LONDON - Midwich Group (AIM: MIDW), a trade distributor specializing in audio visual (AV) products, has revised its full-year guidance for 2024, citing persistent challenging market conditions. The update follows their interim results released on September 3, 2024, which initially indicated a potential market recovery in the second half of the year.
The company has observed a stabilization in the UK market and continued strength in North America and the live events and entertainment sectors. However, the anticipated broader market improvement has not materialized, with Germany experiencing further declines and sustained weak demand for mainstream products, especially in the education and corporate sectors.
As a result, Midwich now anticipates that the current market conditions will continue throughout the remaining months of 2024. The Board expects the Group's full-year revenue to be slightly above last year's figures. Despite the challenging environment, Midwich has maintained gross margins in line with the record levels achieved in the first half of the year, thanks to a shift in product mix favoring technical video, audio, and lighting products.
Midwich has also made progress in reducing overhead costs. These reductions are expected to improve operating profit margins in the latter half of the year. Nevertheless, the Board projects that the adjusted operating profit for 2024 will be significantly lower than the previous year due to the operational gearing of the business.
The company has recently completed three small specialist acquisitions in the UK, with a combined cash outlay of £12 million. These acquisitions, focusing on the live events and fire security markets, are expected to contribute to higher margins. Midwich anticipates that the usual second-half operating cash inflow, combined with the acquisition expenses, will lead to a year-end leverage of approximately 2.2 times adjusted EBITDA, maintaining compliance with debt covenants.
Despite these challenges, Midwich has grown its market share in key areas since the half-year and plans to continue driving revenue towards technical product sales. The Board remains optimistic about the Group's future prospects.
The next scheduled year-end trading update from Midwich is expected on January 20, 2025. This article is based on a press release statement from Midwich Group.
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