exchange rates relative to the current period
result.
Applying the current period exchange rates to the results of the
prior period has the following effect on the translation of profit
before tax and net assets of foreign entities:
Profit before tax
Revised 2022 2022 Impact Impact
GBP'000 GBP'000 GBP'000 %
EUR 10,628 10,364 264 2.5%
AUD 10,366 10,364 2 -%
NZD 10,366 10,364 2 -%
USD 10,463 10,364 99 1.0%
CHF 10,353 10,364 (11) (0.1%)
NOK 10,356 10,364 (8) (0.1%)
AED 10,464 10,364 100 1.0%
QAR 10,358 10,364 (6) (0.1%)
All currencies 10,806 10,364 442 4.3%
Net assets
Revised 2022 2022 Impact Impact
GBP'000 GBP'000 GBP'000 %
EUR 123,061 123,258 (197) (0.2%)
AUD 123,066 123,258 (192) (0.2%)
NZD 123,249 123,258 (9) -%
USD 122,684 123,258 (574) (0.5%)
CHF 123,249 123,258 (9) -
NOK 122,989 123,258 (269) (0.2%)
AED 122,825 123,258 (433) (0.4%)
QAR 123,170 123,258 (88) (0.1%)
All currencies 121,487 123,258 (1,771) (1.4%)
11. Events after the reporting date
On 5 July 2023 the Group acquired 100% of Toolfarm.com Inc based
in the United States of America. The business specialises in the
distribution of video editing software. The consideration is
comprised of an initial payment of $6,430k.
In addition to the acquisition of Toolfarm Inc the Group also
acquired 100% of Digital Media Promos Inc on 5 July 2023. The
Company is also based in the United States of America. The business
specialises in the distribution of broadcast products. The initial
consideration is $968k with a contingent consideration of up to a
maximum of $1,500k based on performance payable in 2026.
On 12 July 2023 the Group acquired 100% of the HHB
Communications Holdings Limited group of companies based in the
United Kingdom. The business specialises in the distribution of
professional audio products. The initial consideration is GBP13.1m
with a contingent consideration based on performance of up to
GBP10.5m payable in instalments due in 2024 and 2025.
On 21 July 2023 the Group acquired 100% of Video Soluciones SL
and Video Digital Import SL, companies based in Spain. The business
specialises in the distribution of broadcast products. The initial
consideration is EUR700k with deferred consideration of EUR500k
payable in 2024 and contingent considerations of up to a maximum of
EUR600k based on performance payable in 2026.
On 21 July 2023 the Group made an investment of GBP275k to
acquire 30% of Dry Hire Lighting Limited. The Group holds a put
option to sell the investment to other private investors of Dry
Hire Lighting Limited and the investors hold a call option to
purchase the investment from the Group.
On 31 July 2023 the Group acquired 100% of the Pulse Cinemas
Holdings Limited group of companies based in the United Kingdom.
The business specialises in the distribution of home cinema
products. The initial consideration is GBP1,282k with deferred
consideration of GBP200k payable in 2024 and contingent
considerations of up to a maximum of GBP1,000k based on performance
payable in 2026.
12. Copies of interim report
Copies of the interim report are available to the public free of
charge from the Company at Vinces Road, Diss, IP22 4YT.
13. Adjustments to reported results
Six months ended
30 June 30 June
2023 2022
GBP000 GBP000
Operating profit 18,551 12,659
Cost of acquisitions 306 377
Share based payments 2,385 2,548
Employer taxes on share based payments 370 252
Amortisation of brands, customer and supplier relationships 4,812 4,351
---------- ----------
Adjusted operating profit 26,424 20,187
Depreciation 3,817 3,429
Amortisation of patents and software 255 179
---------- ----------
Adjusted EBITDA 30,496 23,795
(Increase)/decrease in adjusted inventories 2,353 (27,293)
(Increase)/decrease in adjusted trade and other
receivables (9,138) (68,834)
Increase/(decrease) in adjusted trade and other
payables (15,492) 64,754
Adjusted cash flow from operations 8,219 (7,577)
Adjusted EBITDA cash flow conversion 27.0% (31.8%)
Profit before tax 15,596 10,364
Cost of acquisitions 306 377
Share based payments 2,385 2,548
Employer taxes on share based payments 370 252
Amortisation of brands, customer and supplier relationships 4,812 4,351
Derivative fair value and foreign exchange gains
and losses on acquisition borrowings (1,514) (223)
Finance costs - deferred and contingent considerations 243 382
Finance costs - put option liabilities over non-controlling
interests (443) 1,134
---------- ----------
Adjusted profit before tax 21,755 19,185
Profit after tax 11,559 7,562
Cost of acquisitions 306 377
Share based payments 2,385 2,548
Employer taxes on share based payments 370 252
Amortisation of brands, customer and supplier relationships 4,812 4,351
Derivative fair value and foreign exchange gains
and losses on acquisition borrowings (1,514) (223)
Finance costs - deferred and contingent considerations 243 382
Finance costs - put option liabilities over non-controlling
interests (443) 1,134
Tax impact (1,636) (1,979)
---------- ----------
Adjusted profit after tax 16,082 14,404
Profit after tax 11,559 7,562
Non-controlling interest (NCI) (600) (566)
---------- ----------
Profit after tax attributable to equity holders
of the Parent Company 10,959 6,996
Adjusted profit after tax 16,082 14,404
Non-controlling interest (600) (566)
Share based payments attributable to NCI (7) (7)
Employer taxes on share based payments attributable
to NCI - (1)
Amortisation of brands, customer and supplier relationships
attributable to NCI (243) (278)
Tax impact attributable to NCI 45 48
---------- ----------
Adjusted profit after tax attributable to equity
holders of the Parent Company 15,277 13,600
Weighted average number of ordinary shares 90,242,805 88,224,914
Diluted weighted average number of ordinary shares 93,217,499 90,926,724
Adjusted basic earnings per share 16.93p 15.42p
Adjusted diluted earnings per share 16.39p 14.96p
14. Dividends
During the period the Group declared a final dividend of 10.50
pence per share. (30 June 2022: 7.80 pence per share). After the
period end the Group declared an interim dividend for the six
months to 30 June 2023 of 5.50 pence (30 June 2022: 4.50 pence per
share) that relates to profits earned over the period.
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END
IR NKQBDDBKBKCK
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