Midwich (MIDW) fell to a loss as the audiovisual industry was wracked by the coronavirus pandemic. Customers’ difficulties in accessing sites disrupted projects, which translated into reduced orders. Industry trade body AVIXA expects the global audiovisual market to contract by 8 per cent this year and only outgrow last year in 2022.
Midwich, which distributes AV equipment to vendors, has been seeking to diversify its revenue base away from the UK via mergers and acquisitions. It paused M&A activity in response to the pandemic, after completing the purchase of its first North American business, Starin, in February, which was partly funded by a £39m share placing in the same month.
The addition of Starin muddies the picture on Midwich’s inventory management. In normal times, Midwich builds its inventories in its first half. These rose by 22 per cent compared with last year’s first half, but the rise is solely down to the inclusion of Starin’s stock - excluding this impact, inventories fell by £8m over the period as Midwich sought to gain a tighter grip on its cash flows. This fall, and proceeds from the equity placing, helped to reduce net debt by almost a quarter from the end of June 2019.
Berenberg forecasts full-year 2020 adjusted pre-tax profits and earnings per share of £8m and 5.36p respectively, rising to £18m and 14.49p in 2021.
| MIDWICH (MIDW) | ||||
| ORD PRICE: | 429p | MARKET VALUE: | £ 380m | |
| TOUCH: | 406-429p | 12-MONTH HIGH: | 622p | LOW: 334p |
| DIVIDEND YIELD: | Nil | PE RATIO: | 58 | |
| NET ASSET VALUE: | 111p* | NET DEBT: | 56% | |
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2019 | 315 | 11.3 | 11.06 | 4.85 |
| 2020 | 302 | -2.5 | -3.29 | nil |
| % change | -4 | - | - | - |
| Ex-div: | na | |||
| Payment: | na | |||
| *Includes intangible assets of £63m, or 71p a share | ||||
