Trading Update

Midwich Group (AIM: MIDW), a global specialist audio visual distributor to the trade market, is today providing a trading update and revised guidance for the year ending 31 December 2024.

At our Interim Results, issued on 3 September 2024, we highlighted the challenging market conditions experienced in the first half of the year, with market survey data indicating a return to growth in mainstream products during the second half.

In recent weeks, whilst the UK market has stabilised, and performance in the North American region, as well as demand in the live events and entertainment sectors remains strong, broader market conditions have not improved as anticipated. In particular, Germany has seen a further deterioration and there remains subdued demand for mainstream products, primarily in the education and corporate markets.

We now expect current market conditions to persist for at least the rest of the year. Given the challenging AV market backdrop, the Board now expects full year Group revenue to be marginally ahead of the prior year.

In line with the Group's stated strategy, the continued progress in product mix in favour of technical video, audio and lighting products, is expected to result in full year Group gross margins in line with the record levels achieved in the first half.

The previously announced overhead reduction programme is also well progressed. However, whilst these overhead reductions will support increased operating profit margins in the second half of the year onwards, the Board expects adjusted operating profit for 2024 to be significantly below the prior year, reflecting the operational gearing of the business.

In recent weeks, the Group has completed three small specialist acquisitions in the UK for a total combined cash consideration of £12m. These higher margin technical businesses operate primarily in the live events and fire security markets. The total consideration paid, when combined with the usual second half operating cash inflow, is expected to result in year-end leverage of around 2.2 times adjusted EBITDA. The Group remains well within its debt covenant levels.

Despite the continuing challenging market conditions, the Group remains well positioned, has continued to grow market share in its key markets since the half year and will seek to drive further revenue mix towards technical product sales. The Board remains confident in the future prospects of the Group.

Midwich expects to release a scheduled year-end trading update on 20 January 2025.

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