Overview
Midwich Group Plc (MIDW) is a Support Servicescompany providing solutions related to document and audio-visual (AV) distribution to the trade market.The company operates in multiple locations and Australia, Europe and the United Kingdom being the major markets.The company divided its operations based on the geographic locations in which it operates which includes Australasia, Germany, France and the UK & Ireland. The company works closely with brands such as Panasonic, Samsung, Canon, Reserva, Revolabs, Datapath, BrightSign, Planar, Ricoh, Philips, Nec, Sharp, Sony, Chief, Casio and Bosch. The company also provides information technology and AV integrators services to various sectors which include hospitality, residential, retail, education and corporate.

Recent News
On 10th September 2019, Midwich Group announced interim results ending 30th June 2019.

Financial Highlights – H1 Financial Year 2019 (30^th June 2019, £, million)
 

(Source: Interim Report, Company Website)

In the first half of the financial year 2019, the company’s revenue increased by 19 per cent to £314.8 million from £264.1 million in the first half of the financial year 2018. The increase in the revenue was mainly driven by an increase in revenue from Continental Europe for the period. The company’s gross profit was up by 22 per cent from £42.9 million H1 FY2018 to £52.2 million in H1 FY2019. The group’s adjusted operating profit was at £14.6 million in H1 FY2019 versus £13.5 million in H1 FY2018, an increase of 9 per cent for the period. The group’s statutory Operating profit declined by 6 per cent to £10.5 million in H1 FY2019 versus £11.1 million in H1 FY2018. The group’s adjusted PBT (Profit before Tax) was at £13.7 million in H1 FY2019 versus £12.9 million in H1 FY2018, an increase of 6 per cent for the period. The group’s statutory PBT (Profit before Tax) declined by 5 per cent to £11.3 million in H1 FY2019 versus £11.8 million in H1 FY2018. The group’s adjusted PAT (Profit after Tax) was at £10.5 million in H1 FY2019 versus £9.7 million in H1 FY2018, an increase of 8 per cent for the period. The group’s statutory PAT (Profit after Tax) declined by 1 per cent to £9 million in H1 FY2019 versus £9.1 million in H1 FY2018. The company adjusted earnings per share stood at 12.78 pence in H1 FY2019 as against 12.02 pence in the H1 FY2018. The company’s Statutory earnings per share stood at 11.06 pence in H1 FY2019 as against 11.30 pence in the H1 FY2018. The company’s interim dividend per share surged to 4.85 pence in H1 FY2019 from 4.60 pence in H1 FY2018.

Share Price Performance

Daily Chart as at 27th September 19, after the market close (Source: Thomson Reuters)

On 27th September 2019, Midwich Group Plc shares closed at GBX 510, down by 1.92 per cent against the previous day closing price. Stock's 52 weeks High and Low are GBX 700.00/GBX 470.00.

Valuation Methodology


Conclusion
Although on a statutory basis, the company’s financial performance has declined slightly but on an adjusted basis, the financial performance has improved in the first half of the financial year 2019. Both the revenue and profitability has improved for the period. The revenue from all the territories in which the company operates has increased for the period.

The negative sentiments in the global economy are created due to US/China trade war, political changes in certain locations and Brexit but the market in which company operates had shown good performance in the past in challenging economic scenarios.

The company is also looking forward to growing further through acquisitions, which will help in enhancing its capabilities and increase its global reach.

Over the course of 4 years (FY14 - FY18), the company’s revenue surged from £280.8 million in FY14 to £573.7 million in FY18. Compound annual growth rate (CAGR) stood at 19.56 per cent.

Based on the above rationale and supported by valuation done using the above method, we have given a "Speculative Buy" recommendation at the closing price of GBX 510 (as on 27th September 2019), with single digit upside potential, based on 17.50x NTM Price/Earnings (approx.) on FY19E earnings per share (approx.).
 
*All forecasted figures have been taken from Thomson Reuters.

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