Midwich H1 2025: revenue slips, statutory loss, dividend cut – outlook held
Midwich Group has posted a tougher first half as AV demand stayed muted in key end markets. Revenue fell 4.3% to £620.3 million (down 2.7% at constant currency), and the Group reported a statutory loss before tax of £3.0 million. Adjusted earnings stayed positive, but lower year-on-year. Despite the wobble, management kept full-year expectations unchanged and says H2 has started well.
| Metric | H1 2025 | H1 2024 (restated) |
|---|---|---|
| Revenue | £620.3m | £648.5m |
| Gross margin | 17.7% | 18.0% |
| Adjusted operating profit | £16.6m | £22.0m |
| Adjusted profit before tax | £9.6m | £17.2m |
| Statutory (loss)/profit before tax | £(3.0)m | £10.1m |
| Adjusted EPS | 6.91p | 11.22p |
| Basic EPS (statutory) | (2.42)p | 6.50p |
| Interim dividend | 1.75p | 5.5p |
| Adjusted cash flow conversion | 60% | 13% |
| Adjusted net debt | £148.2m | £154.1m (30 Jun 24 total net debt) |
| Leverage (adj. net debt/adj. EBITDA) | 2.5x | n/a |
What’s driving the numbers
Germany did most of the damage. Management points to a weak corporate market and delayed education spend there. Strip Germany out and Group revenue was in line with last year. FX also pinched – revenue was clipped by about 1.6% from a stronger pound.
Gross margin held up relatively well at 17.7% (down 0.3 percentage points). The squeeze came from price pressure in mainstream displays and some mix effects in North America and EMEA. Adjusted operating margin fell to 2.7% from 3.4%, reflecting softer volumes and higher finance costs.
Segment performance: UK strength, Germany drag, North America reset
- UK & Ireland: Revenue up 5.0% (2.8% organic), margin improved to 18.4%, and adjusted operating profit jumped 35.1% to £11.4 million. Gains from market share, new vendors, and cost cuts. Commercial drones in broadcast helped.
- EMEA: Revenue down 7.3%, mainly Germany. Elsewhere in EMEA grew about 3% with stronger technical sales. Gross margin slipped to 16.8% and adjusted operating profit dropped to £6.2 million. ERP disruption in France is easing and expected to normalise by end-2025.
- Asia Pacific: Revenue up 1.7%, small adjusted operating loss of £0.4 million as mix shifted to more mainstream product.
- North America: Revenue down 8.5% due to tariff uncertainty and a planned vendor transition in Canada. Gross margin of 18.4% (down 2.4 ppts) and adjusted operating profit fell to £2.2 million. Management expects recovery as trade terms settle and new vendors ramp.
Product mix: mainstream softer, technical more resilient
Mainstream categories (displays and projection) declined by around 7% overall, with a deliberate pullback from oversupplied German lines. Ex-Germany, mainstream sales were slightly ahead. Importantly, these categories are now less than one third of Group revenue.
Technical categories – the higher margin engine of Midwich – were slightly down year-on-year due to Germany and the Canada transition. Ex those, technical products grew over 4%, with strong showings in broadcast, lighting, security and rental. Sales of commercial drones, lighting and accessories grew strongly.
Cash, debt and dividend: belt tightened, firepower preserved
Cash generation was a bright spot. Adjusted cash flow conversion reached 60% (H1 2024: 13%) thanks to tighter working capital and lower sales levels. Full-year conversion guidance remains 70-80%.
Adjusted net debt stood at £148.2 million, with leverage at 2.5x. Management expects this to fall to about 2.2-2.3x by year end, comfortably within covenants on the £175 million revolving credit facility (runs to June 2028). Adjusted net finance costs rose to £7.0 million as debt and rates bit.
The interim dividend has been reset to 1.75p, reflecting a new c.25% payout ratio of adjusted EPS. The priority is funding organic growth and, later, acquisitions. The dividend will be paid on 17 October 2025 to shareholders on the register on 12 September 2025 (DRIP election deadline 26 September 2025).
Strategy shift: ERP rethink and an AI-led digital plan
Midwich has pivoted away from a single global ERP roll-out. Instead, it will lean into agility, AI automation and a global ecommerce platform, with benefits expected from 2026. A review of ERP deployment is underway and may result in an impairment of the ERP intangible asset, currently carried at around £30 million, in H2. That’s a material swing factor to watch on the statutory line.
On costs, the Group delivered targeted headcount and overhead reductions in H1, expected to add over £5.0 million in annualised savings. That, together with seasonality, should lift H2 margins.
Outlook and guidance: cautious on macro, confident on execution
The Board assumes challenging macro conditions persist through 2025, particularly in Germany, France and the US. Even so, trading into H2 has started positively and Midwich still expects organic sales growth in the second half, aided by a stronger seasonal skew and cost actions.
Germany’s new education funding is now expected to benefit demand from 2026 rather than 2025. Acquisitions remain core to strategy, but the Group plans to “more actively resume” dealmaking from 2026, which looks sensible given leverage and market noise.
Key jargon explained
- Adjusted results: management’s view of underlying performance, excluding items like acquisition costs, exceptional charges and certain amortisation.
- Constant currency: removes the impact of exchange rate moves to show like-for-like trends.
- Leverage: adjusted net debt divided by adjusted EBITDA – a measure of indebtedness.
- ERP: enterprise resource planning software. A central system for finance, operations, inventory and more.
My take: mixed first half, credible levers for H2, keep an eye on ERP risk
This is a classic “good execution in a bad market” set of results. Market share gains, resilient gross margins and strong cash discipline are all positives. UK&I’s performance shows the model works when the backdrop cooperates.
The negatives are clear too: a statutory loss, a sharply lower adjusted PBT, higher interest costs and a reset dividend. Germany remains a drag and North America needs the vendor transition to bed in. The potential ERP impairment – c.£30 million carrying value – is the biggest near-term swing factor for reported earnings.
Guidance unchanged tells you management can see a path through H2 via seasonality, cost savings and a better mix. With leverage expected to edge down and acquisitions parked until 2026, the focus is rightly on execution and cash. For investors, the watch list is short but important: H2 margin recovery, Germany order momentum, North America vendor ramp, and any ERP impairment in the second half.
