Midwich : Annual Report 2024 Document - 07 Apr 2025

ABOUT US

Partnering with the world's leading technology companies to accelerate growth.

Read how Midwich Group is enabling tomorrow p.89, taking technology further p.7 and bringing people together p.63.

Midwich Group is a global network of specialist technology distributors. Our teams leverage relationships and deep product knowledge to take innovation to market and help manufacturers and our customers connect across the world, with operations in UK&I, EMEA, North America and APAC.

We specialise in technology solutions which bring people together to make society more efficient, more impactful or more exciting. From state of the art meeting rooms to a festival main stage, audio visual technology is all around us, helping the world connect, communicate and experience wow moments.

Our purpose

Our culture

With services ranging from product distribution to complex system design, focused marketing campaigns to flexible financing solutions and showcase events to seed funding for start-ups, our ever evolving offering is tailored to add value and solve our partners' biggest challenges.

Our culture is built around our people, fostering an environment where everyone feels valued. Collaboration, innovation, and excellence shared across regions, strengthen our teams, enabling them to perform at their best. By nurturing a positive, inclusive workplace, where everyone thrives, we enable our people to deliver exceptional service and contribute to the ongoing success of the Group.

Highlights

FINANCIAL HIGHLIGHTS.

Statutory measures

Revenue

£1,317m

2023: £1,295m

Operating profit

£24.1m

2023: £41.6m

Gross margin

17.8%

2023: 17.5%

Basic EPS

15.69p

2023: 27.98p

Adjusted performance measures

Adjusted operating profit^

£48.3m

2023: £59.6m

Adjusted cash flow conversion^

97%

2023: 114%

Adjusted profit before tax^

£38.3m

2023: £50.0m

Adjusted net debt^

£130.6m

2023: £82.6m

OPERATIONAL HIGHLIGHTS.

• - Further delivery of the Group's strategic goals with a record revenue and gross margin, despite continued challenging macro conditions

• - Revenue growth of 3.5% at constant exchange rates, with organic sales 1.4% below the prior year against a challenging market backdrop

• - Highest ever gross profit margins of 17.8%, substantially ahead of the prior year (2023: 17.5%)

• - Adjusted operating profit of £48.3m reflects a resilient performance in a tough market with strong Adjusted cash flow conversion of 97%

  • - Four small tuck-in acquisitions with integration progressing well

  • - Compound annual growth in revenue and adjusted operating profit since IPO in 2016 of 17% and 13% respectively, with a strong return on capital. Testament to the strength of our long-term strategy and the quality of our teams

  • - No M&A opportunities currently in late stages, but appetite for M&A remains in the medium term

• ^ See pages 106 to 107 of the Group financial statements for definitions of non-GAAP measures and pages 31-35 for the reconciliations of non-GAAP measures to statutory reported results.

Contents.

Overview

Highlights 01

At a Glance 02

Investment Case 04

Strategic Report

Chair's Statement 08

Managing Director's Review 12

Our Markets 16

The Value Chain 20

Business Model 22

Our Strategy 24 Strategy in Action:

Our Acquisitions 26

Key Performance Indicators 28

Financial Review 30

Stakeholder Engagement 36

Sustainability 40

TCFD 49

SECR Statement 56

Managing Risk 57 Principal Risks and

Uncertainties 59

Governance

Chair's Introduction 64

Experienced Management 66

Corporate Governance Report 68 Nominations

Committee Report 70

Audit Committee Report 73 Remuneration

Committee Report 76 Directors'

Remuneration Report 80 Annual Report

on Remuneration 83

Directors' Report 85

Financial Statements

Independent Auditor's Report 90 Consolidated

Financial Statements 96 Notes to the Consolidated

Financial Statements 100 Company Statement

of Financial Position 138 Company Statement

of Changes in Equity 139 Notes to the Company

Financial Statements 140

Resolutions Summary 143

Notice of AGM 145 Directors, Officers

and Advisers 149

Midwich Group plc 01

At a Glance

AT A GLANCE.

Number of colleagues

1,800+

TECHNOLOGY COVERAGE.

Signal Management From IPTV to digital signage and image processing systems, there is ever-increasing complexity in connectivity, content and control.

Professional Audio Provision of class-leading audio for the installed audio, concert sound and studio broadcast industries.

LED

LED displays deliver across a wide range of applications without compromise: seamless, high brightness, scalable to any shape or size and versatile in set-up.

Projection Offering a selection of projectors and projection screens to suit all needs and budgets. The key market driver is the introduction of projectors that are laser light sourced.

Display Businesses in almost every market you can think of are deploying increasing numbers of screens. Commercially, displays have become ever more prevalent with the increase in touch enabled apps.

Security

The rise of digital capability and image quality, along with remote access and a requirement to secure homes and businesses, has led to an ever evolving demand.

Unified Communications ("UC")

The rise of the so-called "huddle room" means a new generation of video and audio meeting room technology has become available.

Lighting Distribution of spectacular, professional lighting and accessories for theatres, concerts and live productions.

Broadcast Providing professional equipment and solutions enabling live and recorded TV and video production along with supporting post-production, encoding and streaming.

WHO WE SERVE.

Our customers are always professional technology providers, but encompass a diverse range across system integrators, live events production companies, specialist resellers and global e-tailers.

These professionals are responsible for designing and installing cutting-edge audio visual solutions for end users.

Our end user markets

Corporate 41%

Education 21%

Hospitality 4%

Travel 2%

Healthcare 5%

Broadcast/media 6%

Government 5%

Venues and events 7%

Residential 1%

Retail 8%

Source: Midwich internal estimates

Investment Case

Our investment proposition.

A market-leading position with room to grow.

A clear strategy with solid foundations.

A proven track record and strong financial position.

A values-based culture.

• - We are the leading global specialist distributor of audio visual technology with a presence in all of the world's key markets

• - The professional audio visual market is estimated to be worth $325bn globally and is expected to grow by 5.4% per annum to 2029 (source: AVIXA IOTA 2024)

• - Our current revenues represent less than 4% of our estimated target addressable market ("TAM")

• - Our strategy of scale, geographical coverage and specialisation has remained consistent since our IPO

• - We have delivered strong organic growth, coupled with a progressive M&A strategy

• - Our long-term customer and vendor relationships provide significant barriers to entry

• - We have the strongest team in the industry, supported by continued investment in our people and our infrastructure, including experience centres

• - Long track record of consistent and resilient revenue and profit growth

• - Product portfolio management skills combined with a high degree of repeat business

• - Strong cash generation and funding position

• - Successful M&A track record with strong returns

• - Experienced and stable management team

• - High levels of team engagement and share ownership

• - Long-standing commitment to sustainability

Estimated share of TAM

4%

Compound five-year revenue growth

14%

Acquisitions since IPO

30

Management and staff ownership

20%+

Delivering record revenue and gross margin.

30 acquisitions since IPO.

• 2016 Holdan UK

  Wired New Zealand

• 2017 Earpro Spain and Portugal

  Van Domburg Partners Netherlands Sound Technology UK

• 2018 New Media Germany, Austria and Switzerland

  Perfect Sound France and Switzerland Blonde Robot Asia Pacific region

• 2019 Mobile Pro Switzerland

  Prase Italy

  AV Partner Norway EES Spain

• 2020 Starin Marketing USA

  With an outlook for long-term growth.

  Vantage Systems Australia

  Organic revenue.

  Gross margin progression.

  Cost base management.

• 2021 NMK Group UAE and Qatar eLink Distribution AG Germany Intro 2020 UK

• 2022 Cooper Projects Limited ("DVS") UK

  Nimans Limited UK

  • - Structural market growth (AVIXA c. 5-6% per annum)

    • - Continue to focus on higher-margin technical products

      • - Operational leverage from scale

• 2023 S.F. Marketing Inc. Canada

  • - Trend towards increased use of distribution

    • - Continue value-added approach

      • - Productivity from new systems

• HHB Communications Holdings Limited UK Pulse Cinemas Holdings Limited UK Toolfarm.com Inc. USA

  • - Further market share opportunities - notably in

  • - Focus on new software/services/ rental revenue streams

  • - Interest cost upside if rates fall

  Digital Media Promos Inc. ("76 Media") USA Video Digital Soluciones S.L. Spain prodyTel Distribution GmbH Germany

• 2024 The Farm USA

  North America

  Dry Hire Lighting Limited UK UK Fire & Safety Limited UK Direct Cable Systems Limited UK

Strategic Report

Contents.

Chair's Statement 08

Managing Director's Review 12

Our Markets 16

The Value Chain 20

Business Model 22

Our Strategy 24

Strategy in Action: Our Acquisitions 26

Key Performance Indicators 28

Financial Review 30

Stakeholder Engagement 36

Sustainability 40

TCFD 49

SECR Statement 56

Managing Risk 57

Principal Risks and Uncertainties 59

Strategic Report.

Case study

Overview

TAKING TECHNOLOGY FURTHER.

Virtual production studio success

Collaboration and innovation have redefined filmmaking with the creation of a cutting-edge virtual production studio by Target3D, PSCo, Absen, and Brompton Technology.

Transforming filmmaking through technology

Virtual production, a groundbreaking integration of live-action footage and real-time CGI, is reshaping the film industry by seamlessly blending the digital and physical worlds. Target3D, a leader in motion capture and 3D technology, partnered with Digital Catapult and PSCo, a Midwich Group business, to deliver an innovative virtual production studio.

Building the future of filmmaking

The situation

Target3D aimed to develop a modular and flexible studio that exceeded conventional virtual production setups. Collaborating with PSCo, Absen, and Brompton Technology, the team addressed complex challenges, including acoustic optimisation and advanced LED integration, to meet diverse production needs.

The outcome

The result is a state-of-the-art studio featuring a 10.5m x 3.5m Absen LED backdrop powered by Brompton's cutting-edge technology, ensuring unmatched colour accuracy and performance. With over 2,000 pieces of equipment and a hardware-agnostic design, the studio offers unparalleled flexibility for production, training, and innovation.

Why it matters

This project highlights the Midwich Group's ability to enable pioneering partnerships and technologies, demonstrating its leadership in delivering tailored, high-impact solutions that drive creativity and business growth.

Chair's Statement

Overview

Revenue

£1.3bn

Gross margin

17.8%

Adjusted operating profit

£48.3m

Our presence, product diversification, and specialist Pro AV focus delivered strong gross margin improvement.

Midwich Group demonstrated resilience against a challenging market backdrop and I am pleased to be able to report further progress in 2024, including record revenue and gross margin, increased specialisation, further strategic investments and continued development of our leadership team.

• 1 Source: AVIXA.

After an exceptional period of growth, following the pandemic, which saw Group revenue in 2022 almost double the level in 2019, growth in the last two years has been characterised by strong demand for live events and entertainment solutions offset by challenging corporate and education end user markets.

Our industry-leading position and diversity of geographies and technical solutions enabled the Group to respond to this changing market backdrop. Record revenue and gross margin in 2024 is testament to our team's exceptional resilience, knowledge and commitment.

Whilst the Pro AV market has consistently grown above GDP, there were a number of unprecedented challenges that continued throughout 2024. The pressures of macroeconomic slowdowns, the impact of election cycles, higher interest rates and labour inflation continued to moderate demand for our mainstream products. An element of over-supply, as manufacturers struggled to accurately anticipate demand, also resulted in unprecedented levels of discounting in the displays market. The Group responded to this by focusing on value-added technical solutions and, as a result, achieved both gross margin improvements and further market share gains in many of our markets.

At constant currency, Group revenue increased by 3.5% (organic -1.4%) to £1.32bn whilst a gross margin of 17.8% (2023: 17.5%) was a record. Overhead growth reflected the on-boarding of the eleven acquisitions completed in the last two years combined with the impact of inflation on the core cost base. Despite a tight focus on cost control, and some targeted restructuring during the year, which has delivered c.£5m in annualised savings, adjusted operating profit reduced to £48.3m (2023: £59.6m).

In the face of extensive cost inflation in recent years, the Group has achieved compound annual growth in revenue and adjusted operating profit over the last five years of 14% and 8%, respectively, which is down to the strength of our long-term strategy and the quality of our teams.

Looking to the future, the Group remains well placed to benefit from its global scale to develop and deploy digital solutions such as e-commerce and artificial intelligence ("AI"). These will position the Group well to deliver positive operating leverage and net margin improvements as demand across all markets returns to normal levels.

With the start of 2025, the wider economic backdrop continues to remain challenging. Nevertheless, the Board believes that the structural increase in the use of AV solutions will see robust demand in the years ahead, with Midwich a provider of choice for our customer base.. Over the longer term, the Pro AV market is forecast to grow by an average of 5.4%1 per annum for the next five years and the Group is well placed to benefit from this. Despite the Group's significant revenue, our market share represents less than 4% of our estimated target addressable market value for the global Pro AV market. The Group continues to have ambitious growth plans and will continue to execute its strategy to deliver on this sizable market opportunity.

The Group is well placed to benefit from its global scale to develop and deploy solutions such as e-commerce and AI."

Andrew Herbert Non-executive Chair