Midwich profit grows 10%, but Middle East uncertainty clouds 2026 outlook

Midwich delivers first-half profit growth

Midwich Group has reported an encouraging first-half performance, with adjusted profit before tax expected to rise by around 10% despite disruption affecting its Middle East operations.

The specialist audiovisual distributor expects revenue of approximately £640 million for the six months ended 30 June 2026. That represents growth of around 3% compared with the same period last year, or approximately 2% on a constant currency basis.

Constant currency figures strip out the effect of exchange-rate movements, giving investors a clearer view of underlying trading.

Adjusted profit before tax is expected to reach approximately £10.6 million, up from £9.6 million in H1 2025. Excluding the Middle East and businesses that Midwich has exited, adjusted profit before tax increased by 20%.

That last figure is important. It suggests that the wider group performed considerably better than the headline 10% profit increase implies, although investors should remember that it excludes parts of the business which still affected the reported result.

Midwich's key H1 2026 figures

Metric	H1 2026 expectation	Comparison
Revenue	Approximately £640 million	Up around 3%
Constant currency revenue growth	Approximately 2%	Versus H1 2025
Adjusted profit before tax	Approximately £10.6 million	Up around 10%
H1 2025 adjusted profit before tax	£9.6 million	Prior-year comparison
Profit growth excluding Middle East and exited businesses	20%	Versus H1 2025
Adjusted net debt	£138 million	£148 million at H1 2025
Leverage	2.3 times	2.5 times at H1 2025
Expected year-end leverage	Approximately 2.0 times	Board expectation

Adjusted profit before tax excludes items including acquisition-related expenses, share-based payments, exceptional items and amortisation of acquired intangible assets. It can be useful for examining underlying operations, but investors should still review the eventual statutory figures when the full interim results arrive.

Regional performance was mixed

The strongest revenue performance came from UK & Ireland, a reporting segment which now includes Midwich's Australian and New Zealand businesses.

Revenue in this division increased by more than 10%, supported by new vendor launches and market share gains. This is a positive signal because it indicates that growth did not rely solely on the wider market expanding.

North American revenue increased by 5%. The Canadian operation remained below H1 2025 as it continued to recover from the loss of a significant vendor during 2025. However, strong revenue growth in the US more than offset that weakness.

The picture was less favourable in Europe, the Middle East and Africa, where revenue declined by 5%.

Midwich continued to face soft market conditions in Germany, while the ongoing Middle East conflict significantly affected customers involved in live events. Growth in Iberia provided a partial offset.

Region	H1 2026 revenue performance	Main factors disclosed
UK & Ireland	Up more than 10%	New vendor launches and market share gains
EMEA	Down 5%	Middle East disruption and soft German demand, partly offset by Iberia
North America	Up 5%	Strong US growth more than offset weaker Canadian revenue

Middle East disruption remains the central risk

Midwich's Middle East business was an important profit contributor in 2025. The ongoing conflict has now had a significant effect, particularly on business with live events customers.

Management said the regional operation had been resilient under the circumstances and that the group had compensated for part of the lost business. Even so, Middle East trading remained below last year's level.

The timing of the prior-year contribution adds uncertainty. The Middle East business was more heavily weighted towards the second half of 2025, so a prolonged conflict could create a tougher comparison during the remainder of 2026.

This explains why a 10% increase in first-half adjusted profit before tax does not translate into an expectation for full-year profit growth. The board currently expects the full-year results to be broadly in line with 2025.

The precise range of potential full-year outcomes was not disclosed.

Gross margins edged lower

Underlying gross margins were slightly below H1 2025, although Midwich did not disclose an exact percentage.

The decline was attributed mainly to lower Middle East revenue and a change in the UK sales mix. Sales mix refers to the balance between different products or services, which can carry different levels of profitability.

For investors, this is worth monitoring alongside revenue growth. Distribution businesses can report higher sales without achieving equivalent profit growth if a larger proportion comes from lower-margin products.

In this case, adjusted profit before tax still grew faster than revenue during the first half. That points to some resilience elsewhere in the income statement, but the announcement does not provide enough detail to identify the precise contribution from operating efficiencies or other factors.

Debt is lower year on year, but still material

Adjusted net debt stood at approximately £138 million at the end of June. This was around £12 million higher than at the previous year end due to normal working capital seasonality, where cash requirements fluctuate through the trading cycle.

However, net debt was below the £148 million reported at the end of H1 2025.

Leverage, measured as adjusted net debt divided by adjusted earnings before interest, tax, depreciation and amortisation, or EBITDA, was 2.3 times. That compares with 2.5 times one year earlier.

Management expects leverage to decline to approximately 2.0 times by the end of 2026 and says it remains comfortably within the group's banking covenants.

The direction of travel is positive, but delivery matters. Investors will want to see the expected second-half cash generation translate into lower year-end leverage, particularly while the trading environment remains challenging.

Efficiency plans and AI opportunities

Chief executive Stephen Fenby highlighted initiatives intended to improve future performance. These include developing new vendor and customer relationships, building additional revenue streams and pursuing operating and cost-saving efficiencies.

Midwich is also exploring the implementation of artificial intelligence solutions designed to improve productivity and support future growth.

No expected cost savings, investment requirements or implementation timetable were disclosed, so the potential financial benefit cannot yet be assessed.

The group's longer-term strategy remains focused on higher-margin, specialist product areas, alongside organic and acquisition-led growth. Management also reiterated its focus on overhead efficiency.

What investors should watch next

This update contains a credible mix of progress and caution.

The positives include 10% adjusted profit growth, strong UK & Ireland revenue, US growth, market share gains and improved year-on-year leverage. The 20% profit increase excluding the Middle East and exited businesses also shows useful momentum in the rest of the group.

The negatives are concentrated but meaningful. Middle East disruption could have a greater impact during the second half, EMEA revenue declined, Germany remained soft and underlying gross margins slipped slightly.

The board also assumes that general macroeconomic conditions will remain challenging for the rest of 2026. Its expectation for full-year results to be broadly in line with 2025 therefore leaves limited room for further operational disruption.

Midwich is due to publish its half-year results on 22 September 2026. The main areas to examine will be gross-margin detail, regional profitability, cash conversion, the path towards approximately 2.0 times leverage and any change to the range of Middle East scenarios.