Midwich (MIDW) has been working to branch out internationally, to reduce its reliance on the UK market and establish itself in new geographies. Judging by the audiovisual specialist’s first-half performance, things are going well. The group’s home market now accounts for just under half of sales, compared with 58 per cent at the same time last year. The growth of the European business is a major factor in the shift, with 14 per cent constant-currency organic sales growth driven by a strong performance in France, Germany and the Netherlands. Including the impact of acquisitions, the division was up 47.5 per cent.
On the topic of acquisitions, management struck deals to buy companies in Italy, Switzerland and Norway in the period, as well as investing in organic growth through establishing a broadcast business in the Benelux region and opening a new office in Singapore.
Margins continued to improve, with a 40 basis point improvement in gross profitability in the period driven by the group’s focus on higher-margin, more technical work, boosted by acquisitions.
Meanwhile, costs related to acquisitions dented earnings and led net debt to increase, but – at 1.36 times consensus forecast cash profits – this remains well shy of the group’s upper limit of two times. What’s more, management expects the group’s typically higher cash generation in the second half of the year to reduce leverage for the full year.
Broker Berenberg is forecasting adjusted pre-tax profits of £34m for the full year, giving EPS of 31.1p, up from £29m and 27.2p in 2018.
| MIDWICH (MIDW) | ||||
| ORD PRICE: | 497p | MARKET VALUE: | £398m | |
| TOUCH: | 495-500p | 12-MONTH HIGH: | 695p | LOW: 478p |
| DIVIDEND YIELD: | 3.1% | PE RATIO: | 27 | |
| NET ASSET VALUE: | 69p* | NET DEBT: | 87% | |
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2018 | 264 | 11.8 | 11.3 | 4.60 |
| 2019 | 315 | 11.3 | 11.1 | 4.85 |
| % change | +19 | -5 | -2 | +5 |
| Ex-div: | 19 Sep | |||
| Payment: | 25 Oct | |||
| *Includes intangible assets of £46.9m, or 59p a share | ||||
