Annual Report and
Financial Statements 2022
Local
solutions
GLOBAL
IMPACTS
DELIVERING EXPERIENCES
BEYOND EXPECTATIONS
Midwich Group is a
leading global specialist
AV distributor
to the trade market
The Group’s long-standing relationships with over
600 vendors, including blue-chip organisations,
support a comprehensive product portfolio across
major audio visual (“AV”) categories such as large
format displays, projectors, digital signage, unified
communications and professional audio. With
operations in the UK and Ireland, EMEA, Asia Pacific
and North America, the Group operates as the sole
or largest in-country distributor for a number of its
vendors in their respective product sets.
Overview
FINANCIAL HIGHLIGHTS
Statutory measures
Adjusted performance measures
Revenue
£1,204m
2021: £856m
Adjusted operating profit
£51.1m
2021: £34.0m
Operating profit
Adjusted EBITDA cash conversion
£35.1m
2021: £21.0m
54%
2021: 45%
Gross margin
15.3%
2021: 15.3%
Basic EPS
17.32p
2021: 14.11p
Adjusted profit before tax
£45.2m
2021: £31.9m
Adjusted net debt
£96.0m
2021: £58.0m
OPERATIONAL HIGHLIGHTS
— Record financial performance with further market share gains
— Revenue growth of 38.6% at constant exchange rates, including
20.7% organic growth
— Two UK acquisitions, DVS and Nimans, strengthen our unified
communications offering and bring video security capabilities
— Acquisitions have been fully integrated and are delivering a
positive net contribution to the Group
— Gross profit margins remained stable at 15.3%, in line with the
prior year (2021: 15.3%)
— Compound annual growth in revenue and adjusted operating
profit since IPO in 2016 of 22% and 19% respectively, testament
to the strength of our long-term strategy and the quality
of our teams
— Management continues to see a strong future acquisition pipeline
across a number of regions and technologies
— Post-period end increase in the Group’s revolving bank
facilities from £80m to £175m to support future delivery
of our acquisition pipeline
See page 111 of the Group financial statements for definitions of non-GAAP
measures, and note 25 of the financial statements for the actual and constant
currency exchange rates.
O
V
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CONTENTS
Overview
Highlights
At a Glance
Strategic Roadmap
Strategic Report
Our Global Reach
Our Value Proposition
Chair’s Statement
Our Markets
The Value Chain
Business Model
Managing Director’s Review
Our Strategy
Key Performance Indicators
Sustainability
Stakeholder Engagement
Financial Review
Managing Risk
Principal Risks and
Uncertainties
SECR Statement
Governance
Chair’s Introduction
Experienced Management
01
02
03
05
06
08
12
16
18
20
24
30
32
46
50
55
57
45
62
64
Corporate Governance Report 66
Nominations
Committee Report
Audit Committee Report
Remuneration
Committee Report
Directors’
Remuneration Report
Annual Report
on Remuneration
Directors’ Report
68
70
73
77
80
84
Financial Statements
Independent Auditor’s Report 90
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
Company Statement
of Financial Position
Company Statement
of Changes in Equity
Notes to the Company
Financial Statements
Resolutions Summary
Notice of AGM
Directors, Officers
and Advisers
99
104
140
141
142
147
149
154
01
Annual report and financial statements 2022
Midwich Group plc
AT A GLANCE
WHAT WE DO
We support a comprehensive product portfolio which enables
us to be a world‑class distributor of AV products and services.
Our customers are primarily installers and resellers of AV equipment into the Pro AV market.
This market addresses a number of segments covering a very broad range of end user markets.
WHO WE SERVE
The performance of
the Group in 2022
was outstanding with
record revenue and
profit increases.”
Stephen Fenby
Group Managing Director
A strong balance sheet,
combined with the
Group’s underlying
cash generation,
equips it well to fund
organic growth and
continue to pursue
accretive acquisition
opportunities.”
Stephen Lamb
Group Finance Director
30%
Corporate
7%
Venues and events
7%
Media and entertainment
7%
Retail
31%
Education
2%
Residential
Transportation
2%
Government and military 5%
4%
Hospitality
5%
Healthcare
Staff members
1,500+
Offices/showrooms
33
Vendor relationships
600+
Customers served
22,000+
02
Midwich Group plc
Annual report and financial statements 2022
STRATEGIC ROADMAP
We value honesty, trust, hard work, humility and creativity.
OUR VALUES
Honesty
Trust
Hard work
Humility
Creativity
OUR PURPOSE
To help our customers win and then deliver successful
projects, and our manufacturers to reach a broad market.
STRATEGIC
PILLARS
COMPETITIVE
ADVANTAGES
SUSTAINABILITY
Specialisation
Geographical coverage
Scale
Industry expertise
Global footprint
Acquisitions
Our people
The environment
Our solutions
The AV channel
Read more about our strategy on P.24
Read more about our business model on P.18
Read more about ESG on P.32
OUR CULTURE
Our people are passionate, collaborative, supportive, ambitious and service-minded:
AV solutions help people to communicate, collaborate and work more efficiently.
They also provide experiences and entertainment.
Read more about our culture on P.10
Annual report and financial statements 2022
Midwich Group plc
03
OVERVIEW TECHNICAL
From IPTV to digital signage
and image processing systems,
there is ever-increasing
complexity in connectivity,
content and control. The
provision of advice, training
and a specialist technical team
supports the customer in all
things technical as much or as
little as they require.
PROFESSIONAL AUDIO
Provision of class-leading audio
for the installed audio, concert
sound and studio broadcast
industries. Supported by
comprehensive demonstration
facilities and the offer of
training courses.
LED
LED displays deliver across a
wide range of applications
without compromise: Seamless,
high brightness, scalable to
any shape or size and versatile
in set-up. Demand for Narrow
Pixel Pitch LED displays shows
no signs of stopping. Suitable
for numerous verticals
including retail, corporate,
education, command & control
and rental.
PROJECTION
Offering a selection of
projectors and projection
screens to suit all needs and
budgets. The key market driver
is the introduction of projectors
that are laser light sourced.
This technology allows not only
enhanced image capabilities
and a longer product life, but it
is also more cost efficient and
environmentally friendly than
ever before.
DISPLAY
Businesses in almost every
market you can think of are
deploying increasing numbers of
screens. Commercially, displays
have become ever more prevalent
with the increase in touch
enabled apps, the corporate,
education and retail markets are
taking full advantage to interact.
The displays in our portfolio vary
greatly in specification to meet
the cross-vertical demands.
SECURITY
The rise of digital capability
and image quality, along with
remote access and a
requirement to secure homes
and businesses, has led to an
ever evolving demand. This is
supported by specialist CCTV
and associated video
recording and security
technology expertise now
offered to the channel and
home install markets.
UC
The rise of the so-called
“huddle room” means a new
generation of video and audio
meeting room technology has
become available. This makes
video conferencing simpler and
inexpensive, focusing on the easy
sharing of laptop or tablet
screens on a single display -
enabling unprecedented
collaboration through unified
communication.
04
Midwich Group plc
LIGHTING
Distribution of spectacular,
professional lighting and
accessories for theatres,
concerts and live productions.
Offering a full technical service
and focus on continual support
through training courses and
specialist teams.
BROADCAST
Providing professional
equipment and solutions
enabling live and recorded TV
and video production along
with supporting cinema,
gaming and media delivery
covering post-production,
encoding and streaming.
Supported by media specialists
with decades of experience in
the market, and working closely
with the customers to deliver
bespoke systems and solutions.
Annual report and financial statements 2022
Strategic Report
OUR GLOBAL REACH
WHERE WE OPERATE
With operations in the UK and Ireland, EMEA,
Asia Pacific and North America, the Group operates as
the sole or largest in‑country distributor for a number
of its vendors in their respective product sets.
REVENUE
2022
34.9%
OUR GROUP
EMEA
AV PARTNER AS
Norway
EARPROEES
Spain
HOLDAN BV
Netherlands
KERN & STELLY
Germany
MOBILE PRO
Switzerland
NEW MEDIA AV
Germany, Austria
and Switzerland
NMK/EDGE
Middle East
PRASE ENGINEERING
Italy
SIDEV
France
VAN DOMBURG
PARTNERS
Netherlands
UK and Ireland
DVS
UK
HOLDAN
UK
INVISION UK
UK
MIDWICH LTD
UK
NIMANS
UK
OWL VISUAL
UK
PSCo
UK
SOUND TECHNOLOGY
UK
SQUARE ONE
Ireland
UK and Ireland
£492m
EMEA
£535m
APAC
£54m
North America
£123m
APAC
BLONDE ROBOT
Asia Pacific region
MIDWICH LTD
Australia
North America
STARIN MARKETING
US
Annual report and financial statements 2022
Midwich Group plc
05
OVERVIEW
OUR VALUE PROPOSITION
INVESTMENT CASE
Our experienced team has achieved over fifteen years of unbroken
revenue growth, with strong gross margin expansion.
Expertise, focus, strong customer and supplier relationships, and scale in a £263bn market expected
to grow at an average of 5.9% per annum for the next five years (Source: AVIXA 2022).
Specialist AV offering
Absolute focus on AV market brings broad
offering, technical support and expertise to
customers and vendors in a market with a
history of long-term growth.
Geographical footprint
Presence in many key markets means
strong support for international vendors,
customers and their end user
project roll-outs.
Vendor relationships
600+
Read more on P 26
Countries of operation
21
Read more on P.28
Revenue
)
m
£
(
e
u
n
e
v
e
R
£1,400
£1,200
£1,000
£800
£600
£400
£200
£0
134
157
173
184
202
203
211
234
574
472
370
291
314
1,204
856
686
712
20%
18%
16%
14%
12%
10%
8%
6%
4%
2%
0%
G
r
o
s
s
m
a
r
g
n
(
%
)
i
06
07
08
09
10
11
12
13
14
15
16
17
18
19
20
21
22
Revenue
Gross margin
06
Midwich Group plc
Annual report and financial statements 2022
O
V
E
R
V
I
E
W
19 ACQUISITIONS
SINCE IPO
Holdan
UK
Wired
New Zealand
Earpro
Spain and Portugal
Van Domburg Partners
Netherlands
Sound Technology
UK
New Media
Germany, Austria and
Switzerland
Perfect Sound
France, Switzerland
Blonde Robot
Asia Pacific region
Mobile Pro
Switzerland
Prase
Italy
AV Partner
Norway
EES
Spain
Starin Marketing
USA
Vantage Systems
Australia
NMK Group
UAE, Qatar
eLink Distribution AG
Germany
Intro 2020
UK
Cooper Projects
Limited
UK
Nimans Limited
UK
2016
2017
2018
2019
2020
2021
2022
Proven acquisition capability
Long track record of successfully buying,
integrating and growing businesses. Often
seen as the buyer of choice in the market
by owners who want to be part of a large,
well regarded AV specialist group.
Acquisitions since IPO
19
Read more on P.29
Adjusted PBT
m
£
50
45
40
35
30
25
20
15
10
5
0
45.2
31.2
29.1
31.9
24.3
17.9
14.6
14.2
11.7
9.1
13
14
15
16
17
18
19
20
21
22
Annual report and financial statements 2022
Midwich Group plc
07
CHAIR’S STATEMENT
Our global
expansion and
specialist Pro AV
focus on local
markets put us in a
strong position
Compound annual growth
in revenue and adjusted
operating profit since our
IPO in 2016 of 22% and 19%,
respectively, is testament to
the strength of our long-term
strategy and the quality of
our teams.”
Andrew Herbert
Non-executive Chair
^ Source: AVIXA
I am delighted that the Group once again
achieved record results in 2022. This was a
milestone year, with exceptional profit growth
and sales exceeding £1bn for the first time.
The Pro AV market can be characterised by the breadth of
product offering to a wide spectrum of end users in a market
that has consistently grown above GDP for over twenty
years. The overall market continues to demonstrate robust
levels of demand, exceeding pre-pandemic levels^ in 2022
despite the impact of product shortages during the year.
Midwich Group once again made significant market share
gains in the year, with revenue growth of 40.7% (organic
revenue growth of 20.7%) to £1.2bn against an estimated
market growth of 10.5%^. The Group has achieved compound
annual growth in revenue and adjusted operating profit since
our IPO in 2016 of 22% and 19%, respectively, which is testament
to the strength of our long-term strategy and the quality of
our teams.
Looking to the future, the Pro AV market is forecast to grow
by an average of 5.9%^ per annum for the next five years and
the Group is well placed to benefit from this. Despite the
scale of the Group’s revenue in 2022, it represented less than
1% of the global Pro AV market which provides significant
opportunity for future growth.
08
Midwich Group plc
Annual report and financial statements 2022
Revenue
£1.2bn
Gross margin
15.3%
Operating profit
£51.1m
On a macroeconomic level, 2022 was characterised by
change and uncertainty, but, after two years of significant
disruption from issues such as computer chip and product
shortages, post-Brexit customs arrangements and labour
shortages in logistics, the AV market largely returned to
normal. In the second half of the year supply chains, for all
but the most specialist products, were stable, global shipping
costs reduced and inflationary pressures in the AV industry
were generally below those in the wider economy. Whilst the
industry is not immune from recession, the Board feels that
the structural increase in the use of AV solutions combined
with post-pandemic changes in behaviour will result in
robust AV demand in the years ahead.
Alongside record organic growth, I am pleased that the
Group was also able to achieve further strategic milestones,
which included:
The Group’s acquisition of a controlling stake in Cooper
Projects Limited, the UK-based parent company of DVS
Limited (“DVS”), in January 2022 marked its entry into the
distribution of video security products. This is a significant
segment of the AV market in which the Group had little
presence. The knowledge and support of the experienced
DVS team bring opportunities for our customers in an
increasingly converging technology market.
In February 2022, the Group acquired Nimans Limited
(“Nimans”) which is a UK-based specialist distributor of
unified communications, telecoms, collaboration and audio
visual technologies. Based near Manchester, Nimans was
founded in 1981 and has built a strong presence and
reputation in the UK telephony hardware market. In recent
years the business has expanded successfully into new
market areas such as unified communications, VOIP solutions,
security and networking. Key brand relationships include
Yealink, Jabra and BT. The acquisition brought 2,500
telephony, IT and retail customers to the Group.
Annual report and financial statements 2022
Midwich Group plc
09
09
STRATEGIC REPORT CHAIR’S STATEMENT CONTINUED
The integration of both businesses is progressing well,
delivering some exciting revenue synergies in the first year,
and we have thoroughly enjoyed welcoming the DVS and
Nimans teams to the Group.
We anticipate a continuation of our expansion strategy
through both organic growth and acquisition of
complementary businesses, and with that in mind, early in
2023 we increased our revolving credit facility to £175m.
Dividend
The Board understands the importance of dividends for
many of our investors and is pleased to recommend a final
dividend of 10.5p per share which, if approved, will be paid
on 16 June 2023 to all shareholders on the register as on 5
May 2023. The last day to elect for dividend reinvestment
(“DRIP”) is 26 May 2023. With the interim dividend of 4.5p
per share this represents a total dividend for the year of
15.0p per share. The combined value of the interim and
proposed final dividends is covered 2.4 times by adjusted
earnings.
The Board continues to support a progressive dividend
policy to reflect the Group’s strong growth and cash flow.
While there is no hard or fixed target, in order to allow for
continued investment in targeted acquisitions, the Board
anticipates that future dividends will continue to be covered
in the range of 2.0 to 2.5 times adjusted earnings per share.
Board
Membership of the Board has remained stable throughout
the year, and we have moved to a hybrid approach to our
meetings, mixing in person with unified communications
solutions for our meetings. The Board met ten times during
the year and received regular updates from the Executive
Leadership Team (“ELT”).
In line with prior years, the Board completed a self-evaluation
exercise during 2022, reinforcing our commitment to, and
success in, establishing a strong corporate governance
framework. We took the opportunity of this review to
confirm our strong and effective governance and reaffirmed
the role of the Board and its individual members in ensuring
compliance with the QCA code. There were no major issues
or concerns raised about the effectiveness of the Board or
its individual members. The Nominations Committee has
reviewed the skills and experience of Board members
individually and collectively and concluded that the size and
composition of the Board remain appropriate at this stage of
the Group’s development.
The Group has a broad international footprint with the
majority of its revenue coming from outside the UK & Ireland
and the Board welcomes the cultural diversity that this
brings. The Midwich culture is an open and welcoming
one and we have been recognised for this. In 2022 we were
named “Distributor of the Year” at the AV Awards whilst
in 2021 we were named the “Best place to work” at the
Inavation Awards. The Board understands the importance
of diversity of gender and ethnicity and is committed to
ensuring that diversity will be a key consideration in the
appointment of future Directors and senior leaders.
The Group is committed to doing the right thing for the
wider society; community engagement is embedded in our
DNA. This year we have stepped up our work on formalising
our approach to Environmental, Social and Governance
(“ESG”) matters by engaging a third party to support us in
developing our Midwich Sustainability Strategy which we
have set out in this year’s annual report.
10
Midwich Group plc
Annual report and financial statements 2022
The process for establishing our baseline CO2 emissions
was completed in 2022 and we are making good progress
on finalising our plans and metrics to reduce our carbon
emissions. Although the absolute value of CO2 emissions
is important, given the historical and planned growth of
the Group, the Board considers that emissions divided by
revenue is a more relevant KPI.
As an AIM listed company, the Mandatory Climate-related
Financial Disclosures are not yet applicable to the Group,
but as a Board we are on track to report Group-wide data
for the 2023 financial year.
The Group continues to apply the QCA code as its
governance framework. The Board has reviewed all
aspects of compliance and continues to believe that it
meets or exceeds the requirements of the code. We go
beyond the QCA code requirements through the
inclusion of a comprehensive Directors’ remuneration
report and an annual advisory vote on this at the AGM.
We continue to engage with our largest shareholders
including seeking input into our sustainability strategy
and inviting them to join us at our capital markets day
and AV trade show in October 2022.
The Board recognises its duty to have regard to broader
stakeholder interests and, in addition to developing our
sustainability strategy this year, our teams shared
industry-leading ideas with a wide audience through our
Midwich Live social media broadcasts.
In 2022, I was also delighted to
see how our country Managing
Directors responded to the
cost-of-living pressures. Our
business leaders acted to support
our people through a mix of
accelerated pay reviews, a step
up in staff benefits and a focus
on wellbeing.”
Andrew Herbert
Non-executive Chair
People
The success of any company is down to the quality of its
leadership and its people. I believe that we have the best
teams in the industry, and they have once again delivered
exceptional service to vendors, customers and end users
alike. The Board has a strong belief in rewarding success and
ensuring that engagement levels are high. Share ownership
by our people is a core part of our engagement strategy and
I believe that our employee share plans have incentivised the
exceptional business performance. In 2022, I was also delighted
to see how our country Managing Directors responded to
the cost-of-living pressures. Our business leaders acted to
support our people through a mix of accelerated pay
reviews, a step up in staff benefits and a focus on wellbeing.
After the disruption from Covid-19, I was extremely pleased
to see our offices buzzing once again in 2022. Our teams
address every challenge with commitment and determination,
and it is this positive approach that is the main driver of our
market share gains and continued growth.
The Board has regular interaction with the ELT, which comprises
the Executive Directors together with the Managing
Directors of our key operating units. We have been delighted
with the ELT’s success in delivering strategic goals at the
same time as leading the Group’s record performance. This
regional leadership model is working well and is fully aligned
to the Group’s long-term growth ambitions.
On behalf of the Board, I would like to thank all employees
and our partners for their commitment and hard work and
congratulate them on achieving an impressive performance
in an exceptionally challenging year.
Andrew Herbert
Non-executive Chair
Annual report and financial statements 2022
Midwich Group plc
11
11
STRATEGIC REPORT OUR MARKETS
OUR MARKETS
Our addressable market in Pro AV solutions
covers areas such as sound, video and lighting.
These solutions are prevalent
and relied upon in many areas
of daily life – at home, in transit,
at the workplace, in education
and in a wide range of retail,
leisure and recreational uses.
The application of AV systems is found
in areas such as unified communications,
workplace collaboration and digital
signage solutions, with end users
broadly covering the corporate, education,
government, events, retail, hospitality,
healthcare and residential markets.
Industry data indicates that the global
Pro AV market exceeded pre-pandemic
levels in 2022 at £263bn. The market is
forecast to grow at 5.9% over the five
years to 2027 (Source: AVIXA 2022).
We believe that Midwich is the largest
specialist AV distributor in the world,
and that we have consistently gained
market share and are well positioned to
continue to further grow our share of
this large and fragmented global market.
Our end user markets
Our customers are primarily installers
and resellers of AV equipment into the
Pro AV market. This market addresses
a number of segments covering a very
broad range of end user markets. We
believe that in 2022 these segments
represented the following proportions
of our business:
3030+
Corporate
Venues and events
Media and entertainment
Retail
Education
Residential
Transportation
Government and military
Hospitality
Healthcare
30%
7%
7%
7%
31%
2%
2%
5%
4%
5%
12
Midwich Group plc
Annual report and financial statements 2022
+
7
7
+
+
7
7
+
+
7
7
+
+
31
31
+
+
2
2
+
+
2
2
+
+
5
5
+
+
4
4
+
+
5
5
+
+
O
O
Link to strategy
Specialisation
Geographical coverage
Scale
Key trends in the AV market
Growing use of AV products and technology
Continued research and development in the sector is
expected to create further advances, increasing
applications and therefore use of AV.
In addition, there is an established renewal cycle for AV
products, ensuring a base level of demand.
Fundamentally, we believe that the multiple demand
drivers for AV solutions have an appeal in periods of
economic growth and more challenging times. During both
the financial crisis and the unprecedented disruption from
COVID-19, AV market demand remained robust and we
believe that the industry will continue to grow at above
GDP levels in the coming years.
How we’re responding
Midwich is a specialist distributor serving only the trade
market and specialising in AV equipment.
We believe that our primary role is to facilitate growth in
the markets in which we operate and that our ability to
help our manufacturer partners to gain access and grow
their businesses is a particular strength of the Group.
The Group has a long-standing programme of
supplementing its organic growth with the acquisition of
smaller businesses which provide it with access to new
products, sectors and geographical markets. Our general
strategy is to acquire businesses which not only add to the
Group’s capabilities, but which provide exciting opportunities
for growth and widen our addressable market. We
continue to have significant success with this strategy.
The Group accesses new technologies and applications
through close contact with innovative manufacturer
partners. Our intimate knowledge of the AV market and
trends means that we are able to feed into manufacturer
product development programmes. This helps our partners
to develop and exploit commercially focused products.
The global Pro AV market has grown and
evolved significantly over the last 25 years
with both cultural and technological changes
increasing the demand for AV solutions.
There are multiple demand drivers in the AV
industry, including:
— Cost savings – reducing people costs, for example using
touch screens to take orders in food outlets, and reducing
waste by eliminating single-use marketing materials;
— Improved effectiveness/efficiency – improved learning;
for example, collaborative solutions give teachers real
time analysis of students’ understanding of lessons;
— Competitive advantage – improved customer proposition;
for example, extensive use of innovative AV solutions
enhances audience experience at live events;
— Environmental considerations – reduced carbon
footprint; for example, unified communications allow
highly productive meetings to take place without the
need for people to travel;
Our sales and marketing operations, backed by strong
product and technical knowledge, helps us develop markets
for technologies at the early stage of their life cycle.
— User expectations/social trends – people now expect
to use technology in both the workplace and in their
interactions with retail/leisure providers; and
The Group continues to invest in training facilities which we
use to educate our customers in specific technologies and
market development opportunities.
— Safeguarding – improved safety solutions, for example
the use of high-end audio solutions to improve
evacuation procedures at large venues.
Annual report and financial statements 2022
Midwich Group plc
13
13
STRATEGIC REPORT OUR MARKETS CONTINUED
Link to strategy
Specialisation
Geographical coverage
Scale
Key trends in the AV market continued
Increased use of distributors as intermediaries
in the AV supply chain by large manufacturers
The use of distributors is well established in the
AV market and has increased in recent years.
The distribution model allows the manufacturers
to reach a large and fragmented customer base
without the need for investment in substantial
sales and marketing, technical support and
logistics activities. A value added distributor
helps manufacturers grow faster whilst
reducing their costs and financial risk.
In addition, the distribution model helps AV integrators
develop the right solutions for their customers, which
are often made up of products from multiple vendors.
This enhances the growth of the overall AV industry and
increases customer satisfaction. It also allows the distributor
to share broad market feedback with the manufacturers
which helps inform long-term product development.
How we’re responding
The Group’s long-standing relationships with over 600
vendors, including blue-chip organisations such as
Samsung, LG, Epson and SMART, support a comprehensive
product portfolio across major AV categories such as large
format displays, projectors, technical and professional
video, audio and digital signage. The Group operates as
the sole or largest in-country distributor for many of its
vendors in their respective product sets. We attribute this
position to the Group’s technical expertise, extensive
product knowledge, focused sales capability and strong
customer service offering built up over many years.
The Group offers a range of support to our customers,
including demonstrating products, training their staff and
providing technical advice, logistics and post-sales
support. We have a large and diverse base of over 22,000
customers, most of which are professional AV integrators
and IT resellers serving sectors such as corporate,
education, retail, residential and hospitality.
5.9%
Annual expected AV market growth to 2027
Source: AVIXA 2022
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Midwich Group plc
Annual report and financial statements 2022
FURTHER DETAILS IN RESPECT OF OUR TWO
MAIN SEGMENTS ARE AS FOLLOWS:
Education
Corporate
The corporate market covers principally offices,
including meeting rooms, huddle spaces, conference
rooms and reception areas. The use of technology
within the corporate market is widespread, and AV
technology has been used increasingly to aid the
efficiency and effectiveness of operations. We
believe that the pandemic accelerated trends that
were already taking place in this market, such as the
use of technology to collaborate in meetings and to
communicate remotely.
The recent move to hybrid working has resulted in
further investment in the corporate market as end
users contemplate their future office strategy. Our
belief is that offices will continue to be used
extensively, but with adjustments to occupancy
levels and to methods of working. For example, we
have seen greater adoption of video and audio
conferencing technology, which enables staff in
offices and working remotely to communicate
effectively. The Midwich Group product portfolio
is ideally suited to these corporate requirements,
particularly following the strengthening of our
unified communications offering.
Other end user market segments are individually
smaller and tend to have other own product and
support needs, which the Group addresses through
its range of specialist businesses and staff. In 2022
the majority of these markets – such as venues,
events and hospitality – have rebounded, although
other sectors – such as retail – still have some way
to go to fully recover from the pandemic. Our
flexible business model allows us to quickly adapt to
changes in end user market demand.
The education market covers primary schools
through to higher education, and is one of the two
most significant markets for the Group – particularly
in the UK, Germany, France and North America.
Through our long presence in this market the
Group has built a very strong vendor portfolio,
close relationships with customers addressing the
education sector and also in-house expertise in
supporting the needs of this segment.
The majority of the education market is funded by
government as part of its investment in developing
the skill sets of its population. Historically,
government education spend has tended to be
relatively stable, with the occasional addition of
significant additional investment programmes.
Recent trends in this market have included the
growth in interactive displays and, more recently,
technology to facilitate effective remote learning.
The Group’s growing portfolio of products
addressing the unified communications and
broadcast markets improved our offering to the
education segment.
Annual report and financial statements 2022
Midwich Group plc
15
15
STRATEGIC REPORT THE VALUE CHAIN
THE AV EQUIPMENT VALUE CHAIN
Midwich Group is part of a larger value chain in the AV
equipment industry. This is shown below, along with the value
exchange between each member of the value chain.
AV MANUFACTURERS
MIDWICH GROUP
Develop and manufacture products
across multiple AV categories, such as
displays, projectors, video, audio
and digital signage.
Midwich Group distributes AV products
to the trade market.
Value that AV manufacturers
get from Midwich:
— Market intelligence and strategic and tactical input
into planning
— Market access through highly experienced and
effective AV sales, marketing and technical teams
— Ability to reach broad, profiled AV customer base
— Industry-leading events and experience centres
enable greater interaction with customers and
end users
— Efficient logistics and specialist product support
— Global reach gives ability to support
multinational projects
— Midwich’s scale means fewer points of contact,
improving operating efficiency for manufacturers
Value that Midwich
gets from the trade
market:
— Customers for AV
products
— Opportunities to
support multinational
end users’ projects
across geographies
— Market knowledge and
end user feedback
Value that
Midwich gets from
AV manufacturers:
— Access to high quality
products to distribute
to its customers, often
on an exclusive or
number
one basis
— Ability to influence
product development
and early access to
new technology
— AV product training,
informing users of the
value proposition
16
Midwich Group plc
Annual report and financial statements 2022
TRADE MARKET
END USERS
The AV trade market is formed of
professional AV integrators and IT
resellers. AV integrators assess their
clients’ needs and develop an integrated
solution, utilising various AV products.
End users of AV products broadly
cover the corporate, events, government,
education, retail, hospitality, healthcare
and residential markets.
Value that the
trade market gets
from Midwich:
— Proactive help to sell and
deliver successful projects
Value that the trade
market gets from
end users:
— Customers for
AV products
— Unrivalled depth
of product and
technical expertise
— Feedback on their
needs from the
AV market
Value that end users get from
the trade market:
— Advice and assistance on AV products and the
solution that they require to meet their needs
— Integration and installation of the AV products to
ensure that all the products work well together as
one solution
— Ongoing monitoring and support of AV installations
— Widest product range
and an ability to offer
complete solutions
— Efficient logistics
— Demonstration and
training facilities
— Credit team knowledge
and support
— Technical requirements
and targeted marketing
support for different
vertical markets
— Strong relationship
management skills
— 100% trade focus builds
high customer trust
Annual report and financial statements 2022
Midwich Group plc
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17
STRATEGIC REPORT BUSINESS MODEL
MARKET-LEADING SPECIALIST VALUE ADDED AV DISTRIBUTION
Local solutions with global impact
The Group now has a global presence. Operating in every key geographic region,
we believe that Midwich is the largest specialist AV distributor in the world.
Whilst the vast majority of the Group’s revenue is generated through the sale
of products it is the Group’s specialist value added approach that underpins
its growth and return on investment.
Link to strategy
Specialisation
Geographical coverage
Scale
KEY RESOURCES AND CAPABILITIES
Market-leading AV
vendor portfolio
Strong relationships with
a broad range of focused
AV customers
WHAT MAKES US
DIFFERENT?
— Our industry expertise allows
us to specialise and add value
to both our vendors and
our customers
— Our global footprint makes us
the largest specialist AV
distributor in the world
— Our approach to acquisitions
creates scale and growth in
value whilst retaining
entrepreneurial spirit
Resource
Resource
The Group operates as the sole or
largest in-country distributor for many
of its 600+ vendors in their respective
product sets. We believe this is the
largest global vendor portfolio in the
AV market, a position that has been
built over many years through our
technical expertise, extensive product
knowledge, focused sales capability
and strong customer service offering.
Benefits
The Group’s long-standing vendor
relationships make it attractive to
customers who are looking to limit
their number of buying relationships.
Opportunities
Broad and close vendor relationships
lead to opportunities to introduce new
brands and technologies into current
or new Group companies.
The strongest industry team of account
managers and pre and post-sales
technical and product specialists gives
customers the support they need to
win and deliver successful projects.
Experience centres, demonstration
facilities and training facilities help
develop customer knowledge and
support their end user sales activities.
Benefits
A consistently reliable and supportive
trade-only distribution partner
encourages customer loyalty and a
larger share of wallet.
Opportunities
Continued investment in technical
expertise, support services and
experience centres should facilitate
closer customer relationships.
18
Midwich Group plc
Annual report and financial statements 2022
Scale
KEY RESOURCES AND CAPABILITIES
VALUE GENERATED
Trade customers
By having our sales
capability focused on
trade customers, we
are well placed to ensure
we meet the needs
and requirements of
our customers.
We partner with our
customers to support
their growth ambitions,
including helping them
operate across multiple
geographies.
AV manufacturers
Our scale and specialist
AV approach allows our
vendors to reach the widest
range of opportunities.
Through our distribution
reach, we can grow
the market share of the
products of our AV
manufacturer partners.
Employees
We ensure that our
employees develop the
technical expertise and
product knowledge
required to service
our customers.
Our merit-based
approach recognises
value contributed and we
actively encourage
employee share
ownership.
Shareholders
The Group has generated
above AIM market returns
since IPO and continues
to invest to deliver
future growth.
Our strategy is focused
on both organic and
inorganic growth.
Industry data indicates
average growth in the AV
sector will exceed global
GDP growth for the next
five years.
Proven ability to successfully
acquire, integrate and
grow businesses
Depth of up-to-date
market knowledge
Financial
strength
Resource
Resource
Resource
More than fifteen years’ acquisition
experience and a strong internal team
of M&A, integration and business
development specialists have
facilitated a steady stream of
successful acquisitions.
Benefits
The Group uses acquisitions to quickly
gain access to relevant and attractive
new geographical and product markets.
An effective acquisition process
reduces the risk of failed acquisitions
and management distraction. The
Group’s reputation as a trustworthy
potential partner makes it an attractive
prospect for business owners looking
to join a larger, focused AV group and
often allows us to partner with the best
businesses in the market.
Opportunities
The Group has a strong pipeline of
acquisition opportunities either in new
geographical markets or in specialist
product areas.
We have a strong team of business
management and technology experts
whose roles include the identification
and assessment of new products and
technologies. The scale of our business
enables us to track movements in the
market such as demand for different
technologies and products. Strong
internal collaboration helps to share
insight amongst the wider Group.
Benefits
Up-to-date market insight gives a
competitive advantage in terms of
stock profiling and customer and
vendor strategies. Market intelligence
can be used to support customers and
vendors, making Midwich a more
valued partner.
A strong balance sheet, with strong
bank facilities and supportive
shareholders. Our expertise and
propriety tools and analysis help all
Group businesses maintain a
disciplined approach to working capital
management and cash generation.
Benefits
Our financial strength and capabilities
mean the Group is capable of exploiting
new opportunities – whether acquisitions,
investment in infrastructure or the
financing of working capital. Expertise
in inventory and receivables
management ensures the Group’s risks
from obsolescence or default are
minimised and provides comfort to
banks, trade insurers and vendors.
Opportunities
Opportunities
The continued development of internal,
specialist market-focused teams which
share information will improve the Group’s
capabilities to support customers and
vendors as well as designing more
profitable future strategies.
Continued focus on the interests of all
stakeholders should ensure the Group
has the resources to continue its
organic and inorganic growth.
Annual report and financial statements 2022
Midwich Group plc
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19
STRATEGIC REPORT Strategic Report
MANAGING DIRECTOR’S REVIEW
Our focus is to
ensure that we
provide the best
service possible
The performance of
the Group in 2022 was
outstanding, with revenues
increasing 40.7% to over
£1.2bn and adjusted profit
before tax of £45.2m being
41.5% up on 2021.”
Stephen Fenby
Group Managing Director
Overview
The performance of the Group in 2022 was outstanding, with
revenues increasing 40.7% to over £1.2bn and adjusted profit
before tax of £45.2m being 41.5% up on 2021. Our organic
revenue growth of 20.7% (2021: 18.9%) was supplemented
by a significant contribution from the two UK businesses
we acquired early in the year.
On a constant currency basis, organic growth was between
14% and 18% in all regions except for North America where
we grew at 60%.
The impact of the pandemic reduced somewhat in the
period, with product shortages easing (but not completely)
and the cost of shipping containers reducing significantly
during the year. We saw the resumption of a significant part
of the live events and hospitality markets, and the corporate
market strengthened during the year. Although only a small
part of the business, demand for consumer products was
suppressed during the year, and lower consumer demand
generally appears to have had a negative impact on
investment by high street retailers.
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Midwich Group plc
Annual report and financial statements 2022
Our team worked very well in dealing with sporadic product
supplies, particularly in the earlier part of the year where it
was important to ensure that we had sufficient product for
our customers’ needs. Subsequently, in some parts of the
market (such as displays), manufacturers accelerated
production very rapidly which led to the oversupply of
product which required careful inventory management.
Cash flow was good, particularly given the strong organic
growth in the business. Adjusted net debt to adjusted
EBITDA of 1.6 times at the year end (2021: 1.4 times) was
comfortably within the Board’s target range and demonstrates
the Group’s ability to deleverage post the two acquisitions
completed this year.
Strong organic revenue growth outperforms
the market significantly
Group organic revenue growth was 20.7% on a constant
currency basis. This compares with AVIXA’s estimated
growth in the global AV market of 10.5% in 2022.
Steady improvement in most end user markets
We saw a steady improvement in a number of end user
markets that have been quieter since the start of the
pandemic. The corporate market was stronger for us, with
demand for our offering of unified communication and
collaboration products showing the greatest improvement.
The live events, hospitality and entertainment markets also
improved during the year as in-person activity resumed.
The retail market has remained relatively subdued – a
reflection of relatively tough trading conditions. AVIXA
anticipates that this market may not return to 2019 levels
until 2025. We believe that this market has historically
accounted for around 5% of Group revenue.
Operating margin improvement
The Group’s adjusted operating margin improved from 4.0%
in 2021 to 4.2% in 2022. Gross margins were in line with the
prior year whilst better operating leverage led to an
improvement in net margins.
The gross margin was positively impacted by strong growth
in our higher margin professional audio business and relatively
strong margins from businesses acquired in the year.
However, these were offset by a negative swing in the
provision for aged stock. In 2021, the gross margin was
positively impacted by an aged stock provision release,
whereas a charge was seen in 2022. Excluding these
provision movements, the gross margin would have been
0.5% higher in 2022 than in 2021.
Strong contribution from acquisitions
The Group acquired two significant businesses early in
the year, Cooper Projects (trading as DVS) and Nimans.
Combined, these two businesses contributed total revenue
of £154m at a gross profit level, marginally ahead of the
Group average and with a strong contribution to net profit,
after funding costs. The acquired businesses are based in
the UK and either strengthen our existing technical capabilities
(such as in unified communications in the case of Nimans) or
move the Group into new market areas (CCTV and access
control in the case of DVS).
Profitability and cash generation
Adjusted profit before tax increased by 41.5% to reach
£45.2m – a new record for the Group.
In addition to maximising profitability, we continued to focus
on managing our cash flow. The significant organic growth
experienced in 2022, plus the cash outflow from acquisitions,
meant that adjusted net debt increased from around £58m to
£96m. At 31 December 2022, the ratio of adjusted net debt
to adjusted EBITDA was 1.6 times – well within the Board’s
target range. The Board considers that cash conversion of
54.3% is satisfactory given the strong organic growth of the
business. Our expectation of long-term cash conversion
remains between 70% and 80%.
Read more on page 111 for definitions of alternative performance measures
Group strategy remains unchanged
Our Group strategy focuses on long-term profit growth
driven by increasing specialisation, expanding our geographical
footprint and growing the scale of the business. The Board
reviews the validity of this strategy on a regular basis and
believes that it continues to provide a sound basis for the
future development of the business.
Technologies
In broad terms, we categorise our products into mainstream
and specialist categories. Mainstream products cover
displays and projectors, which comprised an aggregate of
40.4% of Group revenue in 2022 (2021: 50%). Specialist
categories cover technologies which require greater pre and
post-sales support and hence tend to carry higher margins.
This group covers categories such as audio, technical video
and broadcast and represented 54% of total sales compared
with 43% in 2021. A core part of the Group’s long term
strategic focus is to become more specialist.
Our largest technology area is displays, a category which
grew by 16% in 2022 and is now 30% larger than it was in
the pre-Covid year of 2019. Growth was strong across all
geographical regions. LED displays experienced very strong
growth, in excess of 60% in the year, and we believe we
have established a strong market position in this category.
These products require a higher level of expertise to
distribute effectively, and hence tend to carry a higher
overall gross margin.
Revenue from projector sales increased by 8% in 2022
(2021: 6%), with the UK&I once again achieving the most
significant growth due to its focus on high-end projection.
Whilst the overall projector market continues to be
impacted by a shift towards displays, we believe that we
gained market share in this category through our focus
on high-end projection.
Growing our technical product categories has been a
particular focus of the business for many years and in 2022
revenues in this category increased by over 76% (2021: 50%).
As expected, after two particularly strong years, revenues in
the broadcast segment declined in 2022. However, we saw
strong growth in professional audio, particularly in EMEA.
Revenues from lighting products increased by 60% as live
events returned in 2022. Other technical product categories
grew, with the two acquisitions contributing to a new
category of security products and also expanding our
unified communications revenues.
Annual report and financial statements 2022
Midwich Group plc
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STRATEGIC REPORT MANAGING DIRECTOR’S REVIEW CONTINUED
Outlook
The Group has a proven capability to grow ahead of its
markets both organically and through acquisition. I believe
that our standing with customers and vendors alike continues
to go from strength to strength. However, our team is not
complacent – we recognise that we operate in a competitive
market where both vendors and customers have a choice of
which partners to work with. Our focus is to ensure that we
provide the best service possible, and continue to develop
our service offering. We have a strong pipeline of acquisition
opportunities which will enable us continue our strategy of
entering new geographical markets and expanding our
range of products.
With the global AV market expected by AVIXA to grow at
5.9% per annum over the five years to 2027, I believe our
Group is very well positioned for the future.
Although still early into the new financial year, and mindful of
the slower general economic conditions and higher interest
rate environment, we remain confident that 2023 will see yet
another year of growth in excess of the overall market.
Growing our technical product
categories has been a particular
focus of the business for many
years and in 2022 revenues in this
category increased by over 76%.”
Stephen Fenby
Group Managing Director
NORTH
AMERICA
UK &
IRELAND
Starin, our North American business, performed well in the
year, with revenues increasing by 78.2% to £123.1m (60.0%
on a constant currency basis). The gross margin of 14%
achieved in the year was below the 2021 level, but we believe
it is still strong for a business in the US market. Our 2021
profitability in this region was particularly positively
impacted by aged stock provision movements.
Our focus in North America has been to expand our sales
and business management teams, to gain market share through
high service levels and to win strong new brands. In each of
these respects the business performed well in 2022.
Adjusted operating profit was £6.4m – a 41.3% increase on
2021 (27.1% in constant currency) and 5.2% of revenue in
the year.
Revenue
£123.1m
14.0%
Gross margin
Revenues in the UK&I grew by 72.1% to £492m. This included
organic revenue growth of 18.4%. Technical product
categories, such as audio and lighting, were particularly
strong, as were high-end projector sales. The gross margin
percentage in this division increased from 15.8% to 16.1%
despite an increase in the aged stock provision.
Adjusted operating profit more than doubled from £12.7m
to £26.5m due to strong contributions from both organic
growth and the acquired companies.
Revenue
£492.2m
16.1%
Gross margin
22
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Midwich Group plc
Annual report and financial statements 2022
34.9%
EMEA
ASIA
PACIFIC
The EMEA region comprises our businesses in France,
Germany, Switzerland, Benelux, Norway, Italy, Iberia and
the Middle East. Revenues, on a constant currency basis,
increased by 16.8% to £535.0m, with organic growth also
being 16.8%.
Our audio-focused higher margin businesses in Iberia, Italy
and the Middle East performed particularly well in the year
with the return of in-person activities and improved
availability of product. We saw high single digit revenue
growth in the main territories of Germany and France. Gross
margins remained flat in France but declined marginally in
Germany due to a change in product mix.
Gross margins in EMEA decreased by 0.1% to 14.6%.
Adjusted operating profit in EMEA increased by 6.4%
(3.2% on a constant currency basis).
Revenue
£535.0m
14.6%
Gross margin
After a slow start, due to extended pandemic restrictions,
our Asia Pacific business improved in the latter part of the
year and finished with revenue growth of 18.5% to £53.8m
(14.3% growth on a constant currency basis). The overall
gross margin percentage dropped slightly due to a
relatively strong performance in the lower margin displays
product category.
Adjusted operating profit of £1.4m was 48.8% higher in 2021
(42.3% on a constant currency basis).
Revenue
£53.8m
17.3%
Gross margin
Annual report and financial statements 2022
Midwich Group plc
23
23
STRATEGIC REPORT
OUR STRATEGY
OUR STRATEGY
Our ambition is to build on our position as the
leading global specialist AV distributor.
Our strategy is to take advantage of the significant opportunities in our sector
to increase our market share and deliver long-term profitable growth.
Market dynamics and the opportunity
The global Pro AV market was estimated to be worth
$263bn^ in 2022 and is forecast to grow to $351bn^ by
2027. This represents a forecast growth rate of 5.9% per
annum, well ahead of the global GDP projections.
At £1.2bn revenue in 2022, the Group revenue represents
less than 1% share of the global AV market, which
presents us with a significant opportunity for further
growth. In context, since the Group’s IPO in 2016, global
GDP has grown by an average of 2.7% per annum, whilst
the global Pro AV market has grown by c.7% and Midwich
Group revenue has grown by 22% demonstrating our
ability to sustainably increase market share.
To achieve our strategic growth objectives, we aim to
expand our addressable market and we look to do this by
increasing our technology coverage. At the end of 2022,
the Group has a presence in approximately 55% of the
global AV territories. This presence ranges from broad
product solutions (e.g. UK&I) to more modest offerings
(e.g. North America).
Our approach to growth
The Group’s growth strategy has been, and continues to
be, both organic and inorganic.
Our primary focus is on organic growth supplemented by
acquisition of businesses in new geographical or product
markets. Where we acquire, it is always with a plan for
how we can help that business to grow and be more
successful. The Group takes a disciplined approach to
acquisitions, seeking to add capital value without an
adverse impact on the existing business. We have a
strong ongoing pipeline of opportunities.
Our strategic decisions are
based on achieving three
core objectives:
specialisation,
geographical coverage
and scale. We believe that
a focus on this combination
of factors provides the
right framework to achieve
our long-term profitable
growth objectives.
S P E C I ALISATION
OUR
THREE
STRATEGIC
FOCUS
AREAS
E
L
A
C
S
G
E
O
G
R
A
P
H
I
C
A
L
C
O
V
E
R
A
G
E
Source: AVIXA
24
24
Midwich Group plc
Annual report and financial statements 2022
TECHNOLOGY COVERAGE
Strong offering Modest offering No offering
Display
Projection
Technical
LED
Audio
UC
Broadcast
Lighting
Security
55%
of global
market*
Existing Group
territories
UK & Ireland
Germany
Austria
France
Iberia
Italy
Norway
Switzerland
Benelux
Middle East
USA
APAC
Target Group
opportunities
Rest of
North America
Rest of
SE Asia
Rest of Nordics
Eastern Europe
* Management view based on AVIXA market data.
Annual report and financial statements 2022
Midwich Group plc
25
25
STRATEGIC REPORT
OUR STRATEGY CONTINUED
Specialisation
Why?
— Relevance
— Profitability
— Defensibility
How?
— Portfolio management
— Acquisition
— Values and services
Success measures
— Growth in technical
product sales
— Long-term growth in gross
profit margin
— The increasing complexity of AV solutions highlights more
than ever the need for both customers and manufacturers
to use a high-quality specialist distributor such as Midwich.
— Our specialisation strategy includes both launching new
vendor relationships and rolling out existing relationships
into new technology areas and geographical markets; this
expands our technical product offering, adding both
breadth and flexibility to our solutions.
— Greater specialisation allows us to invest in technical
expertise and develop experience centres. By doing this
we can offer industry-leading advice to our customers
and end users. It also allows us to share deep market
knowledge with our vendor partners.
— The Group has acquired 19 specialist AV businesses since
2016. These investments have accelerated our development
of specialist capabilities and we have a strong pipeline of
similar opportunities.
Increase in technical product sales mix over time demonstrates increased specialisation
21%
36%
2016
4343+
43%
2019
4040+
40%
O 3030+
2022
54%
30%
Displays
Projection
Technical
Other
22%
21%
14%
Displays
Projection
Technical
Other
17%
36%
7%
Displays
Projection
Technical
Other
11%
54%
5%
26
26
Midwich Group plc
Annual report and financial statements 2022
+
22
22
+
+
21
21
+
+
14
14
+
+
0
+
0
+
0
+
0
+
0
+
0
+
0
+
0
+
0
+
0
+
0
+
0
+
O
O
+
17
17
+
+
36
36
+
+
7
7
+
+
0
+
0
+
0
+
0
+
0
+
0
+
0
+
0
+
0
+
0
+
0
+
0
+
O
+
11
11
+
+
54
54
+
+
5
5
+
+
0
+
0
+
0
+
0
+
0
+
0
+
0
+
0
+
0
+
0
+
0
+
0
+
O
O
DVS acquisition
integration: Tesco
invests in security
— We acquired DVS, a specialist
security distributor, in January
2022.
— Traditional security deal to roll
out a solution across multiple
Tesco stores.
— Displays strategically placed within
high-value or high-volume theft
areas for customer awareness.
— Cross-market opportunity
meant DVS could now source
screens from Midwich with 100
iiyama screens supplied.
— Delivering cross-market sales
opportunities to the Midwich
Group as many more security
solutions require displays.
Annual report and financial statements 2022
Midwich Group plc
27
27
STRATEGIC REPORT OUR STRATEGY CONTINUED
Geographical coverage
Why?
— Support
— Projects
— Share of wallet
How?
— Acquisition
— Investment
Success measures
— Number of territories
— Market presence
— Number of customers
— Pro AV is a £263bn global industry with an increasing
need from end users for consistent solutions across
multiple territories. The switch to hybrid working and the
expansion of unified communications, which typically rely
on global software platforms, accelerated demand from
multinational organisations for common solutions. Similarly,
in a connected world, retailers want consistent brand
strategies and customer experiences across their markets.
— Many of the Group’s largest customers are becoming
increasingly global in their approach and Midwich is able
to support them, to create solutions, demonstrate options
to end users and meet their product requirements across
the world.
— There is also an increasing desire from vendors to work
with partners who can provide a consistent, high-quality
service across the globe. Working closely with our vendor
partners we have accelerated the roll-out of existing
vendor relationships into new markets over the last few
years. This is one of the key drivers of the Group’s
increase in market share.
Increasing scale from greater geographical coverage, whilst increasing non-UK&I revenue from
33% in 2016 to 59% in 2022
33%
2016
6767+
67%
26%
54%
O 4646+
2019
46%
47%
59%
O 4141+
2022
45%
41%
UK&I
EMEA
APAC
North America
7%
0%
UK&I
EMEA
APAC
North America
7%
0%
4%
10%
UK&I
EMEA
APAC
North America
2016
— Countries of operation: 6
2019
— Countries of operation: 17
2022
— Countries of operation: 21
— Number of vendors: 300+
— Number of vendors: 500+
— Number of vendors: 600+
— Number of customers: c.10,000
— Number of customers: c.16,000
— Number of customers: 22,000+
28
28
Midwich Group plc
Annual report and financial statements 2022
+
26
26
+
+
7
7
+
+
0
+
0
+
0
+
0
+
0
+
0
+
0
+
0
+
0
+
0
+
0
+
0
+
0
+
0
+
O
+
47
47
+
+
7
7
+
+
0
+
0
+
0
+
0
+
0
+
0
+
0
+
0
+
0
+
0
+
0
+
0
+
0
+
0
+
O
+
45
45
+
+
4
4
+
+
10
10
+
+
0
+
0
+
0
+
0
+
0
+
0
+
0
+
0
+
0
+
0
+
0
+
0
+
O
O
Scale
Why?
— Efficiency
— Profitability
— Cross-selling
How?
— Focus
Success measures
— EBIT % growth
— Sharing expertise
— Growth in acquired companies
— Referral
— Acquisition
— Product offering
— The Group has a track record of gaining market share;
— Scale also helps with our acquisition model, from
for example, the wider Pro AV market has typically grown
by 6-8% per annum (AVIXA data) whilst the Group has
grown by a compound annual growth rate of 22% since its IPO
in 2016.
attracting target companies, to developing in-house
acquisition capabilities, to integration and support for
future growth and having the balance sheet to do multiple
deals each year.
— Scale brings significant benefits such as a greater degree
of importance and influence in the AV market with both
customers and manufacturers. The benefits of scale allow
the Group to make investments in experience centres,
technical expertise and also support capabilities to help
our businesses grow.
— At the heart of our strategy is leveraging the scale of
the Group to help each of our local businesses grow
and punch above their weight.
ADDING VALUE TO GROUP COMPANIES
Enabling local companies to grow
Central
support
— Specialist
departmental/
functional knowledge
— Industry expertise
and relationships
— Vendor and customer
strategic relationships
Local expertise/
a peer group
approach
— Departmental
knowledge transfer
— Market knowledge
— Vendor and customer
relationships
Vendor
access
Digital
infrastructure
— Significant vendor
access for new and
existing businesses
— Group reputation is
the key factor
— Focus area for
enhancement
— Efficiency and
commercial
opportunities
— Increase upside as
we scale
Annual report and financial statements 2022
Midwich Group plc
29
29
STRATEGIC REPORT
KEY PERFORMANCE INDICATORS
HOW WE PERFORMED IN 2022
Record revenue growth resulting in exceptional
Group results in 2022.
39%
16.5%
16.5%
15.3%
15.3%
14.3%
21% 20%
23%
3%
18
19
20
21
22
18
19
20
21
22
Change in total revenue vs prior
year at constant currency
Gross profit as a percentage of revenue
REVENUE GROWTH
39%
GROSS MARGIN
15.3%
Why we use this measure
Revenue growth (at constant currency) is often
an indicator of the financial health of the Group.
It may indicate the Group is participating in a
growing market or has gained market share, or both.
Performance
The Group achieved record revenue growth in
2022 and further increased its market share
with total growth of 39% (CFX).
Target
The Group aims to grow its revenue at a faster
rate than the overall market to increase its
market share.
Why we use this measure
An increase in the gross margin would suggest
an improved competitive positioning from year
to year either through carrying a greater range
of products that require a technical sale,
stronger relations with customers and vendors,
or greater buying power, or a combination of each.
Performance
In 2022, the Group maintained gross margin.
Excluding the impact of the change in aged
stock provisions in the year the gross margin
improved by 0.5 percentage points.
Target
Maintain or increase gross margin each year.
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Annual report and financial statements 2022
The Group once again made
significant market share gains
in the year.”
Andrew Herbert
Non-executive Chair
194%
92%
69%
54%
45%
21
20
18
17
14
18
19
20
21
22
Adjusted operating cash flow as a
percentage of adjusted EBITDA
18
19
20
21
22
The number of countries in which the
Group has operations
CASH FLOW CONVERSION
COUNTRIES WITH A PRESENCE
54%
21
Why we use this measure
Cash flow conversion measures the ability of
the Group to generate cash from its operations
as a function of turning stock to sales to cash
quickly. It gives an indication as to the ability
of the Group to pay its dividend and self-
fund investments.
Performance
The Group invested in working capital in 2022
to support its record increase in revenue.
Target
Over 70% of EBITDA.
Why we use this measure
Geographic footprint is an indicator of our
ability to support customers, end users and
vendors with global project rollouts, in addition
to scale and the opportunity to further grow
revenue.
Performance
At the end of 2022 the Group continued to
increase its international presence, obtaining a
licence to operate an entity in Saudi Arabia.
This gives the Group a presence in all the major
global AV regions and increased the number of
countries where we operate to 21.
Target
Entry into at least one new geographical market
per annum.
Annual report and financial statements 2022
Midwich Group plc
31
31
STRATEGIC REPORT SUSTAINABILITY
Formalising
our approach to
sustainability
Our strategy harnesses
the collective power of our
culture and is underpinned
by strong governance and
responsible behaviours.”
Hilary Wright
Non-executive Director
I am pleased to report that we have made significant
progress in Environmental, Social and Governance (“ESG”)
matters during the period, and I am excited to introduce our
new sustainability strategy. This has been developed over
the last year with the enthusiastic support of our wide-
ranging stakeholder groups together with external
sustainability consultants.
The new strategy formalises our approach to sustainability,
building on the previous three pillars that we reported
against. It provides a more holistic plan to address the key
sustainability-related risks and opportunities that impact our
business. It focuses on four areas that we can leverage to
create and add economic, social and environmental value by
incorporating material sustainability considerations into the
decisions we make, the actions we take and the relationships
we nurture.
Our approach to sustainability has always been about doing
the right thing for our business, our stakeholders and wider
society. As one of the largest distributors of specialist AV
equipment globally, we understand the unique role we play
in the sector, both supporting our customers to meet their
own sustainability ambitions and using our voice to advocate
for more sustainable ways of working across the wider
AV industry.
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Annual report and financial statements 2022
Sustainability isn’t just important to us – we know that the
end users of our products, our employees, our investors and
other stakeholders value it highly too. From climate change,
energy efficiency and the circular economy to the focus on
inclusivity, we are acutely aware of the emerging trends that
will continue to impact our business now and in the future.
Our new sustainability strategy
Our new Group-wide Midwich Sustainability Strategy
recognises that there are critical areas where we have more
direct control – supporting the growth and development
of our people and reducing our environmental impacts.
We are looking at other areas, where we have less control
but can influence and leverage our position in the value
chain to add value and support the sustainability agenda
in the communities in which we operate and across the
AV sector.
Our strategy harnesses the collective power of our culture and is
underpinned by strong governance and responsible behaviours.
Our Midwich Sustainability Strategy incorporates the
following four areas:
OUR PEOPLE AND
GIVING BACK
To care about our team and local
community. Developing skills and
diverse talent that will support our
business and sector, now and in
the future. Be a resource to the
local community, benefiting
all involved.
s s i o
a
O
ur culture: P
R P E
D GIVI N
U
O
N
A
g o
sin
s
e
n
r
a
H
OUR ENVIRONMENTAL
PERFORMANCE
To manage and reduce emissions
and energy consumption in our
own business and influence key
impacts in our supply chain.
a
A R E A S W E CAN MANAGE
l a b o rative, supportive, a
t e , c o l
OUR E
PE
N
E
n
P
L
G B A C K
m
bitio
u
s
V
I
R
F
R
a
n
d
O
O
s
R
N
M
e
r
M
A
E
N
N
C
T
E
A
L
v
i
c
e
-
m
i
n
d
e
d
CREATING
VALUE
L
E
N
N
A
H
G O UR C
h a vio urs
e
O
U
R
S
O
L
E
n
a
b
le
d b
U
O
N
S
TI
I N F L U E N C I N
y strong governance an d r e s p o n s i b l e b
AREAS WE CAN IN F L U E N C E
OUR SOLUTIONS
To promote AV solutions that
help people to communicate,
collaborate and work
more efficiently.
INFLUENCING OUR
CHANNEL
To support a sustainable value
chain to ensure its long-term
success and maximise
collective benefit.
Annual report and financial statements 2022
Midwich Group plc
33
33
STRATEGIC REPORT
SUSTAINABILITY CONTINUED
Next steps
Our focus for the year ahead is to embed sustainability
considerations further into the way we operate and
stretching, but achievable, and measurable targets and KPIs.
These sustainability-related success measures will help us
define the direction of the strategy for the Group, whilst
enabling some flexibility and autonomy for each of our
businesses on how they want to achieve the objectives in
their own unique way.
Progress in 2022
Across the Group there has been a strong focus on
sustainability actions and the Group met or exceeded the
targets that we set for 2022.
2022 ESG targets
Completed
Target
THE ENVIRONMENT
To complete baseline CO2 emissions data
Outcome
To report on our environmental strategy and approach to carbon reduction
OUR COMMUNITIES AND CHARITY SUPPORT
To contribute over £25,000 to our chosen charities
To launch “the Gift of AV” initiative in the UK
OUR PEOPLE
Welcome our teams back to our offices and promote hybrid working
Invest in our facilities to make them great places to work
£55,214.09 funds raised for
14 ‘Gift of AV’ charities.
Ongoing with
numerous initiatives
Complete in 2022
I have been delighted with the Group’s engagement
with sustainability during the last twelve months. We have
many team members who are passionate about making a
difference and I believe that our new strategy will provide
a framework to bring this together across the business.
We have also seen some positive results from our actions
during the year as noted in the table above.
The work to establish a baseline for our global carbon data
this year means that we are fully on track to incorporate
Task Force on Climate-related Financial Disclosures (“TCFD”)
in next year’s annual report.
Hilary Wright
Non-executive Director with responsibility for ESG
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Midwich Group plc
Annual report and financial statements 2022
DEVELOPING OUR MIDWICH SUSTAINABILITY STRATEGY
Crucial to the development of our new Midwich
Sustainability Strategy was conducting a full
environmental, social and governance (ESG)
materiality assessment.
To achieve this, we worked with external consultants to ensure that the results
were impartial and truly reflective of the key sustainability-related challenges that
our business and the wider AV industry face.
The materiality process was conducted in collaboration with
all our stakeholders. Employees across multiple geographies
were invited to participate in a survey asking for their views
on the most important issues to them and those impacting
the business. Interviews with external stakeholders including
customers, vendors and investors were also conducted to
ensure our strategy aligned with wider industry initiatives
and goals. Stakeholder engagement, combined with a detailed
analytical review involving academic research and industry
intelligence gathering, helped us identify a long-list of 20
material topics across each of the environmental, social and
governance areas. We then conducted risk and opportunity
analysis against each topic to establish its potential to
impact the business and significance based on stakeholder
views and the wider global sustainability agenda.
The result, our materiality matrix, is shown below.
Risk heatmap
Current risk assessments taking account of current mitigations
Environment Social Governance
l
s
r
e
d
o
h
e
r
a
h
s
o
t
e
c
n
a
c
fi
i
n
g
S
i
i
h
g
h
y
r
e
V
e
t
a
r
e
d
o
M
w
o
l
y
r
e
V
Manage
8
1
Monitor
Maximise
9
3
2
12
11
4
17
15
5
6
10
16
7
18
13
14
Mitigate
Very low
Moderate
Very high
Exposure/impact on the business
Maximise
2 Energy management
3 Greenhouse gas reduction
4 Logistics and transport
9 Employee inclusivity
11 Employee training
12 Employee wellbeing
Manage
5 Packaging
6 Product lifecycle management
8 Community involvement
16 Fair operating practices
Mitigate
14 Product security
15 Executive remuneration
17 Responsible procurement
Monitor
1 Biodiversity loss
7 Child labour and human
trafficking
10 Employee health and safety
13 Product accessibility
18 Responsible tax
Annual report and financial statements 2022
Midwich Group plc
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STRATEGIC REPORT
SUSTAINABILITY CONTINUED
SUSTAINABILITY CONTINUED
The process to define and identify our highest priority
sustainability-related issues has fed into the development
of our new Midwich Sustainability Strategy and will inform
our approach to disclosures going forward.
The topics that are most significant to our stakeholders and
have the highest potential to impact our business are those
within the top right-hand quadrant These are the areas
where we will initially dedicate the majority of our time
and resources. Our next step is to develop the roadmap
that will set out our core objectives, the actions we’ll take,
measurement metrics and long-term targets against each
of our most material issues.
Managing sustainability
The Board recognises its responsibility to not only oversee
sustainability throughout the business, but to also advocate
for innovation and creative solutions to the challenges that
the business faces. Hilary Wright, as the Non-executive
Director with responsibility for ESG, has increased the
Group’s focus on sustainability and is ensuring the Board
is fully conversant with the objectives of the new strategy.
Our Group operating model respects the autonomy of our
local teams and their values, but sets out our strategic intent
and provides goals, frameworks and objectives to achieve
this. This model will also apply to our Midwich Sustainability
Strategy and each of our businesses is truly committed to
enhancing our approach to sustainability while acting locally
to achieve the aims set out in the new strategy.
A steering group (“Midwich 25”) has been established to
ensure that we make progress against our objectives. This
team is made up of representatives from our businesses and
has responsibility for the governance of sustainability across
our Group as well as driving change and supporting the
long-term goals of the strategy. This will allow us to support
a transition to a decarbonised economy and society, whilst
nurturing the growth of the people who work for us.
36
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Midwich Group plc
Annual report and financial statements 2022
MIDWICH SUSTAINABILITY STRATEGY
AREAS WE CAN MANAGE
Our people and giving back
OUR E
P
E
N
V
I
R
F
R
O
O
R
N
M
M
A
E
N
N
C
T
E
A
L
CREATING
VALUE
L
E
N
N
A
H
G O U R C
I N F L U E N C I N
Strategic priority
Our employees are core to everything we do, and we want
them to be fully engaged with the Group and feel a strong
sense of belonging and ownership. Supporting our team,
through an environment that helps them flourish is part of
our purpose, and it is critical to our long-term success as a
business. This is delivered through continued involvement in
our communities and to develop the skills of our people
providing a broader talent pool to meet the needs of our
business and sector, now and in the future.
Focus areas
1. Inclusivity
Our business sits at the heart of the AV industry, and it is our
people and their relationships with our multiple stakeholders
that drive our results. The materiality assessment reinforced
what we’ve always known: A feeling of inclusivity and
belonging by our team members is an important factor
in our long-term sustainability. The Group’s rapid growth
over the last few years combined with the shift to hybrid
working has presented numerous challenges with respect
to maintaining groupwide engagement which have actively
addressed, and our greater scale and diversity brings
opportunities to invest in our teams as well as creating
more fulfilling careers.
P
E
L
G B A C K
O
R P E
D GIVI N
U
O
N
A
O
U
R
S
O
L
U
TI
O
NS
Annual report and financial statements 2022
Midwich Group plc
37
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STRATEGIC REPORT
SUSTAINABILITY CONTINUED
2. Training and development
Read more Starin career pathways case study
We are committed to developing our team members and
allowing them to build their careers within the Group. We
understand that if our people understand their purpose and
responsibilities and are given the right training and tools
they will perform better. We value autonomy and personal
responsibility and strive to maintain a merit-based culture.
Across the Group we offer a mix of structured training,
leadership development and coaching. Our merit-based
approach recognises success through both our rewards
process and promotion. The rapid growth of the Group
allows us to set stretching and rewarding goals for people
and provide them with opportunities to try new things both
in the UK and, increasingly, overseas.
3. Employee wellbeing
Read more community engagement case study
Looking after our team members is critical to our business
performance, but more importantly is deeply embedded in
our values. We want Midwich to be an engaging, rewarding
and fun place to work. Over the last few years, we have seen
an increasing convergence of personal and work time. As a
leading AV company, we have adopted hybrid working across
the Group. This provides more flexibility to our teams and
ensures that we prioritise productivity vs time in the office.
We’re also conscious of the current pressures on both
mental health and from cost-of-living increases. We have
responded to both with targeted initiatives and employee
benefits. We have also invested in dedicated resources to
proactively support our teams around the world.
As a distributor, we are at the centre of the AV channel
and we have adopted a similar model with respect to the
communities we operate in. The Midwich Group supports
an array of local, national and international charities. We
recognise the importance of giving back to the communities
where we operate and the value this provides to the charities
and to our employees, who love to give back.
Community engagement:
Employee wellbeing
We made great strides towards making a greater
impact in 2022. I am most proud of the £55,000 we
have raised for our 14 “Gift of AV” charities; this sets a
new annual record for Midwich Limited. Midwich has
raised £300,000 for its various chosen charities
since 2012.
At the beginning of 2022, we announced that
employees could take a day’s paid leave to give their
time to local volunteering; as a result, 21% of Midwich
employees based at Midwich HQ committed time to a
project close to their heart, equating to 300 hours of
volunteering. The projects included working in local
charity shops, litter picking, supporting refugees
fleeing the war in Ukraine and 190 hours on local
conservation projects; one of these included planting
600 trees as an initiative to offset our carbon
emissions through air travel in 2021.
In September, we launched a significant cost-of-living
package aimed at supporting our UK employees and
their families. We put together a package of initiatives
implemented throughout the months of September,
October, November and December; this benefited
every employee.
View now!
See what we’ve
been up to.
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Annual report and financial statements 2022
Our committments to people and giving back
We will continue to champion engagement across the Group,
encouraging behaviours that align with our values. Our
training and development will ensure people feel comfortable
and secure in their roles, are treated respectfully and can
operate with autonomy. We will value inclusivity and
recognise performance through both our reward and career
development programmes. We will also continue to
encourage employee share ownership across the Group.
We will prioritise employee wellbeing, adapting to the
changing social and economic backdrop. We will also
continue to support the communities where we operate.
Measures of success
— Engagement survey results
— Employee share ownership
— Average length of service
— Charitable contributions
— Community volunteering
Maximising impact in EMEA
This year our EMEA brands decided to take a more
structured approach to how they select their yearly
‘charity of choice’, by engaging more deeply with
employees during the selection process. The intention
was to provide a common cause for each of the
regions’ businesses to contribute to, and to maximize
the impact we could achieve by collaborating, whilst
working towards meeting some of the group’s
sustainability ambitions.
Over 35 charities were nominated, of which a majority
were environmental protection charities, were nominated
by employees and following a vote Re-Forestation Action
was successfully chosen to be the EMEA charity partner
for 2023. Re-Forestation’s mission is “To preserve, restore
and create forests around the world in order to develop
their multiple environmental, social and economic benefits
over the long term.
RIDE 22 – Tour de AV
In the UK, “Ride 22 – Tour de AV” was Midwich’s first
“Gift of AV” challenge that took place in October. The
bike ride was held in association with AV Magazine and
Pedal Revolution, a team of 24 cyclists from across the
AV industry competed in a gruelling 135 mile (217km)
cycle challenge from Midwich Group HQ (Diss) to
Royal Ascot Racecourse, across two days. The event
raised a fantastic £27,000 with each rider choosing a
‘Gift of AV’ charity of their choice to fundraise for.
Starin: Pathways to growth
initiative
This year, our US brand, Starin, launched a new training
and development initiative – “Pathways to Growth.
After listening to their employees, Starin took its first
steps towards creating a long-term employee
development program. The aim was to help Starin’s
employees flourish in their roles and providing them
with the support to grow, whilst bolstering our ability to
provide specialised talent in-house with a unique
learning and experiencial pathway to advance their
personal and professional growth.
Internal training courses are offered to all employees,
across a range of departments from customer care to
technical, this enables all employees, new or old, to
have a solid understanding of how all departments
work and enabling multi-functional learning. Ongoing
there will be new courses added every quarter.
In addition to supporting our employees, Starin are
committed to continually developing the senior
leadership team to challenge and innovate.
Supporting development
from within is one of the most
important responsibilities I have.
It is what will ensure our long-
term growth and success as a
company, as well as an industry,
well into the future.”
Bobby Swartz
CEO Starin
Annual report and financial statements 2022
Midwich Group plc
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STRATEGIC REPORT SUSTAINABILITY CONTINUED
MIDWICH SUSTAINABILITY STRATEGY
AREAS WE CAN MANAGE
Our environmental performance
P
E
L
G B A C K
O
R P E
D GIVI N
U
O
N
A
O
U
R
S
O
L
U
TI
O
NS
OUR E
P
E
N
V
I
R
F
R
O
O
R
N
M
M
A
E
N
N
C
T
E
A
L
CREATING
VALUE
L
E
N
N
A
H
G O U R C
I N F L U E N C I N
Strategic priority
Our primary goal is to manage and reduce our carbon
emissions and energy consumption in our own business.
We want to do the right thing for the long-term sustainability
of the environment, and we will do this through a focus on
improving our facilities and logistics activities.
Focus areas
1. Reducing our carbon emissions
As a distributor, the Group’s carbon footprint is influenced
by two key factors. Firstly, the offices, experience centres
and warehouses where we work and look after our products,
together with the impact of our team members getting to
these facilities. Secondly, the transport and logistics with
respect to our supply of products. Many of these activities
are outsourced across the Group.
Over the last twelve months we have worked with an
environmental consultant to establish a baseline level of
carbon emissions for the Group. This has been a complex
undertaking, given the geographical reach of our business
and the fragmented nature of base data. This work will
underpin the establishment of our carbon reduction targets
and the Group’s inclusion of comprehensive TCFD aligned
data in next year’s annual report under the Mandatory
Climate-related Financial Disclosures regulations. This
year we have set out our progress towards TCFD aligned
climate disclosures.
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Midwich Group plc
Annual report and financial statements 2022
2. Improving our working environment
We also have a Group-wide commitment to reduce our
wider environmental impact to promote a positive and
healthy working environment and reduce our waste. Across
the Group we support numerous initiatives including electric
vehicle and cycle to work schemes, the elimination of
single-use plastics, using LED lighting and installing solar
panels and switching to renewable energy providers.
Progress on climate disclosures
1. Governance and risk management
In 2021, Hilary Wright was appointed Non-executive Director
with responsibility for ESG matters. Across the Group, we
have established a series of programmes, sponsored by the
Group Managing Director and Group Finance Director,
looking at climate-related matters. Regular updates are
provided to the Board.
In the past year we have completed a Group-wide materiality
assessment to identify the environmental matters that have
the greatest potential impact on our business. From 2023
climate-related risks will form part of the Group’s overall risk
management process.
Throughout 2023 we will be conducting a thorough climate-
related risk and opportunity assessment, which will identify
our principal physical, transitional, transboundary and legal
risks and the impact these will have on the business over the
short, medium and long term. This assessment along with
the establishment of a scenario analysis will form part of our
first TCFD aligned disclosures in next year’s annual report.
2. Climate-related targets
The Group is making good progress towards establishing
its carbon targets. In 2022, we conducted a detailed
assessment of our carbon emissions (Scope 1, 2 and 3). This
process was supported by a specialist climate consultancy
and a summary of baseline carbon emissions is set out
below. A review of this baseline data is currently underway
with an objective to establish Group-wide climate-related
targets and key performance indicators to assess progress
against these.
3. Impact on strategy and the business model
The Board’s initial assessment is that climate-related risks will
be an influencing factor but will not have a material impact
on the Group’s strategy. We believe that the AV industry will
respond proactively to the challenges and contribute
towards solutions to reduce overall carbon emissions. For
example, we have already seen positive benefits from the
use of unified communications as an alternative to road and
air travel. We do not anticipate material changes to our
business model, which is expected to gradually evolve as
economies adapt to a low-carbon future.
SECR reporting
In addition to the activity taking place across the Group we
continue to report on energy consumption and greenhouse
gases under the Streamlined Energy and Carbon Reporting
(“SECR”) regulations. This is included on page 45.
NWT: Norfolk Wildlife
Trust
In July, Midwich Limited showed its support for
Norfolk’s nature by joining Norfolk Wildlife Trust’s
(“NWT”) corporate members scheme. As well as
providing an annual donation towards the
conservation charity’s work, Midwich staff
volunteered over 250 hours on NWT reserves,
taking part in practical conservation tasks to
help ensure these special wildlife sites continue
to provide a home to vulnerable species.
As part of NWT’s Claylands Wilder Connections
initiative, we planted 600 tree saplings on farmland
a mile from our head office in Diss. This project also
formed part of an initiative to offset our carbon
usage from air travel in 2021.
Find out more
For more information
Use the QR code or go to
https://www.midwich.
com/news-and-events
Annual report and financial statements 2022
Midwich Group plc
41
41
STRATEGIC REPORT SUSTAINABILITY CONTINUED
Our commitments on environmental performance
In the year ahead we will complete our analysis of our
baseline carbon data for the Group and set stretching
carbon reduction goals. From next year’s annual report,
the Group will incorporate TCFD aligned reporting.
We will make investments that both support our carbon
reduction goals and improve our working environment.
Measures of success
— Inclusion of TCFD aligned reporting (2023 annual report)
— Establishment of carbon reduction targets
— Further progress to reduce intensity ratios
— A greater proportion of energy from renewables
— Committed time to local conservation projects
Newly launched EV scheme
for UK staff
The UK launched their Electric Vehicle Scheme
in March 2022 initially to Midwich Limited and in
September 2022 expanded the scheme further
to Holdan and Sound Technology. The scheme is
supported by Octopus, who, as well as being a
shareholder of Midwich Group, are well known for
being an energy provider in addition to their new
venture as an Electric Vehicle provider.
Since launching the scheme, 295 employees have
registered. The saving so far is 1.65 tonnes of CO2
emissions, which is as much as 826 trees can absorb,
with the orders created through the Electric Vehicle
Scheme to date and the business is looking forward
to seeing continued up take.
Sustainability on the move
in Hamburg
Kern & Stelly, a group company based in Hamburg,
relocated at the beginning of 2021. Sustainability was
at the forefront of the refurbishment considerations,
which led to them retaining much of the existing
offices in order to avoid creating unnecessary waste.
Materials were carefully selected for all newly created
spaces. For example, carpets and flooring were from
a CO2 neutral company; wall paper is made from old/
recycled materials; and LED lighting with motion
sensors or timed switches in all public areas.
Even the office cleaning has sustainability in mind
with the use of biodegradable detergent as part of
their in-house purchasing policy, where all goods
bought for staff are either recycled, bio/eco, fair trade
or best of both.
The new location is difficult for public transport;
however the business supports a monthly public
transport ticket and bike lease (job bike) which,
together with the Home Office approach, meant they
drastically reduced their CO2 emissions per head.
In conclusion, their focus will be on the office and
canteen waste, commute and efficient energy use.
The result is an efficient and
sustainable new facility which
is also a great place to work.”
Silke Wehling
Management Assistant
42
42
Midwich Group plc
Annual report and financial statements 2022
MIDWICH SUSTAINABILITY STRATEGY
AREAS WE CAN INFLUENCE
Our solutions and influencing our channel
P
E
L
G B A C K
O
R P E
D GIVI N
U
O
N
A
O
U
R
S
O
L
U
TI
O
NS
OUR E
P
E
N
V
I
R
F
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O
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N
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A
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CREATING
VALUE
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A
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G O U R C
I N F L U E N C I N
OUR SOLUTIONS
Strategic priority
Our goal is to champion the use of AV technology and
solutions to deliver positive benefits to both our customers
and wider society. As the AV industry evolves, more creative
uses of technology are emerging. We believe that our teams,
working as part of the wider AV ecosystem, can leverage
technology to enhance people’s lives, through the quality
of communication, and substitute high emission travel for
lower emission remote experiences that support inclusion.
A legacy of the global pandemic has been the shift to
remote and hybrid working. AV technology, combined with
software solutions, makes it possible for remote workers to
fully participate in office-based meetings. Not only does this
reduce emissions, with a three-hour video conference call
producing a similar carbon output to a car driving just one
mile, but it also allows virtual teams to be based almost
anywhere in the world. We believe that AV brings flexibility
and innovation to companies and allows employees greater
choice in how and where they live and work.
Our commitments on our solutions
In the year ahead we will continue to invest in our specialist
teams and experience centres to be able to demonstrate the
creative solutions that AV can deliver.
For example, we supported a leading advertising agency to
set up a virtual production studio in our experience centre,
where they went on to create advertising content for a
well-known car brand without having to travel the world.
Annual report and financial statements 2022
Midwich Group plc
43
43
STRATEGIC REPORT
SUSTAINABILITY CONTINUED
Our commitments on our solutions continued
This is where we are seeing technological advancements
begin to offer sustainability benefits through new ways
of working.
We will continue to work with our vendor brands and
customers, proactively engaging in discussion on
sustainability improvements as part of their new product
development, such as ‘eco modes’.
In addition, we will champion AV channel education for
sustainable best practice when proposing technology as
part of a solution and by delivering key notes at leading
industry events on topics aligned to sustainability. For
instance, our presentation on the topic of ‘Green vs Screen’
shares best practice for creating content that is best suited
to the screen technology and therefore can help reduce
power consumption. These types of key notes are where
installers and content creators gather ideas to adapt to
building a more sustainable offering to their end user clients.
Measures of success
— Macroeconomic statistics for commuting time/mileage
— Customer/end user feedback
— Content creation to support the AV channel with
sustainability
INFLUENCING OUR CHANNEL
Strategic priority
Our goal is to support a sustainable value chain to ensure
the long-term success of our business and, by working
with our vendors, customers and end users, influence and
support their environmental goals. Many of our global
vendors are large corporations who have their own
ambitious plans to reduce their environmental impact.
We believe that in time the AV industry will converge on
a set of principles to reduce carbon emissions and other
environmental impacts.
Whilst this area of our sustainability strategy is not as well
advanced, we are committed to learning and growing to
understand how we can use our position in the value chain
to leverage technology towards a more circular economy.
Our commitments
Continuing to work with industry bodies and leading experts
to play our part in the future formulation of channel
sustainability. This coming year, the AVIXA Sustainability
Task Force is about research and understanding, looking
into the feasibility of what can be done, such as library
resources on sustainability of products, helping the channel
understand how to support sustainability and we commit
to continuing to be a part of this.
Our long-standing relationships with partners throughout
the AV channel provides us with the perfect opportunity
to influence, therefore our commitment will be to continue
to involve ourselves and add value on sustainability in
the channel.
We will continue to support the Waste Electrical and
Electronic Equipment recycling (“WEEE”) regulations and
similar environmental programmes in other geographies.
Measures of success
— Number of key vendors with a net zero commitment
— Customer/end user feedback
— Time invested with AVIXA
44
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Midwich Group plc
Jenny Hicks, Head of Technology, Midwich Group –
AVIXA stand ISE 2023
Using our voice to influence
Promoting debate and thought leadership in AV,
Jenny Hicks, our Group Head of Technology and
Chris Neto, Starin Head of Market Development,
recently hosted a one-hour webinar for our Midwich
Live YouTube channel on Sustainability in AV. A hot
topic within the industry, Jenny and Chris were joined
by special guests, Joe Way of Higher Education
Technology Managers Alliance (HETMA), and Florian
Rotberg of Invidis Consulting, to discuss sustainability
within the AV industry.
The intellectual and engaging conversation was
focused on some of the challenges the AV sector
faces to be more sustainable, from the materials the
sector uses to the energy efficiency of products,
whilst also exploring some of the exciting
opportunities there are to diversify and support a
sustainable transition globally.
Sustainability is about how
future-proof we are in
every possible way across
the industry.”
Jenny Hicks
Head of Technology
For the full film
Use the QR code or go to
youtube.com
Annual report and financial statements 2022
SECR statement
Streamlined Energy and Carbon Reporting
In addition to the activity taking place across the Group to
develop our carbon reduction programme and reduce our
environmental impact, we report on energy consumption and
Greenhouse Gas (“GHG”) emissions under the Streamlined
Energy and Carbon Reporting (“SECR”) regulations.
The data reported is for Midwich Limited, Nimans Limited and
Cooper Projects Limited (2021 and 2020: Midwich Limited
only)1 and we note that the data for prior years was impacted
by the pandemic with lockdowns leading to reduced business
activity, home working and less business travel.
Our carbon footprint
The Group operates within the wider AV industry value chain
but, as a distributor, only has direct influence on its own
operations which include office and warehouse facilities,
travel and its logistics operations. We also support the
action plans of our customers and vendors to reduce
environmental impact across the AV sector.
Quantification and reporting methodology
The information used to calculate these emissions is based
on electricity and gas meter readings, whilst transport
information is captured as part of our operational processes.
We have used a location-based approach and emission
factors from the UK Department for Business, Energy &
Industrial Strategy (“BEIS”) “Conversion factors 2022:
condensed set” to calculate our Scope 1, 2 and 3 emissions.
The reported Scope 3 data relates to fuel purchased by
employees for business travel in their own vehicles. The
Group uses third parties for the shipment of goods from
vendors and to customers. These emissions fall outside of
our Scope 3 reporting as they will be reported as Scope 1
emissions by those parties.
Being the only UK “Large” companies in the Group
GHG emissions and energy use data for the year ended
31 December 2022
Scope 1, 2 & 3 emissions
Scope 1 emissions (direct)1
Gas consumption
Transport
Total Scope 1
Scope 2 emissions (energy indirect)2
Electricity
Scope 3 emissions (other indirect)3
Employee-owned vehicles
Combined total
Midwich Limited only
Year to 31 December 2022
Year to 31 December 2021
Year to 31 December 2020
Energy (kWh)
GHG emissions
(tCO2e)
Energy (kWh)
GHG emissions
(tCO2e)
Energy (kWh)
GHG emissions
(tCo2e)
458,698
16,661
475,629
100.8
5.8
106.6
—
15,907
15,907
—
3.8
3.8
—
8,747
8,747
—
2.2
2.2
1,058,549
214.8
520,357
110.5
430,767
100.4
701,981
2,236,159
872,267
203.4
524.8
199.5
291,629
827,893
827,893
73.5
187.8
187.8
146,452
585,966
585,966
36.2
138.2
138.2
1. Emissions from direct activities such as combustion in owned or controlled boilers and vehicles that release emissions into the atmosphere.
2. Emissions released into the atmosphere associated with the consumption of purchased electricity. These are indirect emissions that are a consequence of
Midwich Limited’s activities but which occur at sources that are not owned or controlled.
3. Emissions from business travel in rental cars or employee-owned vehicles where the Company is responsible for purchasing the fuel.
Intensity ratio
The intensity ratio compares emissions data with an appropriate metric or financial indicator. We have chosen to use tonnes
of CO2e per £ million of revenue. Note, data for 2021 includes the unprecedented impact of COVID-19 which affected both
revenue and emissions. The intensity ratio for 2019, the year prior to the pandemic, was 1.16.
GHG emissions and energy use data
Combined total
Midwich Limited only
Year to 31 December 2022
Year to 31 December 2021
Year to 31 December 2020
Revenue
£ million
432.7
281.9
Intensity
ratio
1.21
0.71
Revenue
£ million
230.1
230.1
Intensity
ratio
0.82
0.82
Revenue
£ million
153.6
153.6
Intensity
ratio
0.90
0.90
The combined UK large company data for 2022 includes the carbon emissions from the acquisitions of DVS and Nimans in Q1
2022. These businesses have in house warehouses and vehicles and also use gas boilers for heating. These emissions will be
addressed as part of the Group’s long-term Midwich Sustainability strategy.
We have also shown data for Midwich Limited only. Over recent years, Midwich has consolidated its southern UK office and
showroom facilities into a modern purpose-built facility and refurbished its head office in Norfolk. Environmental
considerations were at the heart of these changes with investments in areas including automated building monitoring, solar
panels, low energy heating and lighting and electric vehicle charging facilities. We are also moving our vehicle fleet towards
low emission vehicles and have implemented policies restricting single-use plastic and non-recyclable containers. Midwich
Limited’s intensity ratio declined in 2022 despite the return to “normal” following the pandemic. Compared to pre-pandemic
levels (2019), Midwich Limited’s intensity ratio has reduced by over 40%.
Further information on the Group’s approach to sustainability is set out on pages 32 to 44.
Annual report and financial statements 2022
Midwich Group plc
45
45
STRATEGIC REPORT STAKEHOLDER ENGAGEMENT
OUR STAKEHOLDER ENGAGEMENT
Statement by the Directors in performance of their
statutory duties in accordance with s172(1) of the
Companies Act 2006.
When making decisions, the Board of Directors of Midwich Group plc must act in the way
it considers, in good faith, would be most likely to promote the success of the Company
for the benefit of its members as a whole (having regard to the stakeholders and matters
set out in s172(1)(a–f) of the Companies Act 2006).
The Company has a clearly defined strategy (as summarised
on pages 24 to 29) and the Board takes into account the
long-term consequences of its decisions in the context of
this. When making decisions the Board considers a number
of factors, including:
The Board considers relationships with, and the engagement
of, our stakeholders to be a critical success factor for our
business. As a specialist distributor, we add value by
developing and maintaining in-depth understanding of our
vendors’ and customers’ needs.
— The macroeconomic environment, including anticipated
GDP growth, market disruptions and investment activity;
— The AV marketplace (see pages 12 to 15) – specifically
ensuring that the Group continues to build on its reputation
for high standards as a value-add AV specialist;
— The translation of the strategy into both longer-term
goals and annual plans with regular updates reviewed by
the Board throughout the year;
— How the Group’s objectives influence its employees,
customers, suppliers and shareholders together with the
Group’s wider impact on the environment and the
communities where it operates. Further details on
stakeholder engagement are set out below and in the
sustainability section on pages 32 to 45; and
— Our Risk Management Framework which, as a distributor,
places our relationships with wider stakeholders at the
centre of our decision-making (see pages 55 to 59).
During the year, specific significant decisions made by the
Board included the approval of acquisitions and new market
entry, the approval of the strategic plan and budget,
approval of the Group’s sustainability plans, approval of
additional debt facilities and the allocation of share awards
to our employees. The Board members also received
feedback from our customers, vendors, employees and
shareholders. In 2022, the Board resumed “in person”
activities including face-to-face meetings and site visits.
As a Board, our intention is to behave responsibly towards
our stakeholders and treat them fairly and equitably, so that
they all benefit from the successful delivery of our strategy.
The Board of Directors has overall responsibility for
determining the Company’s purpose, values and strategy
and for ensuring high standards of governance. The role of
the Board is to promote the long-term sustainable success
of the Company, generating value for shareholders and
contributing to wider society.
Our business model is predicated on strong long-term
relationships with high-end brand manufacturers, offering
value-added service to trade-only customers.
The Board has identified six principal stakeholder groups:
U S TOMER
S
C
O M M UNITIE
S
C
V E N DORS
OUR
STAKEHOLDERS
T
N
E
MPLOY E E
S
S
H
AREHO L D E
R S
E
N
VIRON M E
46
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Midwich Group plc
Annual report and financial statements 2022
Midwich Group stand
at Integrated Systems
Europe 2023
International trade show hosted at
FIRA, Barcelona, where over 50,000
industry peers could attend seminars
and educational training and network.
VENDORS
Why it is important to engage
Midwich is a value-added distributor
of AV products, representing over
600 high-end manufacturers.
Vendor relationships are critical
to the long-term success of
our business.
Ways we engage
Vendor relationships are managed
across all levels of the organisation
with regular communication on
both strategic matters and day-to-
day engagement.
Midwich prides itself on the longevity
of many of these relationships and the
key position it holds in the commercial
operation of its vendors. The Board
maintains an overview of vendor
relationships through regular
reporting and presentations
from management.
Stakeholders’ key interests
— Market focus and scale
— Support, attention and
market intelligence
— Profiled customer base with
targeted sales and marketing
— Industry-leading events to
interact with customers and
end users
— Ability to support
multinational projects
— Efficient logistics and
product support
Actions taken on the back
of engagement
— Feedback on market trends and
demand to develop creative
solutions
— Hosting trade events in
partnership with our vendors
— Participation in our ESG
materiality survey
— Supporting our vendors to enter
new markets and grow market share
CUSTOMERS
Why it is important to engage
Midwich operates a strictly
business-to-business model so our
customers are also a value-adding
part of the supply chain.
Ways we engage
We have a dedicated sales and
support organisation with
responsibility for both day-to-day
and more strategic communication.
We receive regular feedback
through these channels, together
with the results of formal customer
surveys, on customer needs, our
performance, product performance
and satisfaction of the ultimate
end user.
Customer feedback informs our
decisions on the product portfolio
and helps us to engage effectively
with vendors, suggesting product
enhancements and reporting on
performance issues. Customer
feedback also informs our decisions
on support and how we organise
resources to provide an effective
and efficient service. Matters
pertaining to customers and the
internal support organisation are
reported to the Board regularly.
Stakeholders’ key interests
— Market knowledge and AV
industry trends
— Customer service and value-
added support and advice
— Access to credit
— Product range and availability
— High-quality logistics
— Long-term relationships
Actions taken on the back
of engagement
— Partnering with our customers to
design end user solutions
— Access to our experience
centres to build product and
market knowledge
— Customer training programmes
— Participation in our ESG
materiality survey
— Supporting multi-country
project delivery
Annual report and financial statements 2022
Annual report and financial statements 2022
Midwich Group plc
Midwich Group plc
4747
47
STRATEGIC REPORT STAKEHOLDER ENGAGEMENT CONTINUED
Watch the ISE round-up
For the full film
Use the QR code or go to
LinkedIn.com
EMPLOYEES
Why it is important to engage
Our employees are integral to the
success of our value-add strategy.
Knowledge, skills and experience
are vital to ensuring both vendor
and customer satisfaction and,
therefore, staff recruitment,
retention and reward are critical.
Ways we engage
We hold regular open communication
sessions with staff at all levels via
management briefings and “town
hall” meetings in all locations.
Staff surveys are conducted
periodically, and staff members
have individual appraisals annually.
In 2022, we conducted an ESG
materiality survey with the
results used to inform our
sustainability strategy.
The Board receives regular reports
including the results and action
plans from our staff surveys.
Stakeholders’ key interests
— Alignment with Group strategy
— Understanding our purpose,
culture and values
— Belief in our approach to
sustainability
— Feeling part of the Company
through share ownership
— Feeling informed and
understanding why we do things
— Having meaningful and
enjoyable roles
— Training and career development
— Responding to employee feedback
Actions taken on the back
of engagement
— Targeted actions to address the
cost-of-living pressures
— A step up in our engagement
programmes including
community and charity activity
— Participation in our ESG
materiality survey
— Group-wide and local
communication programmes
— Broad participation in share
ownership
— The adoption of hybrid working
SHAREHOLDERS
Why it is important to engage
As a publicly listed company we
need to provide fair, balanced and
understandable information to instil
trust and confidence and allow
informed investment decisions to
be made.
Ways we engage
The Company engages with its
shareholders through formal
meetings, informal communications
and stock exchange
announcements.
Management meets with institutional
shareholders presenting Company
results, articulating strategy and
updating shareholders on progress.
Trading and other statements are
made via the stock exchange during
the year and the Company holds its
Annual General Meeting (“AGM”), at
which all shareholders can attend
and speak with management.
Company contact details are
included in all announcements and
are available on the Company website.
Stakeholders’ key interests
— Annual reports
— RNS announcements
— Annual General Meetings
— Investor presentations
— Corporate website
— One-on-one meetings
— Company visits and events
— Long term sustainability
Actions taken on the back
of engagement
— Payment of dividends
— Meaningful content made
available to stakeholders on
the Group website
— Capital markets event and
invitations to our UK trade show
— Group newsletter and access
to ”Midwich Live” videos
— Participation in our ESG
materiality survey
— Regular shareholder meetings
and dialogue with Directors
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Midwich Group plc
Annual report and financial statements 2022
S
T
R
A
T
E
G
I
C
R
E
P
O
R
T
ENVIRONMENT
Why it is important to engage
COMMUNITIES
Why it is important to engage
As part of the wider AV industry, we
want to promote the use of AV
technology for environmentally
sound purposes while minimising
any adverse effects. We want to
ensure the long-term sustainability
of our industry.
Ways we engage
The Company supports the use of
AV technology as an enabler of
more efficient and effective working;
for example, our products are
increasingly being used as
sustainable alternatives to one-off
actions, such as video conferences
instead of travel to meetings or
digital signage as an alternative to
printed marketing materials.
We are also focused on reducing our
impact on the environment and
embedding a sustainable approach
into all areas of the business, for
example the use of solar energy
generation at our buildings in the
UK or reducing our consumption of
single-use plastic and non-recyclable
containers across the Group.
We are increasingly engaging with
the wider supply chain to identify
and enable more sustainable
approaches.
Stakeholders’ key interests
— Alignment of Company values
with environmental concerns
We are a significant employer across
a number of countries, and we aim
to contribute positively to the
communities and environment in
which we operate.
Ways we engage
In line with our people-orientated
ethos and ethical values, we
continued to support the local
communities in which our offices
are based, committing to making a
real difference.
Under the “The Gift of AV” brand we
support our chosen charities and
community activities. We provide
our staff with time and support to
volunteer for good causes.
Supporting local communities also
comes in the form of using local
suppliers for our offices, where possible.
We frequently act as a focal point
for community and charitable
activities for the wider AV channel.
For example, the Ride 22 – Tour de
AV event saw twenty four AV
industry participants cycle 135 miles
to our UK trade show which raised
over £25,000 for 14 charities.
Stakeholders’ key interests
— Impact of Group activities on the
wider community
— Support for the local economy
— Supporting the AV channel to do
— Actions to reduce environmental
the right thing
impact
— Staff time and engagement with
— Group long-term sustainability
good causes
strategy
Actions taken on the back
of engagement
— Partnering with a third party to
determine the Group’s carbon
emissions
— Board sponsorship of ESG activity
— ESG materiality survey
— Development of the Group’s
sustainability strategy
— New offices must meet stretching
environmental impact targets
Actions taken on the back
of engagement
— Established charity programmes
across the Group
— Support for local charities
selected by our teams
— Enabling our team members to
support community action
— Numerous team events to raise
money for charity
Annual report and financial statements 2022
Midwich Group plc
49
49
FINANCIAL REVIEW
Our balance sheet
and bank facilities
position us well for
future growth
In January 2023 we increased
our revolving credit facility to
£175m which gives us funding
capacity to support our
acquisition strategy.”
Stephen Lamb
Group Finance Director
2022 was an exceptional year for Midwich Group;
we achieved record revenue growth and made
further significant market share gains which
resulted in revenue of £1.2bn (2021: £856m).
Excluding the impact of acquisitions and currency
movements, organic revenue increased by 20.7%
(2021: 18.9%) whilst gross profit margin was in
line with the prior year at 15.3% (2021: 15.3%).
Adjusted operating profit of £51.1m (2021: £34.0m) was a
Group record and up by 46% at constant currency (2021:
110%). Statutory operating profit (before adjustments) was
£35.1m (2021: £21.0m).
Our adjusted net debt to adjusted EBITDA ratio at 1.6x (2021:
1.4x) positions us well for future acquisitions and in January
2023 we increased our revolving credit facility to £175m
which gives us funding capacity to support our growth strategy.
50
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Midwich Group plc
Annual report and financial statements 2022
Statutory financial highlights
Revenue
Gross profit
Operating profit
Profit before tax
Profit after tax
Basic EPS – pence
Adjusted financial highlights1
Revenue
Gross profit
Gross profit margin %
Adjusted operating profit
Adjusted profit before tax
Adjusted profit after tax
Adjusted EPS – pence
Year to 31
December 2022
Year to 31
December 2021
Total growth
£1,204.1m
£183.7m
£35.1m
£24.9m
£16.9m
17.32p
£856.0m
£131.3m
£21.0m
£18.9m
£13.5m
14.11p
Year to 31
December 2022
Year to 31
December 2021
Total growth
£1,204.1m
£183.7m
15.3%
£51.1m
£45.2m
£34.1m
36.08p
£856.0m
£131.3m
15.3%
£34.0m
£31.9m
£23.9m
25.63p
41%
40%
50%
41%
42%
41%
41%
40%
67%
32%
25%
23%
Growth at
constant
currency
39%
38%
46%
38%
39%
1 Definitions of the alternative performance measures are set out on page 111.
Currency movements increased Group revenue and adjusted operating profit in the year by 2.1% and 4.1% respectively. The
currency impact in the prior year reduced revenue by 2.6% and adjusted operating profit by 4.7%.
Organic growth in revenue was 20.7% (2021: 18.9%).
The Group’s operating segments are the UK and Ireland, EMEA, Asia Pacific and North America. The Group is supported by a
central team.
Regional highlights
Revenue
UK & Ireland
EMEA
Asia Pacific
North America
Total Global
Gross profit margin
UK & Ireland
EMEA
Asia Pacific
North America
Total Global
Adjusted operating profit1
UK & Ireland
EMEA
Asia Pacific
North America
Group costs
Total Global
Adjusted finance costs
Adjusted profit before tax1
Year to 31
December 2022
£m
Year to 31
December 2021
£m
Total
growth
%
492.2
535.0
53.8
123.1
1,204.1
16.1%
14.6%
17.3%
14.0%
15.3%
26.5
22.7
1.4
6.4
(5.9)
51.1
(5.9)
45.2
286.1
455.4
45.4
69.1
856.0
15.8%
14.7%
17.5%
15.9%
15.3%
12.7
21.4
0.9
4.6
(5.5)
34.0
(2.1)
31.9
72.1%
17.5%
18.5%
78.2%
40.7%
0.3ppts
(0.1)ppts
(0.2)ppts
(1.9)ppts
0ppts
108.3%
6.4%
48.8%
41.3%
50.3%
183.5%
41.5%
Growth at
constant
currency
%
72.1%
16.8%
14.3%
60.0%
38.6%
Organic
growth
%
18.4%
16.8%
14.3%
60.0%
20.7%
108.5%
3.2%
42.3%
27.1%
46.2%
178.4%
37.5%
1 Definitions of the alternative performance measures are set out in note 1 to the consolidated financial statements.
Annual report and financial statements 2022
Midwich Group plc
51
51
STRATEGIC REPORT
FINANCIAL REVIEW CONTINUED
The financial performance of each segment during the year was:
UK &
IRELAND
EMEA
ASIA
PACIFIC
NORTH
AMERICA
The UK and Ireland
segment revenue
increased by 72.1% (2021:
27.5%) to £492.2m (2021:
£286.1m). The revenue
growth included the
contribution from the
DVS and Nimans
acquisitions at the start
of the year. Organic
revenue growth was
18.4% (2021: 27.7%). The
UK&I generated gross
profit of £79.1m (2021:
£45.3m) at a gross profit
margin of 16.1% (2021:
15.8%). This resulted in an
adjusted operating profit
of £26.5m (2021: £12.7m),
an increase of 108.3%
(2021: 224.8%).
The EMEA segment
revenue grew 17.5% (2021:
37.5%) to £535.0m (2021:
£455.4m). Gross profit
increased to £78.0m (2021:
£67.0m) at a gross profit
margin of 14.6% (2021:
14.7%), with the slight
erosion in margin
attributable to a £1.4m
increase in the aged
inventory provision (2021:
£1.2m gain). The region
produced an adjusted
operating profit of
£22.7m (2021: £21.4m), an
increase of 6.4% (2021:
127.4%). In constant
currency, revenue grew
16.8% (2021: 41.8%) and
adjusted operating profit
increased 3.2% (2021:
132.8%).
The Asia Pacific segment
revenue grew by 18.5% to
£53.8m (2021: 2.0% to
£45.4m), generating
gross profit of £9.3m
(2021: £8.0m) at a gross
profit margin of 17.3%
(2021: 17.5%). Adjusted
operating profit was
£1.4m (2021: £0.9m). On
a constant currency
basis, revenue increased
by 14.3% (2021: 1.4%) and
adjusted operating profit
grew 42.3% (2021: 9.3%).
The North America
segment achieved very
strong growth of 78.2%
(2021: (38.1%) due to the
exit of fulfilment activity
in 2020) to £123.1m (2021:
£69.1m). Gross margins
were 14.0% (2021: 15.9%)
with adjusted operating
profit up by 41.3% (2021:
(7.2%)) to £6.4m (2021:
£4.6m). On a constant
currency basis, excluding
the impact of the stronger
US$, revenue increased
by 60.0% (2021: (34.3%))
and adjusted operating
profit grew 27.1% (2021:
(2.2%)).
Group costs
Group costs for the year were £5.9m (2021: £5.5m). Group
costs include central support for acquisitions, sales, finance,
compliance, human resources, information technology and
executive management.
Profit before tax
The Group reported a profit before taxation of £24.9m (2021:
£18.9m) and adjusted profit before tax of £45.2m (2021:
£31.9m); the increase using constant currency rates was
37.5% (2021: 130.3%).
Adjusted finance costs
Adjusted finance costs at £5.9m (2021: £2.1m) reflect the
interest costs on borrowings for historical acquisition
investments and working capital together with the costs
associated with hedging instruments for the purchase of goods
in non-domestic currencies. Finance costs increased during
the year mainly because of interest rate increases during the
period. Reported finance costs of £10.2m (2021: £2.1m)
include interest costs on Group borrowings, the change in
valuation of both deferred consideration and put and call
options and the revaluation of loans and financial instruments.
Tax
The adjusted effective tax rate was 24.5% in 2022 (2021: 25.0%)
which reflects the mix of tax rates in the geographies where
the Group operates.
Earnings per share
Basic earnings per share is calculated on the total profit of
the Group attributable to shareholders. Basic EPS for the
year was 17.32p (2021: 14.11p). Adjusted EPS increased by 41%
(2021: 129%) to 36.08p (2021: 25.63p).
Dividend
The Board has recommended a final dividend of 10.5p per
share which, together with the interim dividend of 4.5p per
share, gives a total dividend for 2022 of 15.0p per share
(2021: 14.1p including a special dividend of 3.0p per share). If
approved by shareholders at the AGM the final dividend will
be paid on 16 June 2023 to shareholders on the register on
5 May 2023. The last day to elect for dividend reinvestment
(“DRIP”) is 26 May 2023.
52
52
Midwich Group plc
Annual report and financial statements 2022
Most of the Group’s other borrowing facilities are to provide
working capital financing. Whilst the use of such facilities is
typically linked to trading activity in the borrowing company
these facilities provide liquidity, flexibility and headroom to
support the Group’s organic growth. As at 31 December
2022, the Group has access to total facilities of over £200m
(2021: £185m) with an additional £95m added to the RCF
post year end.
The Group has a strong balance sheet with a closing adjusted
net debt/adjusted EBITDA ratio of 1.6x (2021: 1.4x). This,
combined with the Group’s underlying cash generation,
equips it well to fund short-term swings in working capital as
well as to continue to pursue accretive acquisitions. The
Group targets a long-term adjusted net debt to adjusted
EBITDA (including proforma acquisition earnings) range of
1.5x–2.0x, although we may go above this in the short term
following acquisition investments.
Goodwill and intangible assets
The Group’s goodwill and intangible assets of £111.8m (2021:
£73.1m) arise from the various acquisitions undertaken. Each
year the Board reviews goodwill for impairment and, as at
31 December 2022, the Board believes there are no indications
of impairment. The intangible assets arising from business
combinations, for exclusive supplier contracts, customer
relationships and brands, are amortised over an
appropriate period.
Working capital
Working capital management is a core part of the Group’s
performance. Growth in working capital in the year was
driven by organic growth and the impact of acquisitions. As
at 31 December 2022, the Group had working capital (trade
and other receivables plus inventories less trade and other
payables) of £150.7m (2021: £106.1m). This represented 12.5%
of current year revenue (2021: 12.4%). The Group uses a
range of different techniques to write down inventory to the
lower of cost and net realisable value, including a formulaic
methodology based on the age of inventory. The aged
inventory methodology writes down inventory by a specific
percentage based on time elapsed from the purchase date.
There was no change in this methodology in the year. As at
31 December 2022 the Group’s inventory provision was
£18.8m (10.5% of cost) (2021: £15.2m, 11% of cost).
Cash flow
Adjusted operating profit
Add back depreciation and
unadjusted amortisation
Adjusted EBITDA
Decrease/(Increase) in stocks
Decrease/(Increase) in debtors
(Decrease)/Increase in creditors1
Adjusted cash flow
from operations
Adjusted EBITDA
cash conversion
Year to
31 December
2022
£m
Year to
31 December
2021
£m
51.1
34.0
7.4
58.5
(15.7)
(70.7)
59.6
6.1
40.1
(36.5)
(12.5)
27.0
31.7
18.1
54.3%
45.2%
1
Excluding the movement in accruals for employer taxes on share
based payments.
The Group’s adjusted operating cash flow conversion,
calculated comparing adjusted cash flow from operations
with adjusted EBITDA, was 54.3% (2021: 45.2%). The
exceptional revenue growth rate led to a step up in the
absolute value of working capital in 2022 which resulted in
cash conversion below the long-term average for the Group.
Our expectation of long-term cash conversion remains
between 70% and 80%.
Gross capital spend on tangible assets was £5.3m (2021:
£3.6m) and included investment in new offices in Germany
and Australia and the fit-out of experience centres in the
Middle East, Germany and Spain together with rental asset
purchases in UK&I. An investment of £5.8m in intangible
fixed assets included £5.3m (2021: £1.6m) in relation to the
Group’s new ERP solution.
Net debt
Reported net debt increased from £79.0m at 31 December
2021 to £119.4m at 31 December 2022. The Group’s reported
net debt continues to be impacted by the adoption of IFRS
16 in 2019 which results in approximately £23.4m of lease
liabilities (2021: £21m) being added to net debt. As noted in
the prior year, the Group’s focus is net debt excluding leases
(“Adjusted net debt”). The impact of leases on net debt is
excluded from the Group’s main banking covenants.
Adjusted net debt at 31 December 2022 was £96.0m (2021:
£58.0m). The increase was largely driven by the investment
in working capital together with payments for acquisitions
and deferred consideration.
In January 2023, the Group increased its revolving credit
facility to £175m (£80m at 31 December 2021) to finance
future acquisitions. This facility is supported by six banks, is
for a 4½ year term, and has an adjusted net debt to adjusted
EBITDA covenant ratio of 3 times and an adjusted interest
cover covenant of 4 times adjusted EBITDA. The EBITDA
covenant is calculated on a historical twelve-month basis
and includes the full benefit of the prior year’s earnings of
any businesses acquired.
Innovation House Experience Centre, Bracknell, UK
Annual report and financial statements 2022
Midwich Group plc
53
53
STRATEGIC REPORT FINANCIAL REVIEW CONTINUED
Adjustments to reported results
Operating profit
Acquisition costs
Share based payments
Employer taxes on share based payments
Amortisation of brands, customer and supplier relationships
Adjusted operating profit
Profit before tax
Acquisition costs
Share based payments
Employer taxes on share based payments
Amortisation of brands, customer and supplier relationships
2022
£’000
2021
£’000
35,053
20,980
435
6,031
176
9,413
51,108
24,916
435
6,031
176
9,413
486
4,416
904
7,226
34,012
18,895
486
4,416
904
7,226
Derivative fair value movements and foreign exchange gains and losses on borrowings for acquisitions
(1,194)
(2,058)
Finance costs – deferred and contingent consideration
Finance costs – put option
Adjusted profit before tax
Profit after tax
Acquisition costs
Share based payments
Employer taxes on share based payments
Amortisation of brands, customer and supplier relationships
Derivative fair value movements and foreign exchange gains and losses on borrowings for acquisitions
Finance costs – deferred and contingent consideration
Finance costs – put option
Tax impact
Adjusted profit after tax
Profit after tax
Non-controlling interest
Profit after tax attributable to owners of the Parent Company
Adjusted profit after tax
Non-controlling interest
Adjustments to profit after tax due to NCI
Adjusted profit after tax attributable to owners of the Parent Company
Number of shares for EPS
Reported EPS – pence
Adjusted EPS – pence
508
4,866
45,151
16,855
435
6,031
176
9,413
(1,194)
508
4,866
(3,018)
34,072
16,855
(1,562)
15,293
34,072
(1,562)
(650)
347
1,696
31,912
13,473
486
4,416
904
7,226
(2,058)
347
1,696
(2,545)
23,945
13,473
(1,044)
12,429
23,945
(1,044)
(323)
31,860
22,578
88,299,098
88,101,300
17.32
36.08
14.11
25.63
The Directors present adjusted operating profit, adjusted profit before tax, and adjusted profit after tax as alternative
performance measures in order to provide relevant information relating to the performance of the Group. Adjusted profits are
a reflection of the underlying trading profit and are important measures used by Directors for assessing Group performance.
The definitions of the alternative performance measures are set out on page 111.
54
54
Midwich Group plc
Annual report and financial statements 2022
MANAGING RISK
OUR RISK MANAGEMENT PROCESS
The Board is responsible for maintaining and reviewing
the effectiveness of our risk management activities from
a strategic, financial, and operational perspective.
These activities are designed to identify and manage, rather than eliminate, the risk
of failure to achieve business objectives or to successfully deliver our business strategy.
The risk management process is designed to identify, assess, respond to, report
on and monitor the risks that threaten our ability to achieve our business strategy
and objectives, within our risk appetite.
Approach
Our approach to risk management is a combination of local
and Group-wide activities. Risks are owned and managed
within our businesses and reviewed by the Group Risk
Committee, which reports key matters to the Board half
yearly. At a Group level our teams review risks and controls,
including those relating to information security and
regulatory compliance. Delegated authorities are in place
across the Group to facilitate local ownership, but within
an agreed framework.
When we acquire new companies, we conduct detailed
assessments of commercial, tax, legal and regulatory risks as
part of our due diligence process. Our integration process
includes early establishment of delegated authorities and
key controls.
While the Group does not have a dedicated internal audit
function, the Group team conducts local reviews of tax and
compliance matters. The Group team also has a direct
relationship with the auditors of each business.
The Board is committed
to maintaining an open
culture that emphasises the
importance of managing risk
and encourages transparent
and timely risk reporting.”
Andrew Herbert
Non-executive Chair
Our risk appetite
The Board assesses the level of risk and our associated risk
appetite to ensure we focus appropriately on those risks we
face. We target risks based on an assessment of strategic,
operational and financial impact. We then prioritise them for
mitigation. The Board and Audit Committee review the
principal risks, of which there are currently eight, on an
ongoing basis.
Our risk culture
The Board is committed to maintaining an open culture that
emphasises the importance of managing risk and encourages
transparent and timely risk reporting. We work to align
employees’ behaviours, attitudes and incentives with our risk
appetite and other governance and risk management policies.
Our delegated authorities and risk governance process
reinforce and facilitate appropriate ownership, accountability,
escalation, and management of our principal risks.
Current areas of focus
Whilst the direct impact of the pandemic reduced in the past
year, the knock-on effects on global supply chain and end
user demand have continued. The Board’s risk focus has
shifted towards supply chain and working capital with more
time this year spent on margins, inventory management and
customer credit. The war in Ukraine has not had a direct
impact on the Group, but the wider economic implications of
both inflation and higher interest rates have been, and
remain, key risk topics for the Board.
Annual report and financial statements 2022
Midwich Group plc
55
55
STRATEGIC REPORT MANAGING RISK CONTINUED
Risk heat map
h
g
H
i
t
c
a
p
m
I
w
o
L
Dependence on key people
and staff welfare
Loss of key vendors
Supply chain disruption
Macroeconomic challenges
COVID-19
Loss of key customers
Acquisition benefits may not
be realised
Regulatory risks
Low Likelihood
High
Increasing Stable Reducing
Risk management framework
BOARD
Sets our overarching risk appetite and
ensures that we manage risks
appropriately across the Group.
Regularly monitors the principal risks and
uncertainties identified by our risk
assessment processes, and the actions
we have taken to mitigate them.
GROUP RISK
MANAGEMENT
Primary responsibility to oversee
management of financial risks, including
tax, credit and treasury risks and
legal compliance.
Responsibility for overseeing global
information technology and security risks
together with operational and
insurance risks.
GROUP
MANAGEMENT
Our executive management takes day-to-day
responsibility for implementing the Board’s
policies on risk management and
internal control.
It designates who is responsible and
accountable through the design and
implementation of all necessary internal
control systems, including policies,
standards and guidance.
OPERATIONAL
MANAGEMENT
Our operational management and business
unit leaders take day-to-day responsibility
for operating within the Group’s risk
management framework including local
legal compliance, staff training, risk
mitigation and monitoring.
56
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Midwich Group plc
Annual report and financial statements 2022
PRINCIPAL RISKS AND UNCERTAINTIES
PRINCIPAL RISKS AND UNCERTAINTIES
The following pages set out the principal risks
and uncertainties, including potential impacts and
mitigating actions, as identified by the Board for
the year ended 31 December 2022.
This list is not exhaustive and will continue to evolve. The Group’s principal risks have been
categorised as Strategic, Operational, People, or Financial.
Risk key
Increasing
Stable
Decreasing
Strategic risks
Acquisition benefits may not be realised
Risk change
Potential impact
Acquisitions give rise to inherent execution
and integration risk. Integration may
produce unforeseen operating
difficulties or costs and may absorb
significant attention of the Group’s
management. A poorly implemented
acquisition could damage the Group’s
reputation, brand and financial position.
Mitigation
The Group conducts thorough due
diligence including detailed reviews of
operational resources, financial trends
and forecasts, as well analysis of the
target’s compliance record. Numerous
personal visits to the target will typically
take place in order to establish the
viability of accommodating it and its
senior management into the Group.
The structure of most acquisitions will
involve a significant financial incentive
for departing shareholders to perform
towards certain financial targets in
the first three years after acquisition
in order to maximise their
disposal value.
Changes this year
The Group acquired two businesses
during the year. Acquisition appraisals
and due diligence findings were
reviewed by the Board. The Board
receives progress updates on integration
and conducts post-acquisition
reviews of deals completed.
Loss of key customers
Risk change
Mitigation
Changes this year
Potential impact
Most customers contract with the
Group on a deal-by-deal basis with
no formal ongoing purchasing
commitment. As such, they have a
voluntary right to terminate their
contractual relationships without
notice or penalties. There is therefore
a lack of certainty in respect of the
retention of existing customers.
The Group has a very large customer
base of over 22,000 AV integrators
and IT resellers, many of which have
long-term relationships with it. The
diversity of our customer base is
demonstrated by the fact that no
customer accounted for more than 2%
of overall Group revenues this year. By
providing a best-in-class service in
terms of stock availability, logistics
and credit capacity, the Group intends
to continue to keep our customer
base satisfied.
Across the Group customer service
remains a top priority. In a year with
product availability and logistics
challenges, we provided our
customers with market-leading
product availability and practical
advice on areas such as logistics and
credit management. We continued to
strengthen our dedicated support for
our multinational customers which
allows us to partner with them on
complex projects across our different
geographies.
Annual report and financial statements 2022
Midwich Group plc
57
57
STRATEGIC REPORT PRINCIPAL RISKS AND UNCERTAINTIES CONTINUED
Strategic risks continued
Loss of key vendors
Risk change
Mitigation
Changes this year
Many of the Group’s vendor
relationships are long term and
established and now cover multiple
territories. By bringing projects to our
vendors and enabling them to fulfil
their market share aspirations, the
Group will continue to maintain strong
relationships with its vendors.
Our vendor portfolio was once again
a significant area of strategic focus
in the year with further new vendors
added. We also expanded existing
vendor relationships into more of
our businesses.
Through our acquisitions we added
further vendors to the Group and
strengthened our relationships with
a number of existing ones.
Potential impact
The majority of vendors can terminate
their contractual relationships with
the Group with no or limited notice.
Certain vendors also provide the
Group with incentives in the form of
rebates, marketing development
funds, early payment discounts and
price protections. There can be no
assurance that the Group will
continue to receive the same level
of income in future.
Financial risks
Macroeconomic challenges
Risk change
Mitigation
Changes this year
The AV industry is highly competitive
and innovative and AV product
inflation is typically below general
inflation. The Group’s wide range of
vendor and product offerings allows
us to meet customer needs at
multiple price points and budgets.
The Group’s benchmark rates for
returns on acquisitions accommodate
the risk of higher interest rates.
The Group has a number of fixed rate
contracts (rent, utilities and interest
rate swaps) that have partially
mitigated input inflation.
In the second half of the year and
looking to 2023 the Group’s interest
costs will be higher than in
recent years.
Potential impact
The war in Ukraine has resulted in
numerous market disruptions
including increased inflation and
higher interest rates. The Group uses
debt facilities (which have covenants)
and the costs of servicing these has
increased during the year. There is
also inflationary pressure on the cost
of the Group’s inputs.
People risks
Dependence on key people and staff welfare
Risk change
Mitigation
Changes this year
Potential impact
The Group is dependent upon key
senior management personnel who
have extensive experience and
knowledge of the Group, its markets,
product and service offering, vendor
portfolio and customer base. The
future success of the Group depends
on the continuing availability of key
people and its ability to attract,
motivate and retain talent.
The Group actively measures the
retention of talent and engages with
employees by focusing on training
and development. We assess
remuneration packages to ensure
a market position is maintained. The
Group has adopted share plans
to align the interests of senior
management and the broader
employee workforce with those
of shareholders.
The Board has made succession
planning and leadership development
a key agenda item.
Engagement with our teams and staff
welfare have been top priorities during
the year. Mindful of the cost-of-living
pressures and the return to office
working, we have invested in resources
dedicated to engagement and have
multiple programmes in place to make
life a little easier for our teams.
58
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Midwich Group plc
Annual report and financial statements 2022
Risk key
Increasing
Stable
Decreasing
Mitigation
Changes this year
The successful rollout of vaccinations
has resulted in a return to normal
activity in all of the Group’s markets.
The Board will continue to monitor
this risk.
We took decisive actions to protect
our people and business. The majority
of our people were able to work from
home, successfully using technology
to undertake their roles. Since our
offices reopened, staff have typically
returned on a hybrid basis. We
continue to monitor the impact of
COVID-19 on the wider market and
work closely with our customers and
vendors to minimise any disruption.
Operational risks
COVID-19
Risk change
Potential impact
The COVID-19 risks to our business
include: reduction in demand
(Impacting: sales and margins), excess
working capital (Cash and liquidity)
and disruption to our teams and
supply chain (Operations).
Supply chain disruption
Risk change
Mitigation
Changes this year
The Group is typically the leading
distributor for each of its vendors in
the countries where it operates. These
strong relationships together with
close vendor collaboration to forecast
demand provide the Group with some
of the most predictable supplies of
goods in the market. The Group has
multiple vendor relationships and is
able to work with its customers to
offer alternative products when there
are supply limitations.
The post-pandemic recovery in
market demand combined with
disruption to the supply chain
continued to result in product
shortages in 2021 and 2022. The
Group enhanced its focus on
continuity of supply and increased its
inventory holding of certain product
lines. During the year this disruption
began to ease with product
availability back to normal in many
categories by the end of the year.
Potential impact
The vast majority of the Group’s
products are manufactured outside of
the markets in which they are sold
and, as such, the Group is dependent
on the global product supply chain.
Failures or delays in the supply chain
will impact revenue and working
capital and could impact the Group’s
ability to meet financial expectations.
Regulatory risks
Risk change
Mitigation
Changes this year
Potential impact
The Group is subject to an
increasingly complex regulatory
environment. A failure to follow
regulatory laws, orders and codes of
practice requirements will expose the
Group to regulatory sanction and
subsequent reputational damage.
The Group has defined policy
statements and staff training
programmes to ensure awareness and
alignment with these policies.
Acquired businesses are subject to a
post-acquisition onboarding process
which includes improvement of
compliance protocols where
necessary. The Board is regularly
updated on compliance matters. This
includes a full review across the
Group on an annual basis.
The regulatory environment has been
relatively stable across the Group
during the year.
We continue to monitor the
regulatory backdrop for changes that
will affect the Group and adapt our
internal policies and procedures
accordingly.
The Strategic Report comprising the Chair’s Statement, Managing Director’s Review and Financial Review was approved by
the Board on 13 March 2023 and signed on its behalf by:
Andrew Herbert
Non-executive Chair
13 March 2023
Annual report and financial statements 2022
Midwich Group plc
59
59
STRATEGIC REPORT Governance
Governance
CONTENTS
Chair’s Introduction
Experienced Management
Corporate Governance Report
Nominations
Committee Report
Audit Committee Report
Remuneration
Committee Report
Directors’
Remuneration Report
Directors’ Report
62
64
66
68
70
73
77
84
LIGHTING UP
THE ROYAL
ALBERT HALL
60
Midwich Group plc
Annual report and financial statements 2022
G
O
V
E
R
N
A
N
C
E
The challenge
As part of a progressive upgrade, the
Royal Albert Hall has added Martin MAC
Ultra Performance lighting fixtures to the
Martin MAC Encore Performance fixtures
they acquired in September 2019. Both
orders were fulfilled by theatre lighting
specialists White Light Ltd, with all fixtures
sourced from Midwich Group’s Sound
Technology Ltd as the exclusive Martin
lighting distributor.
How we helped
Sound Technology’s Joe East and Chris
Walker arranged a site demonstration
where the MAC Ultra was put through its
paces, and having impressed all involved a
subsequent order for 26 units was placed
with White Light.
The results
When it came to the MAC Ultras, the
venue knew it needed a super-powerful
and reliable LED replacement for their
discharge fixture. The MAC Ultras are
positioned three levels up on the circle,
in the gallery, and on a central circular
truss. The incredibly low noise floor of the
super-high output fixtures has proven to
be a real benefit.
We are extremely
impressed so far. Given
their proximity to the
audience, the MAC Ultra’s
quietness is just incredible
even at high output.
This allows us to use
them, unlike our previous
fixtures, to enhance
all events including
orchestral concerts.”
Richard Thomas
RAH Lighting Designer
Read more on this case study
For the full story
Use the QR code
or go to midwichgroupplc.com
Annual report and financial statements 2022
Midwich Group plc
61
CHAIR’S INTRODUCTION
We have achieved
exceptional
revenue growth
with no loss
of focus on
governance
Our teams continue to have
an impact whether through
involvement in environmental
or community matters,
raising funds for charities
or supporting AV industry-
wide initiatives to improve
long-term sustainability.”
Andrew Herbert
Non-executive Chair
I’m pleased to present the Governance report for the year
ended 31 December 2022. This report provides an overview
of how Midwich Group is governed and the control
structures that we have in place. The Board is responsible for
long-term sustainable success, generating value for
shareholders and contributing to wider society.
The Board does this by supporting and challenging
executive management to ensure we operate with high
governance standards. This report explains how we seek to
achieve this. It also contains some highlights from my
perspective as Chair.
The established policies and strong management disciplines
within the Midwich Group have enabled the business to achieve
record revenue growth with no loss of focus on governance.
The Board continues to support the emphasis placed by the
Group on culture, values and the wellbeing of our people
and I firmly believe that this creates an environment for
sustained long-term success.
Governance code
The Board considers sound governance to be an essential
element of a well-run business and continues to follow the
Quoted Companies Alliance (“QCA”) Corporate Governance
Code. We have included a summary of our compliance with
the QCA code in the annual report whilst the full statement of
compliance, as approved by the Board on 5 September 2022,
is available on the Company’s website.
62
Midwich Group plc
Annual report and financial statements 2022
Revenue
£1.2bn
Gross margin
15.3%
Operating profit
£51.1m
Experience Centre, Van Domburg, Netherlands
Corporate website
Information including the terms of reference of the principal
Board committees, the schedule of matters reserved for the
Board, the Company’s articles of association and, where
appropriate, the performance of the Group is available at
midwichgroupplc.com.
The following reports explain how the Board and its
Committees operate and some of their undertakings during
2022. I would like to thank my fellow Board members for
their ongoing engagement and support.
Sustainability
We take our social responsibility seriously. Having increased
our focus on sustainability over the last few years, we
formalised our sustainability strategy this year (Pages 32 to
45), but, more importantly, I can see the passion across the
Group for making a difference. Our teams continue to have
an impact whether through involvement in environmental or
community matters, raising funds for charities or supporting
AV industry wide initiatives to improve long-term sustainability.
Board composition and succession
My role as Chair of the Board remains separate to, and
independent of, that of the Chief Executive (Group Managing
Director) and we both have clearly defined and separate
responsibilities. Details of the responsibilities of all Directors
along with matters reserved for the Board and terms of
reference for all the committees of the Board can be found
on the Company’s website.
The Board is comprised of three independent Non-executive
Directors (including the Chair who was independent upon
appointment) and two Executive Directors. The Board is
satisfied that it has a suitable balance between independence
and knowledge of the business to allow it to discharge its
duties and responsibilities effectively. The Board regularly
reviews its composition, independence and diversity in the
context of the Group’s international growth.
Executive Directors hold service contracts with a nine-
month notice period. Non-executive Directors’ service
contracts include a three-month notice period on each side.
All Directors retire and submit themselves for re-election
each year at the Company’s Annual General Meeting.
The post of Company Secretary is presently held by an
Executive Director. The Board considers that the size and
nature of the Company mean that the two roles can be
carried out effectively by the Group Finance Director. The
position is kept under review.
Board evaluation
We conduct an annual, survey-based, Board evaluation
seeking the individual views of Directors on Board
composition and effectiveness, business leadership, QCA
code compliance and other matters. The survey findings
were extremely positive and identified no major issues or
concerns about the effectiveness of the Board. I am also
pleased that we were able to resume site visits in 2022 and
were able to join the management team at the ISE trade
show in Barcelona in the last few weeks.
Stakeholder engagement
The Board maintains a regular dialogue with Investec, the
Company’s nominated adviser, and obtains other legal and
financial advice as necessary to ensure compliance with the
AIM Rules and other governance requirements. In 2021, the
Group also completed a formal audit tender process which
resulted in the reappointment of Grant Thornton.
We continue to review our approach to governance and how
the views of stakeholders are represented in our oversight of
the business. To that end, I continue to meet with shareholders
as necessary. Feedback on both operational and governance
matters from those meetings continues to form part of the
Board’s agenda.
Annual report and financial statements 2022
Midwich Group plc
63
GOVERNANCE EXPERIENCED MANAGEMENT
BOARD OF DIRECTORS
A diverse range of skills and experience
Andrew Herbert
Non-executive Chair
Stephen Fenby
Group Managing Director
Stephen Lamb
Group Finance Director
A N R
Appointed
2016
N
Appointed
2016
Qualifications
Andrew has a BA in Business Studies
from Hatfield Polytechnic and is a
Fellow of the Chartered Institute of
Management Accountants. He is also
the non-executive Chair of Xaar plc.
Previous experience
Andrew was Group Finance Director of
Domino Printing Sciences plc from
1998 until the sale of the company to
Brother Industries in 2015.
He joined the business in 1986 and held
senior finance, operational and general
management roles prior to joining
its board.
He has extensive experience of managing
profitable growth in a global business,
including acquisition and disposal
strategy and line management of
overseas subsidiaries.
Qualifications
Stephen has a BSc in Accounting and
Financial Analysis from the University
of Warwick and is an associate of both
the Institute of Chartered Accountants
in England and Wales and the
Chartered Institute of
Management Accountants.
Previous experience
After qualifying as a Chartered
Accountant with Ernst & Young,
Stephen joined Deloitte and worked for
16 years in the corporate finance team,
latterly in the Cambridge office.
Stephen joined Midwich as Finance
Director in 2004 and became
Managing Director in 2010. He has led
the Group’s acquisition and
development programme.
Appointed
2018
Qualifications
Stephen has a BA in Economics and
Econometrics from the University of
Nottingham and is a Fellow of the
Institute of Chartered Accountants
in England and Wales.
Previous experience
Stephen joined Midwich as Group
Finance Director in July 2018. He has
over 25 years’ experience in finance,
working in high-growth, international
business services organisations.
Before joining Midwich, Stephen was
the International CFO at Iron Mountain
Inc, supporting the profitable and
cash-generative development of the
International business.
Stephen qualified as a Chartered
Accountant with PwC and has held
senior financial positions at IWG plc
and Experian plc.
COMMITTEE MEMBERSHIP
A
Audit Committee N Nominations Committee N Remuneration Committee
Chair of Committee
64
Midwich Group plc
Annual report and financial statements 2022
2
2
Board balance
Tenure of Directors
0-4 years
5-7 years
7+ years
1
0-4 years
Stephen Lamb
and Hilary Wright
5-7 years
Andrew Herbert
and Mike Ashley
7+ years
Stephen Fenby
Independence
Independent
3
Non-Independent 2
Independent
Non-Independent
Skills
Strategy
Financial
3
International
Leadership
Technology
3
5
5
5
Mike Ashley
Non-executive Director
Hilary Wright
Non-executive Director
A N R
Appointed
2016
Qualifications
Mike completed retail MBA modules at
Manchester Business School sponsored
by Home Retail Group.
Previous experience
Mike was most recently the Chief
Executive Officer of Coverings Ltd, a
tiles distribution and retail business. He
joined from Holland and Barrett in
2020 where he was the Chief
Commercial Officer. Prior to this he was
with Travis Perkins PLC. In his time
there, he held the position of CCO both
in Wickes and the Plumbing and
Heating division, leading the
transformation of both businesses.
Prior to this Mike led the turnaround of
Harvard International PLC (formerly
Alba PLC) as Chief Executive Officer,
culminating in the successful sale to a
listed Chinese consumer electronics
business. Mike has extensive retail and
consumer experience through senior
commercial, marketing and strategic
roles at Boots, Argos, Dixons Retail
Group and Travis Perkins.
A N R ESG
Appointed
2018
Qualifications
Hilary is a Fellow of the Chartered
Institute of Personnel and Development.
She is also a Director of Plan4Purpose
Ltd.and a Non-excecutive Director of
ActiveOps PLC.
Previous experience
Hilary was Group HR Director of
Domino Printing Sciences plc from
2016 until her retirement in 2019.
Her background was formed in
retailing and more latterly with
Cambridge-based engineering and
technology companies, where she
gained global experience as well as
involvement in a number
of acquisitions.
Hilary has held both strategic and
operational roles. She has provided HR
leadership in support of significant
global growth ensuring people
development, succession planning
and talent acquisition were aligned
with transformational change.
Annual report and financial statements 2022
Midwich Group plc
65
GOVERNANCE CORPORATE GOVERNANCE REPORT
OUR LEADERSHIP STRUCTURE
The Board
Nominations
Committee
Audit
Committee
Remuneration
Committee
The Nominations Committee
evaluates the structure, size and
composition of the Board. It leads
the process of identifying, and
nominating for the approval of the
Board, candidates to fill vacancies
as and when they arise. The
Committee also reviews the
leadership of the organisation
including executive development
plans and succession planning.
Members:
— Andrew Herbert (Chair)
— Mike Ashley
— Stephen Fenby
— Hilary Wright
The Audit Committee monitors the
integrity of the Company’s
financial statements. It provides
review and challenge to accounting
policies and the effectiveness of
the Company’s internal controls
and risk management processes.
The Committee evaluates the
Group auditors and makes
recommendations to the Board in
relation to auditor appointment,
rotation and removal for approval
at the AGM.
Members:
— Andrew Herbert (Chair)
— Mike Ashley
— Hilary Wright
The Remuneration Committee
determines the framework and
broad policy for setting executive
remuneration. It also reviews and
monitors the Company’s approach
to share incentive plans and senior
management remuneration. Taking
input from specialists, the Committee
evaluates the Company’s approach
to remuneration in the context of
both the Group’s performance and
the wider environment, including
all stakeholders’ interests.
Members:
— Mike Ashley (Chair)
— Andrew Herbert
— Hilary Wright
The current terms of reference of the Board Committees are
published on the Group’s website and are reviewed annually.
The Board met in person or by video conference ten times
during the year and also held supplementary meetings by
telephone/video conference to consider specific matters.
The Board receives a full pack of reports in advance of
each scheduled meeting detailing Group and entity trading
performance, and containing individual reports from each of
the Executive Directors. During 2022, the Board also received
presentations from operational management on topics
including business unit strategy, talent and succession
planning, ESG, tax strategy, IT systems and security, ERP
implementation and acquisition proposals. Alongside
monitoring operational performance, it is the Board’s
responsibility to formulate, review and approve the Group’s
strategy, investments (including acquisitions), budgets and
major items of expenditure.
Attendance at board and committee meetings
Board meetings are scheduled in advance for each calendar
year. The scheduled Board meetings and attendance during
the twelve months ended 31 December 2022 are
detailed here:
Attended Meetings
Andrew Herbert (Chair)
Mike Ashley
Hilary Wright
Stephen Fenby
Stephen Lamb
Board meetings
Nominations
Remuneration
Audit
10
10
10
10
10
10
10
10
10
10
3
3
3
3
3
3
3
3
N/A
N/A
3
3
3
3
3
3
3
3
3
3
3
3
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
66
Midwich Group plc
Annual report and financial statements 2022
Compliance with the QCA code
The Board has resolved to establish a strong governance culture using the Quoted Companies Alliance (“QCA”) code as the
basis for its governance framework. The full statement of compliance with the QCA code is available on the Midwich Group
plc website. A summary of how the Group complies with the principles of the code is set out below.
Section of code
Overview
1
2
3
Establish a strategy and business
model which promote long-term
value for shareholders
Seek to understand and meet
shareholder needs and
expectations
Midwich has a clearly articulated strategy and business plan as a value-added
distributor of AV and related products.
The Company engages with its shareholders through formal meetings, informal
communications and stock exchange announcements.
Take into account wider
stakeholder and social
responsibilities and their
implications for long-term success
The Board considers relationships with, and the engagement of, our stakeholders
to be a critical success factor for our business. As a specialist distributor, we add
value by developing and maintaining in-depth understanding of our vendors’ and
customers’ needs.
4 Embed effective risk
management, considering both
opportunities and threats,
throughout the organisation
The Board has ultimate responsibility for the Group’s system of internal controls
and for reviewing its effectiveness. However, any such system of internal control
can only provide reasonable, but not absolute, assurance against material
misstatement or loss. The Board considers that the internal controls in place are
appropriate for the size, complexity and risk profile of the Group.
Maintain the board as a
well-functioning, balanced team
led by the chair
The Group operates a risk assessment and monitoring process with regular
updates provided to the Board and the Audit Committee.
The Board is comprised of three independent Non-executive Directors (including
the Chair who was independent upon appointment) and two Executive Directors.
Ensure that between them the
Directors have the necessary
up-to-date experience, skills and
capabilities
Each Board member brings a different mix of knowledge and experience, which
blend well into a successful and effective team, for example, specialist AV
industry knowledge and broad experience in sales, operations, international
expansion, finance, human resources, information technology and capital markets.
Evaluate board performance
based on clear and relevant
objectives, seeking continuous
improvement
Board composition is kept under review and the Board is committed to ensuring
diversity of skill, experience and gender balance.
The Board conducts a formal evaluation and appraisal process annually. A senior
Group employee compiles the results and subsequently facilitates a Board
discussion during which matters arising are reviewed and actions agreed.
Promote a corporate culture that
is based on ethical values
and behaviours
The Board is committed to promoting a strong ethical and values-driven culture
throughout the organisation. We believe this to be an essential element of a
well-run business.
5
6
7
8
The nature of our business, as a value-adding distributor, means expertise and
people skills are at the core of what we do and how we maintain competitive
advantage. Having a people-orientated ethos, where teamwork and commitment
are recognised, is central to the success of our strategy. We pride ourselves on
our home-grown talent, with a significant number of our senior managers having
built their careers within the Group.
To promote our ethical values, we actively encourage and support community
involvement across the Group.
9
Maintain governance structures
and processes that are fit for
purpose and support good
decision-making by the board
The Board typically meets eight to ten times a year. There were ten scheduled
meetings in 2022 with each attended by all Board Directors. Further ad hoc
meetings are held by telephone as necessary.
A formal Board programme is agreed before the start of each financial year.
This is structured, as far as possible, to align with the Group’s annual financial programme.
10 Communicate how the company is
governed and is performing by
maintaining a dialogue with
shareholders and other
relevant stakeholders
The Group communicates with shareholders through the Annual Report and
Accounts, half-yearly trading updates, the AGM, capital markets days and
one-to-one meetings with certain existing or potential new shareholders.
Reports from the Audit, Nominations and Remuneration Committees are set out
within the Annual Report.
Annual report and financial statements 2022
Midwich Group plc
67
GOVERNANCE NOMINATIONS COMMITTEE REPORT
Nominations Committee report
The Committee continues
to support the Group’s
leadership development
programme and notes the
successful promotion of
internal candidates into
a number of senior roles
during the year.”
Andrew Herbert
Chair
Nominations Committee report
I am pleased to present the report of the Nominations
Committee.
The Committee is comprised of the three independent
Non-executive Directors and the Group Managing Director.
The Committee met three times in 2022.
Main responsibilities:
— To lead the process for Board appointments and make
recommendations to the Board;
— To evaluate the structure, size and composition of the
Board (including the balance of skills, knowledge and
experience);
— To evaluate diversity and inclusion at both Board and
senior management levels;
— Keep under review the leadership needs of the
organisation, both executive and Non-executive; and
— Be responsible for identifying and nominating for the
approval of the Board, candidates to fill Board vacancies
as and when they arise.
Board composition
The Committee is responsible for monitoring the Board’s
balance of skills, knowledge, experience and diversity, and
makes recommendations to the Board throughout the year.
The Board is satisfied that it has a suitable balance between
independence and knowledge of the business to allow it to
discharge its duties and responsibilities effectively. The
Board regularly reviews its composition, independence and
diversity in the context of the Group’s international growth.
The Group Finance Director undertakes the role of Company
Secretary. The Committee keeps this position under review
and believes that, at this present time, the two roles can be
combined effectively.
Leadership diversity
The Committee believes that diversity, including skills,
experience, gender, culture and ethnicity, strengthens our
business. Our Non-executive Directors each bring specific
skillsets that complement the experience of the Executive
Directors. The gender mix of our Board is 80% male/20%
female and, while we have no formal gender or ethnicity
targets for Board composition, the Committee is committed
to ensuring that diversity is a significant consideration in all
Board appointments. Group wide, we are committed to
being an inclusive employer.
Board evaluation
In line with prior years, there was a formal Board evaluation
and appraisal process in 2022. A survey seeking the
individual views of Directors on Board composition and
effectiveness, business leadership, QCA code compliance
and other matters was undertaken.
A senior Group employee compiled the results and
subsequently facilitated a Board discussion during which
matters arising were reviewed and actions agreed. During
2022, the Board adopted a hybrid approach to meeting,
68
Midwich Group plc
Annual report and financial statements 2022
G
O
V
E
R
N
A
N
C
E
Experience Centre, NMK, Dubai
Board evaluation
Step 1
Annual survey of
board members
Step 2
Facilitated review of survey
findings with agreed action plans
Step 3
Monitoring of progress
against agreed plans
and has found this an efficient and effective method of
working. The evaluation identified no major issues or
concerns about the effectiveness of the Board or its
individual members. A few minor points that were raised
have been acted upon.
The Board will continue to monitor its approach to the
evaluation of effectiveness including the use from time to
time of external facilitation.
Leadership development
The Group’s Executive Leadership Team (“ELT”) is responsible
for determining and driving operational strategy. This team
meets frequently and comprises the Group Managing and
Finance Directors, as well as the Managing Directors for each
of our regions. The ELT’s remit also includes succession
planning and talent development across the wider business.
The Committee believes that this is the right model to drive
performance of the Group whilst ensuring implementation of
the agreed strategy. There was regular communication
between the ELT and the Board throughout the year.
The Committee continues to support the Group’s leadership
development programme and notes the successful promotion
of internal candidates into a number of senior roles during
the year, including new leaders of the APAC region and our
business in Iberia, replacing retiring colleagues. The Committee
also acknowledges the further expansion in the Group’s
capabilities through further investment in human resources
and IT leadership during the year.
Andrew Herbert
Chair of the Nominations Committee
13 March 2023
Annual report and financial statements 2022
Midwich Group plc
69
AUDIT COMMITTEE REPORT
Audit Committee report
I am pleased to present the Audit Committee
report describing our work during the past year.
Membership and responsibilities of
the Committee
Membership of the Audit Committee is limited to the
independent Non-executive Directors. I am the Chair of
the Committee and the member with recent and
relevant experience.
The Committee met three times during 2022.
Main responsibilities:
— To monitor the appropriateness and integrity of the
Company’s external reporting, including its financial
statements, interim reports and trading updates;
— To review the relationship with, and performance of the
external auditor;
— To review and challenge, where necessary, the
consistency of, and any changes to, accounting policies
and areas of material judgement both on a year-on-year
basis and across the Company/Group;
— To review the appropriateness of the Company’s controls
to detect and prevent fraud; and
— To keep under review the effectiveness of the Company’s
internal controls and risk management systems.
Auditors
Grant Thornton UK LLP (“Grant Thornton”) was reappointed
as the Company’s auditor at the 2022 Annual General Meeting.
While there is no mandated requirement for AIM companies
to tender their audit, an audit tender, which was informed by
the FRC’s Audit Tenders Notes on Best Practice, took place
in 2021. Following a comprehensive review of the candidates’
proposals and presentations the Committee made the
recommendation to the Board to appoint Grant Thornton
as the Group’s auditors, which was approved by the Board.
The reappointment of Grant Thornton will be recommended
to shareholders for approval at the 2023 AGM.
The Committee seeks to
ensure sufficient rigour and
independence of the auditor.
The Committee also welcomes
feedback from shareholders
and I am available for
discussion of any matters
of concern.”
Andrew Herbert
Chair
70
Midwich Group plc
Annual report and financial statements 2022
Monitoring audit
The Committee oversees the plans for both the interim
review and the full year audit undertaken by Grant Thornton.
They draft initial proposals in consultation with executive
management and these are presented to the Committee for
review. These plans describe an assessment of the principal
risks, proposed scope of work and approach to be taken to
the audit including materiality. The Committee has the
opportunity to challenge and satisfy itself that the proposed
audit plan is appropriate and adequate.
Review of financial statements and audit findings
The Committee reviewed the interim and full year financial
statements, and the report of the auditors on these
statements. The audit partner and relevant senior members
of the audit team attended the Audit Committee meetings,
presenting the results of the audit and answering questions
from the Committee.
Significant potential risks presented to the Committee in
respect of financial statements were:
— Under International Standard on Auditing (UK) 240 (“ISA
(UK) 240”), there is a rebuttable presumed risk that
revenue may be misstated due to the improper
recognition of revenue. Audit procedures performed
gained reasonable assurance over the occurrence,
accuracy, and completeness of revenue;
— Under ISA (UK) 240 there is a non-rebuttable presumed
risk over the management over-ride of controls. Audit
procedures focused on journal entries, significant
accounting estimates and significant unusual transactions
and concluded there were no material adjustments;
— Receivables arising from special pricing arrangements
described ship and debit quotes (“SDQs”) were identified
as a significant potential risk. SDQs are agreements that
allow vendors to provide credit notes that support the
sales of products at a discount. The risk identified
surrounded the existence of the receivable. Audit
procedures did not identify any issues in relation to
the SDQ receivables;
— The judgements and estimates included within the
impairment assessments over goodwill and intangible
asset arising from were identified as a significant risks due
to the unfavourable macro-economic environment. The
audit procedures did not identify any impairments; and
— The going concern basis of preparation was identified as
a significant audit risk due to the uncertain economic
environment. Audit procedures were performed to
provide satisfactory evidence over the assumptions made
in management’s assessment of the use of the going
concern assumption.
The Committee has reviewed the 2022 annual report and
accounts to ensure they are fair, balanced and understandable,
and that they provide the information necessary for shareholders
to assess the Company’s performance, business model and
strategy in a clear, concise and balanced manner.
Internal control and risk management
The Group seeks to operate consistent accounting policies
and control procedures across its subsidiary operations,
including newly acquired entities, and places the onus on
local management to ensure those policies and procedures
are followed. This is confirmed by review by the central
finance team. The Audit Committee receives feedback on
the effectiveness of internal controls from executive
management and correlates that with separate reports from
the external audit process. While there have been no specific
internal control issues identified to date, the growth of the
business has led the Committee to discuss the possible
introduction of an internal audit function, the options for
which are under review.
Annual report and financial statements 2022
Midwich Group plc
71
GOVERNANCE AUDIT COMMITTEE REPORT CONTINUED
Internal control and risk management continued
The Group operates a risk assessment and monitoring
process. This is co-ordinated by the Group Finance Director,
who reports principal risks and mitigation actions to the
Committee. Further detail on these risks is included on
pages 55 to 59.
Audit Committee minimum standards
The Committee notes the FRC’s recent consultation on
minimum standards for audit committees. Although not
expected to apply to AIM companies, the Committee is
committed to adopting any requirements as far as is
practicable. The Committee seeks to ensure sufficient rigour
and independence of the auditor, and their process, and has
committed to an audit tender at least every ten years. In
addition, the Company manages its non-audit relationships
with audit firms to ensure that it has a fair choice of suitable
external auditors at the next tender. The Committee also
welcomes feedback from shareholders and I am available for
discussion of any matters of concern.
Assessment of auditors
The Committee has assessed the qualification, expertise,
resources and independence of the external auditor, and is
satisfied that Grant Thornton is meeting those requirements.
In addition to seeking the views of the executive team, the
Committee considers a range of criteria in that assessment:
— The delivery of a thorough audit, meeting the agreed plan
in a timely manner to agreed budget;
— Demonstration of a deep understanding of the Group and
its subsidiaries, evidenced in the quality and
completeness of presentation material;
— The provision of perceptive advice on key accounting and
technical matters;
— The professionalism and competence of the audit team
deployed; and
— Confirmation from the firm themselves of their processes
to ensure independence.
The Committee also monitors arrangements to ensure the
independence of the auditor is not compromised either by
the non-audit work undertaken or the relationship they have
with executive management.
The Committee continues to require the Company to limit
use of the auditor to only audit and other assurance related
activities. The Group complies with the FRC’s Revised Ethical
Standard 2019 on audit engagements.
During the year, Grant Thornton UK LLP and its associates
were paid fees of £528k (2021: £343k) in respect of audit
and non-audit work as follows:
2022
£’000
2021
£’000
Audit fees in relation to the
audit of the Company
Audit fees in relation to the
audit of subsidiaries
Audit related assurance fees in
relation to the interim review
Total audit fees for audit and
audit related assurance services
Tax compliance services
Tax advisory services
Other services
Total fees for audit and
non-audit services
106
390
24
520
—
—
8
528
84
231
20
335
—
—
8
343
There was no contingent element to any of these fees and
independence was safeguarded as follows:
— No tax advisory work was performed by Grant Thornton
in respect of 2022 or 2021.
— Other services represents assurance work under the German
Packaging Act. The team performing this work is separate
to the Group audit team and led by a different partner.
Terms of reference
The Committee maintains its terms of reference under
review and makes recommendations for changes to the
Board as required. There were no changes made during
2022. Details of the full terms of reference are available on
the Company’s website.
Andrew Herbert
Chair of the Audit Committee
72
Midwich Group plc
Annual report and financial statements 2022
REMUNERATION COMMITTEE REPORT
Statement from the Chair of the
Remuneration Committee
As Chair of the Remuneration Committee, I am
pleased to present the Directors’ Remuneration
report for the financial year ended 31 December
2022. The Remuneration Committee comprises
the three Non-executive Directors.
The Remuneration Committee carried out a review during the
year and is satisfied it continues to meet, and exceed, the
standards set by the QCA Code.
The report is split into three parts:
— This annual statement;
— A ‘Remuneration Overview’ section, which provides a
brief summary of the Company’s remuneration
agreements with its Directors; and
— An Annual Report on Remuneration, which sets out
payments made to the Directors and details the link
between the Company’s performance and remuneration
for the 2022 financial year.
Main responsibilities
The Committee’s main responsibilities are:
— To determine the framework and broad policy for setting
remuneration for the Group Managing Director (chief
executive) and all Executive Directors;
— To recommend and monitor the level and structure of
remuneration for senior management;
— To review the establishment of all share incentive plans for
approval by the Board and shareholders, and determine
each year whether awards will be made, and if so, the overall
amount of such awards and the individual awards per
person to Executive Directors and other senior management;
— To produce an annual report on the Company’s
remuneration policy and its implementation; and
— To engage with stakeholders and respond to their
feedback on the Company’s remuneration policy.
I am pleased to be able
to report that the Group’s
2022 financial performance
exceeded all of the Board’s
stretching profit targets.”
Mike Ashley
Chair
Annual report and financial statements 2022
Midwich Group plc
73
GOVERNANCE REMUNERATION COMMITTEE REPORT CONTINUED
Key activities of the Remuneration Committee
The Remuneration Committee sets the overall approach to
remuneration and the terms of employment of the Executive
Directors, having regard to pay and conditions elsewhere in the
Group. The Committee aims to ensure that the remuneration
packages offered are competitive, and designed to attract,
retain and motivate Directors of the right calibre, as well as
being aligned to the Group’s corporate objectives.
The Remuneration Committee met three times during 2022
and its key activities were as follows:
— Reviewed the 2021 Directors’ Remuneration report;
— Discussed and determined bonus outcomes for Executive
Directors;
— Reviewed and approved the Executive Directors’
2022 remuneration decisions
Salary reviews
From 1 January 2022, the Committee approved salary
increases of 3.7%–4.0% for the Executive Directors. As in
previous years, these increases were in line with the increases
awarded to the general employee population across the Group.
2022 annual bonus
The Committee believes in setting stretching annual
performance targets that align the goals of our Executive
Directors, senior leaders and the wider business to those
of our stakeholders.
Each year the Committee conducts a formulaic assessment
of performance against the targets. For 2022 performance
targets were linked to the following specific goals:
remuneration arrangements;
— Profit growth targets (50% weighting);
— Considered the remuneration of the ELT; and
— Other financial KPIs (35% weighting); and
— Discussed and approved the targets for the 2023 annual
— Strategic/personal targets (15% weighting).
bonus for Executive Directors and senior leaders.
2022 performance and remuneration
Business performance
In the depths of the COVID-19 crisis, the Board set an
extremely challenging strategic objective not only to recover,
but to emerge significantly stronger, with deeper customer and
vendor relationships and with the team even more engaged.
The Board determined that the key performance indicator of
whether this objective had been successfully achieved would
be the delivery of a highly stretching range of profit targets.
Data produced by AVIXA (July 2022), the leading AV
industry trade body, showed that the global Pro AV market was
forecast to only be marginally ahead of pre-pandemic levels
in 2022. Against this backdrop the Group’s revenue of £1.2bn
in 2022 (up over 75% compared to 2019, i.e. pre-COVID-19)
shows the scale of the market share gains achieved in the last
three years.
I am pleased to be able to report that the Group’s 2022
financial performance exceeded all of the Board’s stretching
profit targets. In the past year, the Group achieved revenue
growth of 40.7% (organic growth of 20.7%) and adjusted
profit before tax of £45.2m (up 41.5%). This performance is
particularly impressive when considered in the context of
supply chain disruption, global inflation and challenging
labour markets.
In summary, some of the key performance highlights are:
— Further significant growth in market share;
— Revenue increased by 40.7% to £1.2bn;
— Gross margin maintained at 15.3% despite supply
constraints;
— Adjusted operating profit increased by 50% to £51.1m;
— Adjusted profit before tax increased by 41.5% to £45.2m;
— Two acquisitions were completed enhancing unified
communications capabilities and entering the security market;
— Dividends of 15p per share (interim and proposed final);
and
— £175m revolving credit facility to support future growth.
The Board is pleased with the 2022 performance and believes
that the senior management team has taken actions to deliver
on the Group’s long-term strategic objectives.
The maximum bonus opportunity for 2022 was 100% of salary
for both Executive Directors. The Committee reviewed the
2022 performance outcomes against the performance targets
set at the start of the financial year. Despite the record
financial performance, the formulaic outcome was 65–70% of
maximum for the Executive Directors, reflecting the
stretching targets set by the Committee.
In addition to the formulaic outcome, the Committee also
considered the business’ overall performance in the context
of the wider market and against the Group’s strategic objectives.
Taking into account the exceptional performance of the business
over 2022, the Committee determined that the formulaic
outcome was appropriate and therefore no discretion was
exercised by the Committee to adjust the formulaic outcome.
Further details are set out in the Directors’ Remuneration
report on page 77.
2020 LTIP award vesting
The Committee believes strongly in aligning the goals of the
Group’s leadership with those of other stakeholders. In
addition to annual performance targets, the Committee
believes that such alignment is further enhanced by
incentivising performance linked to stretching long-term
profit growth targets, reflected in the 2020 LTIP award.
The purpose of the 2020 LTIP award was to incentivise the
Group’s leadership team to strive to not only to fully recover
from the COVID-19 disruption but to significantly increase the
scale and profitability of the Group as measured by 2022
adjusted profit before tax (“PBT”). For the Executive Directors,
only the Group FD was a participant in the award – given his
substantial shareholding, the Group Managing Director does
not participate in the LTIP.
2022 adjusted PBT performance exceeded the maximum
stretch PBT performance level (target range from £33m to £45m).
The Committee has considered the Group’s performance in the
context of the wider AV industry (noting the Group’s
significant outperformance vs the overall AV market) and
has also evaluated the Group’s performance against its
strategic objectives. The Committee concluded that the
formulaic outcome reflects the exceptional performance of
the business over the challenging three-year period and has
not exercised any discretion in relation to the final outcome.
74
Midwich Group plc
Annual report and financial statements 2022
The Committee is also mindful of recent shareholder guidance
relating to the potential risk of windfall gains in relation to LTIP
awards granted in 2020, given the impact of COVID-19 on
many companies’ share prices. The Committee conducted a
review of any potential windfall gains in relation to the 2020
LTIP and determined that there has not been a windfall gain
and therefore no adjustment to the outcome has been made.
The 2020 LTIP award will therefore vest in full. The base
award is subject to a two year post-vesting holding period.
Further details are set out on page 81.
LTIP award granted during the year
The Committee granted awards of nominal value share options
under the LTIP in 2022 to the Group FD and other senior
employees. The Group FD was granted an award of 100% of
salary. The award vests after three years subject to performance
criteria and is subject to a two-year post-vesting holding period.
In light of the Group Managing Director’s substantial
shareholding, it was agreed that he will not participate in
the 2022 LTIP award. The Committee notes that he has not
participated in the LTIP at any point since the Company’s
IPO in 2016.
The Committee expects Executive Directors to have sufficient
shareholdings to align their interests with shareholders.
In particular, Executive Directors are expected to develop a
shareholding of 200% of base salary over an appropriate period
of time from appointment. The MD’s substantial shareholding
is significantly above this level (at 21,314% of salary as at
31 December 2022). Including share options that have vested
but are subject to a holding period (net of estimated tax) the
FD has a holding of 79% of salary at 31 December 2022. This is
expected to exceed 200% following the vesting of the
2020 LTIP.
Our long-term approach to executive pay
The remuneration arrangements for the Executive Directors
are designed to be in the best interests of the Company
and appropriately aligned to its strategic goals, delivering
shareholder value and supporting the long-term success
of the Company.
In prior years, the Committee has engaged a third party to
benchmark executive remuneration. The Committee believes
that the remuneration levels are competitive and reflect the
current scale and responsibility of the Executive Directors’ roles.
The Group operates an LTIP for the Executive Directors and
members of the senior management team to incentivise
long-term performance and achieve greater alignment with
shareholders through share ownership. Where Executive
Directors participate in the LTIP scheme, the normal annual
awards are subject to a minimum two-year post-vesting
holding period, bringing the total period of the awards to
five years.
The Committee takes a pragmatic approach to the remuneration
of its executives, acknowledging the substantial shareholdings
of the MD and the external benchmarking of the remuneration
levels of both the MD and FD. The Committee is satisfied that
the incumbents are incentivised to achieve strong performance.
However, the Committee recognises that remuneration
agreements may need to be reviewed should there be any
changes or additions to the executive Board or changes in
the scope or responsibilities of a role and will continue to
monitor this going forward.
In addition to the Committee’s remit of the remuneration of
the Executive Directors, the Committee strongly focuses on
succession and the development of the next tier of talent
in the business. It is our strategy to retain and incentivise
the leadership of the future and the Committee takes an
active role in reviewing the remuneration structures of
the senior leadership.
Wider workforce reward decisions
We are acutely aware of the cost-of-living pressures over the
past year and, across the Group, there has been a significant
focus on supporting our team members through this period.
Examples of steps taken during the year include providing
shopping vouchers, complimentary on-site food and drink,
treat bags and free access to everyday household goods.
We believe that our established actions such as enhanced
communication, flexible working and a focus on employee
wellbeing have ensured that we remain well positioned to
support our team members.
We also decided to bring forward an element of the 2023
salary increase. This resulted in a 2% increase for UK-based
staff (excluding senior management) from 1 July 2022 (six
months earlier than usual) followed by a further average salary
increase for the wider UK workforce of 4% from 1 January 2023,
resulting in a cumulative average annual increase of 6%.
We continue to encourage employee share ownership across
the Group. For the seventh year in a row, we made free share
awards to the majority of the wider workforce to recognise
the long-term value created by our team members. The
award of 300 shares was worth approximately £1,900 at
the date of grant and will vest after three years subject to
continued employment.
As at 31 December 2022, over 60% of Group employees1 were
either shareholders or participants in share awards that will
vest in the next three years. Each year since IPO, the Company
has made free share awards and/or LTIP awards to employees
that meet the Committee’s criteria. Free shares, which vest
after three years, have typically been awarded to employees
of eligible Group companies based on length of service. Since
IPO, over 1.2 million free share awards have been given to
members of staff under this programme, with the total
value of these awards in excess of £5m, based on the share
price at 31 December 2022.
Broader employee remuneration is considered by the
Committee when determining executive remuneration,
for example, Executive Directors’ pension arrangements
(at 6% of base salary) are aligned to those offered to the wider
workforce. Executive salary increases are also considered
in the context of those given to other staff and are not
expected to be significantly different to overall salary
increases (other than in exceptional circumstances or
significant growth of the Company).
1 Excluding businesses acquired during the year.
Annual report and financial statements 2022
Midwich Group plc
75
GOVERNANCE Summary
The Committee believes that the current remuneration
arrangements are in the best interests of the Company and
are appropriately aligned to strategic goals, delivering
shareholder value and supporting the long-term success of
the Company.
We are committed to a responsible and transparent
approach in respect of executive pay and I hope that you
find the information in this report helpful and informative.
Mike Ashley
Chair of the
Remuneration Committee
REMUNERATION COMMITTEE REPORT CONTINUED
Alignment with ESG objectives
Across the Group ESG objectives have been part of senior
leaders’ goals and objectives for a number of years. Following
the development of the Group’s sustainability strategy the
Committee intends to set Group ESG targets in 2023 and
include these targets within annual bonus plans for the
Executive Directors and senior leadership from 2024.
Advisory vote on Directors’ Remuneration report
and AGM response
Since 2019, the Company has included an advisory vote at
the AGM on the Directors’ Remuneration report. Whilst the
Committee acknowledges that this is beyond our obligations
as an AIM-listed company and the requirements of the QCA
code, it has determined that this is an opportunity to better
engage with shareholders on this important topic.
The outcome of the advisory vote at the 2022 AGM was 100%
in favour (2021: 72%).
The 2022 Directors’ Remuneration report will be subject to
an advisory vote at the 2023 AGM.
The remuneration policy is summarised in the “Summary of
remuneration agreements” section of this report.
Outlook for the 2023 financial year
The Committee also recognises that the Company has
delivered long-term shareholder returns, grown strongly,
made market share gains and completed numerous strategic
acquisitions since its IPO in 2016. The Committee believes
that the Group is well positioned to deliver its long-term
strategic objectives and believes in incentivising future
growth. The Committee will keep the remuneration
arrangements under review and retains flexibility to reward
significant outperformance through its incentive schemes.
In consideration of the wider cost-of-living backdrop, the
Committee determined that base salaries for the Executive
Directors should be increased no more than the 6% average
salary increases awarded to the broader workforce. The MD’s
salary was increased by 5.1% to £360,000 and the FD’s salary
was increased by 5.5% to £290,000 from 1 January 2023.
From 1 January 2023 the fees for the Non-executive Chair
were increased by 5% to £90,000 while the fees for the
other Non-executives were increased by 6% to £46,000. The
Chair of the Remuneration Committee receives a further fee
of £2,000 per annum.
The Committee reviewed the Executive Directors’ maximum
bonus opportunity in the context of both the increased scale
and complexity of the business and comparably sized public
companies. For 2023 the Committee determined that the
maximum bonus opportunity for each Executive Director for
2023 will be 125% of base salary.
The Executive Directors are expected to participate in a
2023 LTIP award.
76
Midwich Group plc
Annual report and financial statements 2022
DIRECTORS’ REMUNERATION REPORT
Summary of remuneration agreements
In setting the remuneration arrangements, the Remuneration Committee takes into account:
1.
The responsibilities of each individual’s role and their experience and performance;
2.
The need to attract, retain and motivate Executive Directors and senior management, ensuring an appropriate mix
between fixed and variable pay;
3. The pay and benefits arrangements elsewhere in the Group, and in the sector;
4. Periodic external benchmarking to consider market conditions, and remuneration practices for roles of a similar size and
complexity; and
5. The need to align the overall reward arrangements with the Company’s strategy, both in the short and long term.
A summary of the remuneration arrangements applicable to remuneration in 2022 and 2023 is set out below for reference,
to assist with the understanding of the contents of this report and to demonstrate alignment with strategy.
Operation
Opportunity
Salaries are reviewed at the discretion
of the Committee.
Base salaries will be set by the
Committee at an appropriate level,
with consideration given to
comparable listed companies,
experience in role and the
Company’s performance.
Performance metrics
used, weighting and
time period applicable
None.
Purpose and link
to strategy
Base salary
Provides a base level
of remuneration to
support recruitment
and retention of
Executive Directors
with the necessary
experience and
expertise to deliver
the Company’s
strategy.
Benefits and pension
Provides a competitive
level of benefits
and pension.
The Executive Directors receive
benefits, which include pension
contributions, company cars and
private medical insurance.
Annual bonus
The annual bonus
provides a significant
incentive to the
Executive Directors
linked to achievement
in delivering strategic
goals, including
financial performance.
Maximum bonus is
only payable for
achieving demanding
targets.
The FD also receives a contribution
towards weekday accommodation
near the Company’s head office.
Further benefits may also be provided
for relocation following the
appointment of new executives.
Performance is measured annually
against a range of predetermined
performance conditions. Outcomes
are determined by the Committee
after the year-end based on
performance against these targets.
All bonus payments are at the
ultimate discretion of the Committee,
and the Committee retains an
overriding ability to ensure that
overall bonus payments reflect its
view of corporate performance during
the year.
Annual bonuses are paid in cash or a
mix of cash and shares after the end of
the financial year to which they relate.
Employer pension contribution of 6%
of base salary per annum or a salary
supplement representing this
contribution net of employer’s
National Insurance.
None.
The maximum value of other benefits
will be set at the cost of providing the
benefits described.
The maximum normal bonus
opportunity is currently 125%
of base salary.
The Committee has the discretion to
defer an element of the annual bonus.
The Committee retains the discretion
to operate a higher maximum bonus
in exceptional circumstances.
Performance is
measured over the
financial year.
Targets are set
annually by the
Committee.
Performance metrics
for 2023 will include
targets for:
— Profit growth;
— Other financial KPIs;
and
— Strategic targets.
Annual report and financial statements 2022
Midwich Group plc
77
GOVERNANCE DIRECTORS’ REMUNERATION REPORT CONTINUED
Operation
Opportunity
LTIP awards are made using nominal
cost share options.
The normal maximum LTIP award is
200% of base salary.
The Committee retains discretion to
grant a higher LTIP award in
exceptional circumstances.
Performance is measured over three
financial years against a range of
predetermined performance
conditions.
Normal LTIP awards are subject to a
two-year post-vesting holding period.
All LTIP awards are at the ultimate
discretion of the Committee and the
Committee retains an overriding
ability to ensure that overall LTIP
awards reflect its view of corporate
performance during the period.
LTIP awards may attract dividend
equivalents for the duration of the
performance period.
Performance metrics
used, weighting and
time period applicable
Performance is
measured over a
minimum three-year
performance period.
Targets are set for
each performance
period by the
Committee.
Performance metrics
for the awards are
based on adjusted
profit growth.
Non-executive Directors are paid
a base fee.
The base fees for Non-executive
Directors are set at a market rate.
None.
Fees are reviewed from time to time
at the Remuneration Committee’s
discretion based on equivalent roles in
an appropriate comparator group
used to review salaries paid to the
Executive Directors.
Purpose and link
to strategy
Long-term incentive
plans (“LTIP”)
The LTIP provides a
significant incentive to
the Executive
Directors linked to
achievement in
delivering longer-term
strategic goals,
including sustained
financial performance.
Maximum awards
are only payable
for achieving
demanding targets.
Non-executive
Director fees
Provides a level of fees
to support recruitment
and retention of
Non-executive
Directors with the
necessary experience
to advise and assist
with establishing and
monitoring the
Company’s strategic
objectives.
Wider employee pay
As outlined in the Chair’s statement, the Company is committed to developing the next tier of talent and the Committee
spent some time during the year reviewing, with the Executive Directors, the remuneration of the senior leadership. The MD
put forward proposals to the Committee for base salary and bonus potential together with long-term incentive awards in
line with these individuals’ performance. The proposals also reflected the Executive Directors’ commitment to retaining and
incentivising those individuals who are key to the future success of the Company with succession planning in mind.
Pay and conditions elsewhere in the Group were taken into account when considering arrangements for the remuneration of
the Executive Directors. For example, for 2023 the Executive Directors’ salary increases were set below that of the wider UK
workforce. In addition, pension contributions are consistent with those for the wider employee population. The same overarching
remuneration principles apply but are proportionate to an individual’s influence at Group level.
The Committee also encourages the participation of Midwich employees in share ownership and is supportive of the Group’s
share participation and free share award programmes. At 31 December 2022, over 60% of Group employees1 were
participants in the Group’s share ownership programmes.
1 Excluding businesses acquired during the year.
78
Midwich Group plc
Annual report and financial statements 2022
Directors’ service agreements and letters of appointment
The dates on which Directors’ initial service agreements/letters of appointment commenced and the current notice periods
are as follows:
Executive Directors
Date of original appointment
Term of appointment
Notice period
Stephen Fenby
13 April 2016
Stephen Lamb
26 July 2018
Continuous
Continuous
Subject to nine months’ written notice by either party
Subject to nine months’ written notice by either party
Non-executive Directors Date of original appointment
Term of appointment
Notice period
Andrew Herbert
13 April 2016
Mike Ashley
13 April 2016
Hilary Wright
9 March 2018
Continuous
Continuous
Continuous
Subject to three months’ written notice by either party
Subject to three months’ written notice by either party
Subject to three months’ written notice by either party
The Non-executive Directors’ letters of appointment were renewed in March 2019, at which time the term of appointment was
changed from three years to continuous. Performance of the Board and independence of the Non-executive Directors is
assessed annually.
Executive and Non-executive Directors are subject to annual re-election by shareholders at the AGM.
Approach to recruitment remuneration of Executive Directors
The Company’s approach when setting the remuneration of any newly recruited Executive Director will be assessed in line
with the same principles for the existing Executive Directors, as set out in the service agreements above. The Remuneration
Committee’s approach to recruitment remuneration is to pay no more than is necessary to attract candidates of the
appropriate calibre and experience needed for the role from the market in which the Company competes. The Remuneration
Committee is mindful that it wishes to avoid paying more than it considers necessary to secure the preferred candidate and
will have regard to guidelines and shareholder sentiment regarding one-off or enhanced short-term or long-term incentive
payments made on recruitment and the appropriateness of any performance measures associated with an award.
Executive Directors’ termination payments
The Remuneration Committee will honour Executive Directors’ contractual entitlements. Service agreements do not contain
liquidated damages clauses. If a contract is to be terminated, the Remuneration Committee will determine such mitigation as
it considers fair and reasonable in each case. There are no contractual arrangements that would guarantee a pension with
limited or no abatement on severance or early retirement. There is no agreement between the Company and its Executive
Directors or employees, providing for compensation for loss of office or employment that occurs because of a takeover bid.
The Remuneration Committee reserves the right to make additional payments where such payments are made in good faith
in discharge of an existing legal obligation (or by way of damages for breach of such an obligation), or by way of settlement
or compromise of any claim arising in connection with the termination of an Executive Director’s office or employment.
When determining any loss of office payment for a departing individual the Remuneration Committee will always seek to
minimise cost to the Company whilst seeking to address the circumstances at the time.
Annual report and financial statements 2022
Midwich Group plc
79
GOVERNANCE ANNUAL REPORT ON REMUNERATION
Total shareholder returns
The chart below shows Midwich Group plc’s annual TSR performance against the AIM All-Share Index over the period since
IPO (May 2016).
IPO
n
r
u
t
e
r
l
r
e
d
o
h
e
r
a
h
s
l
a
t
o
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)
6
1
0
2
y
a
M
6
t
a
0
0
1
o
t
d
e
s
a
b
-
e
r
(
350
300
250
200
150
100
50
0
31/12/15
31/12/16
31/12/17
31/12/18
31/12/19
31/12/20
31/12/21
31/12/22
Midwich Group plc
AIM All-Share Index
The Committee believes that a well-run business will deliver superior returns to its shareholders over time. In the period since
IPO, we have created over £170m of value through market capitalisation growth and dividends. Over the same period, we
have outperformed the AIM All-Share Index by 62%.
Executive Director remuneration
(Audited – see note 7 of the notes to the consolidated financial statements)
The table below sets out the total remuneration with a breakdown for each Executive Director in respect of the 2022 financial
year. Comparative figures for the 2021 financial year have also been provided.
Base salary
Benefits1
Annual Bonus
Pension3
LTIP/Other4
Total
2022
£’000
2021
£’000
2022
£’000
2021
£’000
2022
£’000
20212
£’000
2022
£’000
2021
£’000
2022
£’000
2021
£’000
Stephen Fenby
Stephen Lamb
343
275
326
261
12
15
12
22
223
193
603
484
17
14
17
13
—
1,358
—
56
2022
£’000
595
1,855
2021
£’000
958
836
1
The taxable benefits received in 2021 and 2022 were principally company cars/car allowances and private medical insurance. Stephen Lamb also receives a
contribution to weekday accommodation near the Company’s head office.
2 For 2021, the Committee determined that part of the annual bonus would be deferred into shares (in the form of nominal cost share options) for 2 years. This
resulted in an overall mix of 73% cash and 27% in deferred share options for each Executive Director.
3 Executive Directors receive pension contributions of 6% of base salary. Pension contributions were delivered as a salary supplement net of employer’s National Insurance.
4 For 2022, this relates to the 2020 LTIP which was based on a three-year performance period to 31 December 2022. For the Group FD, 297,116 options will vest in
March 2023 at a value of £1,357,820 (net of exercise price) based on an average share price for the final quarter of 2022 of 458p. For 2021, 10,000 options
vested on 26 July 2021 at a value (net of exercise price) of £55,900 based on a share price of 560p at the date of vesting.
Non-executive Directors (audited)
The table below sets out the total remuneration and breakdown for each Non-executive Director.
Andrew Herbert
Mike Ashley
Hilary Wright
Fees
2022
£’000
85
45
43
2021
£’000
83
42
42
Total
2022
£’000
85
45
43
2021
£’000
83
42
42
Additional information regarding Directors’ remuneration
The Remuneration Committee considers that performance conditions for all incentives are suitably demanding, having regard
to the business strategy, shareholder expectations, the markets in which the Group operates and external advice. To the extent
that any performance condition is not met, the relevant part of the award will lapse. There is no retesting of performance.
Base salary
Salary levels as at the end of the financial period were:
Executive Director
Stephen Fenby
Stephen Lamb
Base salaries for the 2023 financial year are set out on page 82 of this report.
Base salary
£342,500
£275,000
80
Midwich Group plc
Annual report and financial statements 2022
2022 Bonus awards
The annual bonus opportunity for the Executive Directors in the year was a maximum of 100% of base salary and
performance was assessed against the following metrics:
Performance measure
Profit growth targets
Other financial KPIs
Strategic/personal targets
Total
Outcome (% of maximum)
Weighting
Stephen Fenby Stephen Lamb
50%
35%
15%
100%
50%
10%
5%
65%
10%
70%
The following bonus awards were approved by the Remuneration Committee for the Executive Directors.
Executive Director
Stephen Fenby
Stephen Lamb
Bonus awarded
(% of maximum)
65%
70%
Bonus awarded
(% of salary)
65%
70%
Bonus awarded
(£’000)
223
193
The Remuneration Committee considers that the specific performance targets for the 2022 annual bonus awards remain
commercially sensitive.
2020 LTIP outcome
The purpose of the 2020 LTIP award was to incentivise the Group’s leadership team to not only fully recover from the
COVID-19 disruption but also significantly increase the scale and profitability of the Group as measured by 2022 adjusted
profit before tax (“PBT”). For the Executive Directors, only the Group Finance Director was a participant in the award – given
his substantial shareholding, the Group Managing Director does not participate in the LTIP.
Whilst the performance targets are generally considered to be commercially sensitive, the 2020 LTIP vesting is of greater scale
and significance than the other outstanding LTIP awards. Set out below are the stretching targets compared to the final outcome.
Performance targets (Based on adjusted PBT)
Vesting (% of maximum award)
Base target
The greater of 2019 PBT (£31.2m) or 5% above the
2021 PBT (Max. £33m)
22.22%
Base PBT or more, but less than £36.8m
Between 22.22% and 66.66%, determined on a
straight line basis
£36.8m or more, but less than £40m
£40m or more, but less than £45m
£45m or more
Actual outcome £45.2m
66.66%
83.33%
100%
100%
Whilst the above stretching targets were applicable to the Group’s executive leadership team, I note that over 75 senior
leaders across the Group are participants in the 2020 LTIP scheme and benefit from the scheme vesting in full.
The Committee has considered the Group’s performance in the context of the wider AV industry (noting the Group’s
significant outperformance vs the overall AV market) and has also evaluated the Group’s performance against its strategic
objectives. The Committee concluded that the formulaic outcome reflects the exceptional performance of the business over
the challenging three-year period and has not exercised any discretion in relation to the final outcome.
As mentioned in the Chair’s statement, the Committee conducted a review of any potential windfall gains in relation to the
2020 LTIP. The Committee noted that the share price movement over the period since the LTIP grant did not indicate a windfall
gain. The Committee also recognised that the Executive Directors voluntarily waived part of their salary for six months in
2020 and received no annual bonus. In light of these factors, and the exceptional performance over the three-year period,
the Committee determined that no adjustment to the outcome for windfall gains is appropriate.
The 2020 LTIP will therefore vest in full. The base award is subject to a two-year post-vesting holding period.
Annual report and financial statements 2022
Midwich Group plc
81
GOVERNANCE ANNUAL REPORT ON REMUNERATION CONTINUED
Long-term incentives awarded in 2022
To reflect the substantial shareholdings of Stephen Fenby, and in line with the approach taken since IPO, no LTIP awards were
granted to him during the year. Stephen Lamb was granted nominal cost options over 52,562 shares (equivalent to 100% of
salary) which vest subject to performance criteria over a 3 year period and are subject a two-year post vesting holding period.
Share interests
The interests of Directors and their connected persons in Ordinary Shares and share options as at 31 December 2022 are
presented in the table below.
Director
Stephen Fenby
Stephen Lamb
Andrew Herbert
Mike Ashley
Hilary Wright
Ordinary
shares at
31 December
20221
17,282,000
38,299
40,000
1,442
4,000
Vested but
not exercised
—
—
—
—
—
Vested and
subject to
holding
period2
Unvested and
subject to
performance
criteria3
31,226
25,020
—
401,178
—
—
—
—
—
—
Percentage
shareholding4
Percentage of
salary held4
19.46%
0.06%
0.05%
<0.01%
<0.01%
21,314%
79%
n/a
n/a
n/a
1
Including closely associated people.
2 Deferred 2021 bonus shares.
3 The 2021 and 2022 LTIP awards will be subject to a two-year post-vesting holding period.
4 Based on a share price of £4.22 and base salary on 31 December 2022.
All share options lapse, if they are not exercised, ten years after the grant date.
Non-executive fees in 2022
Fees for the Non-executive Directors were not increased for the year ended 31 December 2022.
Fees at the end of the financial period were:
Andrew Herbert
Mike Ashley
Hilary Wright
Fees
£85,460
£45,260
£43,260
Non-executive Director fees for the 2023 financial year are set out on page 83 of this report.
Implementation of remuneration agreements in 2023
Base salary
The salaries of the MD and FD were increased by 5.1% and 5.5% respectively from 1 January 2023.
The table below sets out the base salaries effective from 1 January 2023 (with previous base salaries included for reference):
Stephen Fenby
Stephen Lamb
Stretch targets
As at
31 December
2022
As at
1 January
2023
£342,500
£360,000
£275,000
£290,000
Annual bonus
The maximum annual bonus for the MD and FD will be 125% of base salary. With a strong focus on net profit and profit margins,
pay-outs will be determined by performance against the following targets:
— Profit growth targets (65% weighting);
— Other financial KPIs (25% weighting); and
— Strategic/personal targets (10% weighting).
Long-term incentive
The Group MD and FD will be eligible to participate in any long-term incentive awards granted during 2023.
82
Midwich Group plc
Annual report and financial statements 2022
Implementation of remuneration agreements in 2023 continued
Pension
Company pension contributions will remain at 6% of base salary. The MD and FD each elect to receive this via salary supplement
of 6% of salary (less employer’s National Insurance) in lieu of pension contributions.
Non-executive Director fees
Non-executive Directors were increased by 5% (Chair) and 6% (Other Non-executives) from 1 January 2023. An additional fee
of £2,000 is payable to the Chair of the Remuneration Committee.
The table below sets out the 2023 fees for the Non-executive Directors (with previous fees included for reference):
Andrew Herbert
Mike Ashley
Hilary Wright
Fees
As at
31 December
2022
£85,490
£45,260
£43,260
As at
1 January
2023
£90,000
£48,000 1
£46,000
1
Includes £2,000 payable to the Chair of the Remuneration Committee.
Adviser
During the financial year, the Committee received independent advice from PwC and Deloitte. As founder members of the
Remuneration Consultants Group, PwC and Deloitte voluntarily operate under the Voluntary Code of Conduct in relation to
executive remuneration consulting in the UK. The Remuneration Committee is satisfied that the advice received was objective
and independent.
Approval
This report is approved by the Board on 13 March 2023 and signed on its behalf by:
Mike Ashley
Chair of the Remuneration Committee
Annual report and financial statements 2022
Midwich Group plc
83
GOVERNANCE DIRECTORS’ REPORT
The Directors present their report and the financial statements of the Group for the year ended 31 December 2022. Some
disclosures that would normally be included in the Directors’ Report are included in the Strategic Report. These include
the review of the principal risks and uncertainties facing the business (page 57), stakeholder engagement (page 46),
environmental reporting (page 32) and an indication of likely future developments for the Group (page 24).
Results and dividends
The profit after tax for the period amounted to £16.9m (2021: £13.5m).
The Company paid dividends in the year of £10.9m (2021: £5.6m).
Post balance sheet events
The Board takes all reasonable steps to review and consider any factors that may affect the ability of the Group to continue
as a going concern. In January 2023, the Group increased and extended its revolving credit facility to £175m for a term of
4½ years.
Going concern
In considering the going concern basis for preparing the financial statements, the Board considers the Group’s objectives and
strategy and its principal risks and uncertainties in achieving its goals and objectives which are set out in the Strategic
Report. The Board has undertaken a review of going concern under three scenarios: 1) our base plan, 2) a downside scenario
and 3) a reverse stress test for the period to 31 December 2024. The sensitivity stress tests are based on a model that allows
the Group to assess its liquidity, solvency and compliance with banking covenants based on inputs for future trading
performance. Varying the inputs into the model allows the Group to assess the impact of potential adverse trading conditions.
The Directors consider the working capital and finance facilities of the business to be adequate to fund its operations and
growth strategy. The Group has a variety of finance facilities available to it including a revolving credit facility which expires in
2027 and secured invoice discounting facilities which require renewal in the forecast period. The Directors are confident that
they will be able to renew the secured invoice discounting facilities given the secured nature of the facility and state of the
business. Notwithstanding, this represents an uncertainty and further models (base plan and reverse stress test) have been
prepared to assess going concern without the use of on-demand facilities. The base case continues to demonstrate the
Group’s ability to continue as a going concern. The reverse stress test demonstrates that the Group can withstand severe
adverse trading conditions. In assessing the ability to withstand severe adverse trading conditions, the Directors have also
considered mitigating actions available to them.
There are no material uncertainties that cast significant doubt on the Group’s ability to continue as a going concern and the
Group continues to adopt the going concern basis in preparing consolidated financial statements. The Group’s strategy
remains unchanged, and we will continue to focus on profitable organic growth complemented by targeted acquisitions.
Financial risk management and policies
The Group uses various financial instruments such as loans, invoice discounting, forward exchange contracts, trade
receivables and trade payables that arise directly from its operations. The main purpose of the financial instruments is to
provide working capital for the Group’s operations.
The main financial risks arising from the Group’s operations are credit risk, interest rate risk, currency risk and liquidity risk.
The Directors review and agree policies for managing each of these risks and they are summarised below.
Credit risk
The Group’s principal financial assets are cash and trade receivables.
In order to manage credit risk, the Directors prioritise the credit control function, and clear procedures are in place to take
on new customers and manage and mitigate the impact of slow payers. The Group is a significant purchaser of credit
insurance cover.
84
Midwich Group plc
Annual report and financial statements 2022
Interest rate risk
The Group’s borrowing facilities, including its invoice discounting facilities, are linked to either SONIA or base rate.
An increase in these benchmarks would impact the Group’s cost of borrowing which, in turn, would affect the Group’s
financial performance.
The Group uses financial instruments to swap an element of its variable interest rate borrowings into fixed interest rates. The
purpose of this is to provide greater certainty of future interest payments.
The Group regularly monitors its exposure to interest rate movements and, where appropriate, will consider further risk
management products to mitigate this risk.
Currency risk
The Group companies largely source their goods and supply their customers in their domestic currency. In addition, many
foreign currency denominated payments or receipts are hedged naturally with each other.
In the event of a long-term and material exposure to a movement in currency the Group takes out risk management products
to reduce the risk.
Liquidity risk
The Group seeks to manage financial risk by ensuring sufficient liquidity is available to meet foreseeable needs and to invest
cash assets safely and profitably.
Short-term flexibility is achieved by invoice finance facilities and overdraft facilities.
Directors
The Directors of the Company during the year and their beneficial interest in the ordinary shares of the Company at
31 December 2022 are set out below:
Stephen Fenby
Stephen Lamb
Andrew Herbert
Mike Ashley
Hilary Wright
1
Including closely associated people.
The executive Directors’ interests in share options of the Company are detailed on page 82.
Ordinary Shares1
2022
2021
17,282,000
17,262,000
38,299
40,000
1,442
4,000
37,716
40,000
1,442
4,000
17,365,741
17,345,158
Annual report and financial statements 2022
Midwich Group plc
85
GOVERNANCE DIRECTORS’ REPORT CONTINUED
Directors’ remuneration
Salary/fees
and bonus
£’000
Pension
£’000
Benefits in
in kind
£’000
Share option
vesting
£’000
2022
Stephen Fenby
Stephen Lamb
Andrew Herbert
Mike Ashley
Hilary Wright
566
468
85
45
43
1,207
17
14
—
—
—
31
12
15
—
—
—
27
—
1,358
—
—
—
Total
£’000
595
1,855
85
45
43
2021
Total
£’000
958
836
83
42
42
1,358
2,623
1,961
Directors’ and officers’ liability insurance
The Company maintains insurance cover for the Directors and key personnel against liabilities, which may be incurred
by them while carrying out their duties.
Employee involvement and policies
We recognise the importance of our staff to the success of the business, since our product sales rely on the excellent service
provided by our team. We aim to attract, motivate and retain the best people in our industry, regardless of race, age or
disability. The Group provides its employees with information and consults with staff on matters of concern to them.
The Group gives full consideration to applications for employment from disabled persons where the requirements of the
job can be adequately fulfilled by a disabled person. Where existing employees become disabled, it is the Group’s policy,
whenever practicable, to provide continuing employment under normal terms and conditions and to provide training and
career development and promotion to disabled employees wherever appropriate.
The Board would like to thank our staff for the support, commitment and enthusiasm shown last year.
Substantial shareholders
The Company has been notified of the following interests of 3% or more in its issued share capital as at 22 February 2023:
Midwich Group plc Directors & related parties
Octopus Investment Nominees Limited
abrdn plc
Liontrust Investment Partners LLP
Granular Capital Ltd
FIL Limited
Janus Henderson Group plc
Number of
shares
17,365,741
11,567,346
11,462,998
8,971,218
6,788,644
4,909,035
2,786,221
%
19.54
13.01
12.90
10.09
7.64
5.52
3.13
86
Midwich Group plc
Annual report and financial statements 2022
Directors’ responsibilities statement
The Directors are responsible for preparing the Strategic Report, the Directors’ Report and the financial statements in
accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial period. Under that law, the Directors
have elected to prepare the financial statements in accordance with UK adopted International Accounting Standards (“IAS”).
Under company law, the Directors must not approve the financial statements unless they are satisfied that they give a true
and fair view of the state of affairs and of the profit or loss of the Company and Group for that period.
In preparing these financial statements, the Directors are required to:
— select suitable accounting policies and then apply them consistently;
— make judgements and estimates that are reasonable and prudent;
— state whether applicable UK adopted IASs have been followed, subject to any material departures disclosed and explained
in the consolidated financial statements; and
— prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group will
continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s
transactions and disclose with reasonable accuracy at any time the financial position of the Company and Group, and enable
them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for
safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and
other irregularities.
The Directors confirm that:
— so far as each Director is aware, there is no relevant audit information of which the Company’s auditor is unaware; and
— the Directors have taken all steps that ought to have been taken as a Director in order to make themselves aware of any
relevant audit information and to establish that the Company’s auditor is aware of that information.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the
company’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements
may differ from legislation in other jurisdictions.
To the best of our knowledge:
— the group financial statements, prepared in accordance with UK-adopted international accounting standards, give a true
and fair view of the assets, liabilities, financial position and profit or loss of the company and the undertakings included in
the consolidation taken as a whole; and
— the Strategic Report and Directors’ Report include a fair review of the development and performance of the business and
the position of the company and the undertakings included in the consolidation taken as a whole, together with a
description of the principal risks and uncertainties that they face.
Auditor
The auditor, Grant Thornton UK LLP, will be proposed for reappointment in accordance with section 485 of the Companies
Act 2006.
This report was approved by the Board and signed on its behalf.
Mr S B Fenby
Director
13 March 2023
Company registration number: 08793266
Annual report and financial statements 2022
Midwich Group plc
87
GOVERNANCE Financial
statements
CONTENTS
Independent Auditor’s Report
90
Consolidated
Financial Statements
Notes to the Consolidated
Financial Statements
Company Statement
of Financial Position
Company Statement
of Changes in Equity
Notes to the Company
Financial Statements
Resolutions Summary
Notice of AGM
Directors, Officers
and Advisers
99
104
140
141
142
147
149
154
AWARD-
WINNING
SOUND
DESIGN
88
Midwich Group plc
Annual report and financial statements 2022
I
F
I
N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S
The challenge
Music, dialogue and vocal incantations, in
their many expressive forms, set the backdrop
for the enchanting world stage premiere of
My Neighbour Totoro —the Royal Shakespeare
Company’s hit production of the Japanese
animation classic at London’s Barbican.
The challenge
Award-winning sound designer Tony Gayle
took up the RSC’s challenge of designing a
unique soundscape, with the often-beguiling
audience sound delivered in all its
component parts by a HARMAN JBL
Professional VTX A8 dual 8in compact line
array sound system, supplied by Autograph
Sound via Midwich Group company Sound
Technology Ltd. Having carried out due
diligence on the JBL VTX A8, representatives
from Autograph’s loudspeaker department
undertook training at Sound Technology
Ltd’s demo facility in Hertfordshire. Tony
Gayle went on to win the WhatsOnStage
Award for Best Sound Design for his work on
My Neighbour Totoro, with the production
recently nominated for nine Olivier Awards.
This show means a lot
to a lot of people. I was
adamant that I wanted
to use JBL VTX A8...I
knew it would do the
music justice.”
Tony Gayle
Sound Designer
Annual report and financial statements 2022
Midwich Group plc
89
Financial Statements
INDEPENDENT AUDITOR’S REPORT
To the members of Midwich Group Plc
Opinion
Our opinion on the financial statements is unmodified
We have audited the financial statements of Midwich Group Plc (the ‘parent company’) and its subsidiaries (the ‘group’) for
the year ended 31 December 2022, which comprise the Consolidated Income statement, the Consolidated Statement of
Comprehensive Income, the Consolidated Statement of Financial Position, the Consolidated Statement of Changes in Equity,
the Consolidated Statement of Cash Flows, the Company Statement of Financial Position, the Company Statement of
Changes in Equity and notes to each of the Consolidated and Company financial statements, including a summary of
significant accounting policies. The financial reporting framework that has been applied in the preparation of the group
financial statements is applicable law and UK-adopted international accounting standards. The financial reporting framework
that has been applied in the preparation of the parent company financial statements is applicable law and United Kingdom
Accounting Standards, including Financial Reporting Standard 101 ‘Reduced Disclosure Framework’ (United Kingdom
Generally Accepted Accounting Practice).
In our opinion:
— the financial statements give a true and fair view of the state of the group’s and of the parent company’s affairs as at
31 December 2022 and of the group’s profit for the year then ended;
— the group financial statements have been properly prepared in accordance with UK-adopted international
accounting standards;
— the parent company financial statements have been properly prepared in accordance with United Kingdom Generally
Accepted Accounting Practice; and
— the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the ‘Auditor’s responsibilities for the audit of the financial
statements’ section of our report. We are independent of the group and the parent company in accordance with the ethical
requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as
applied to listed entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We
believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
We are responsible for concluding on the appropriateness of the directors’ use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast
significant doubt on the group’s and the parent company’s ability to continue as a going concern. If we conclude that a
material uncertainty exists, we are required to draw attention in our report to the related disclosures in the financial
statements or, if such disclosures are inadequate, to modify the auditor’s opinion. Our conclusions are based on the audit
evidence obtained up to the date of our report. However, future events or conditions may cause the group or the parent
company to cease to continue as a going concern.
A description of our evaluation of management’s assessment of the ability to continue to adopt the going concern basis of
accounting, and the key observations arising with respect to that evaluation is included in the Key Audit Matters section of
our report.
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the
preparation of the financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the group’s and the parent company’s ability to continue as a going
concern for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant
sections of this report.
90
Midwich Group plc
Annual report and financial statements 2022
Our approach to the audit
Overview of our audit approach
Overall materiality:
Group: £1,264,000, which represents circa 5% of the group’s profit before taxation.
Parent company: £280,000 which represents 1% of the parent company’s total assets at the
planning stage of the audit, capped at 22% of group materiality.
Key audit matters were identified as:
— Going concern (same as the prior period);
Materiality
Key audit
matters
— The risk of impairment in relation to the intangible asset under construction (same as the prior
period); and
Scoping
— The risk of impairment in relation to goodwill (new in the period).
Our auditor’s report for the year ended 31 December 2021 included no key audit matters that have
not been reported as key audit matters in our current year’s report.
There were no additional key audit matters identified with specific regard to the parent company only.
The group engagement team and component audit teams have performed an audit of the financial
information for 6 components using component materiality (full scope audit procedures) and
specific-scope audit procedures for 9 components.
This resulted in coverage of 75% of the group’s revenue and 78% of the group’s profit before taxation.
The group engagement team have performed analytical procedures on the financial information of
all other components within the group. This is consistent with the scope of the audit in the prior year.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not
due to fraud) that we identified. These matters included those that had the greatest effect on: the overall audit strategy; the
allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the
context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a
separate opinion on these matters.
Description
Audit response
In the graph below, we have presented the key audit matters,
significant risks and other risks relevant to the audit.
KAM
High
Revenue recognition
Disclosures
Our results
Cash existence
Impairment of Goodwill
Impairment
of intangible
assets under
construction
Management override of controls
Going concern
Potential
financial
stattement
impact
Payables completeness
Ship and debit (SDQs)
Inventories valuation
Business combinations
Put option liabilities
Derivatives
Low
Low
Extent of management judgement
High
Key audit matter
Significant risk
Other risk
Annual report and financial statements 2022
Midwich Group plc
91
FINANCIAL STATEMENTS INDEPENDENT AUDITOR’S REPORT CONTINUED
To the members of Midwich Group Plc
Key audit matters continued
Key Audit Matter – Group
Going concern
We identified going concern as one of
the most significant assessed risks of
material misstatement due to error.
The directors have prepared a base
forecast, a reasonably possible
downside, and an extreme stress test.
Under the base case and reasonably
possible downside scenario the group
remains in compliance with all
debt covenants.
In our evaluation of the directors’
conclusions, we have identified
reliance on uncommitted funding as
the most significant assumption in
management’s evaluation. This is
because continued support from the
lending institutions contributes a
significant proportion to the group’s
headroom during the going concern
assessment period. If the business lost
this support, alternative finance would
need to be used and/or mitigating
actions taken.
In response to this risk, the directors
have also prepared an adjusted base
case forecast, and a reverse stress test
in which the uncommitted funding has
been removed. The directors have
included mitigating actions in the
reverse stress test as part of
demonstrating the business’ ability
to withstand severe adverse trading
conditions during the assessment period.
The directors have concluded, based
on the finance facilities available and
various scenarios developed, that the
group has sufficient resources available
to meet its liabilities as they fall due
and have concluded that there exist
no material uncertainties relating to
the going concern assumptions
employed.
Relevant disclosures in the
Annual Report and Financial
Statements 2022
— Financial statements: Note 1,
Accounting Policies
How our scope addressed the matter – Group
In responding to the key audit matter, we performed the following audit
procedures:
— Obtained an understanding of key controls over management’s going concern
models, including those concerning the inputs and assumptions used in the models;
— Obtained management’s cash flow and covenant compliance forecasts covering
the period to 31 December 2024, which included a base case, a reasonably possible
downside scenario and an extreme stress test scenario. These forecasts were
evaluated to confirm the mathematical accuracy of the model used and that the
covenant calculations have been agreed to the underlying financing agreements;
— Tested the underlying data used to prepare the forecast scenarios and applied
professional judgement to determine whether there was adequate support for
the assumptions underlying the forecast;
— Obtained and compared analyst reports and industry data with management’s
estimates. This included considering whether the data provided corroborative or
contradictory evidence in relation to management’s assumptions;
— Considered the inherent risks associated with the group’s and the parent
company’s business model including effects arising from macro-uncertainties
(such as interest and inflationary pressures) on the forecasting period, we
assessed and challenged the reasonableness of estimates made and the related
disclosures and analysed how those risks might affect the group’s and the parent
company’s business in the going concern period;
— Compared management’s forecasting to historical financial information for the
past four financial periods and post year end for January 2023 to assess the
accuracy of that forecasting;
— Assessed the likelihood of uncommitted funding being withdrawn during the
forecast period. This included the use of an insolvency specialist and was
modelled in our sensitivity analysis;
— Obtained and assessed further cash flow and covenant compliance forecasts
covering the period to 31 December 2024 from management, which assume the
non-renewal of uncommitted finance. This included assessing a revised base
case and a reverse stress test scenario (which included mitigations available
to management);
— Understood management’s proposed mitigating actions to reduce costs and
manage cash flows and assessed the suitability and feasibility of instigating the
proposed mitigating actions. The audit team also challenged the expected
impact of these mitigating actions based on supporting evidence; and
— Evaluated the group’s disclosures on going concern for compliance with the
requirements of IAS 1 ‘Presentation of financial statements’.
Our results
Based on our audit work, we are satisfied that the assumptions made in
management’s assessment of the use of the going concern assumption are
supported by sufficient appropriate audit evidence. We consider that the group’s
disclosure is in accordance with IAS 1.
92
Midwich Group plc
Annual report and financial statements 2022
Key Audit Matter – Group
How our scope addressed the matter – Group
The risk of impairment in
relation to the intangible asset
under construction
We identified the risk of impairment
(valuation) in relation to the intangible
asset under construction as one of the
most significant assessed risks of
material misstatement due to error.
This is due to the high level of
management judgement and
assumptions required to perform the
annual impairment test required under
IAS 36, such as the discount rate and
expected benefits to be derived from
the asset once in use. As a result, there
is a risk that the carrying value of the
intangible asset under construction
(the Group’s new Enterprise Resource
Planning (ERP) system) may exceed
its recoverable amount and therefore
be subject to impairment.
Relevant disclosures in the Annual
Report and Financial Statements
2022
Financial statements: Note 1,
Accounting policies and Note 13,
Intangible assets
In responding to the key audit matter, we performed the following audit procedures:
— Obtained an understanding of the process followed for the impairment
assessment of assets under construction;
— Obtained management’s model to identify the key assumptions and determine
the arithmetical accuracy of the model;
— Used an auditor’s internal expert to calculate an expected range for the discount
rate applied to compare to the rate used by management, and to confirm the
reasonableness of the key inputs and assumptions used in management’s model;
— Used an auditor’s internal expert to consider the key inputs and assumptions
used in the impairment review prepared by management, and to challenge
whether the expected timing of remaining development costs and net savings
are reasonable. This is based on the experts experience in design and
implementation of ERP systems in other organisations;
— Challenged management on the classification of the asset as under construction
at the year end;
— Assessed the historical accuracy of management’s forecasting by comparing
historical forecasts to actual results for the past four financial periods and post
year end to January 2023;
— Sensitivity analyses were completed by the engagement team on the key
assumptions and inputs into the value in use calculations; and
— Evaluated the group’s disclosures according to the requirements of IAS 38 and
IAS 36.
Our results
Based on our audit work, we are satisfied that the valuation of the intangible asset
under construction is not materially misstated.
Annual report and financial statements 2022
Midwich Group plc
93
FINANCIAL STATEMENTS INDEPENDENT AUDITOR’S REPORT CONTINUED
To the members of Midwich Group Plc
Key Audit Matter – Group
How our scope addressed the matter – Group
Valuation of goodwill
We identified the valuation of the
carrying value of goodwill as one of
the most significant assessed risks of
material misstatement due to error.
We have pinpointed the significant risk
to the Asia-Pacific (APAC) group of
cash generating units (“CGUs”).
The goodwill recognised in respect of
historical acquisitions is subject to an
annual test for impairment under IAS
36. There is a risk that goodwill
recognised on historical acquisitions
may be impaired due to the current
trading performance relating to
such acquisitions.
Management prepare impairment
models to assess the value in use.
Management’s assessment of potential
impairment incorporates significant
judgements in assumptions, such as
determining the groups of CGUs along
with the appropriate allocation of
goodwill to them, and the timing and
extent of future cash flows related to
those groups of CGUs whilst applying
an appropriate discount rate that is at
risk of management bias. The selection
of certain inputs within the cash flow
forecasts can also significantly impact
the results of the impairment assessment.
Relevant disclosures in the Annual
Report and Financial Statements
2022
Financial statements: Note 1,
Accounting policies and Note 12,
Goodwill
In responding to the key audit matter, we performed the following audit procedures:
— Updated our understanding of, and evaluated, the business processes and
controls over the year-end impairment process;
— Obtained management’s impairment assessment for each group of CGUs, which
are based on discounted cash flow models;
— Evaluated management’s basis for determination of CGUs and considered its
appropriateness in line with the requirements of IAS 36, corroborating key
judgements to supporting evidence;
— Assessed the mathematical accuracy of the impairment models;
— Evaluated the key assumptions using industry data and other external information
to assess the reasonableness of management’s assumptions. This included
engaging our internal valuation experts to evaluate the discount rate who
derived an estimated range based on a WACC determined on a market
participant basis;
— Tested the accuracy of management’s historical forecasting through a
comparison of budget to actual data and historical variance trends;
— Performed our own sensitivity analysis to understand the impact of any
reasonably possible changes in assumptions, and evaluated the headroom
available from different outcomes to assess whether goodwill could be impaired;
— Evaluated the information included in management’s impairment models
through our knowledge of the business and discussions with management; and
— Assessed the accounting policy and disclosure to ensure it is in accordance with
the financial reporting framework, including IAS 36.
Our results
Based on our audit work, we are satisfied that the valuation of goodwill is not
materially misstated.
There were no key audit matters identified that solely relate to the parent company.
94
Midwich Group plc
Annual report and financial statements 2022
Our application of materiality
We apply the concept of materiality both in planning and performing the audit, and in evaluating the effect of identified
misstatements on the audit and of uncorrected misstatements, if any, on the financial statements and in forming the opinion
in the auditor’s report.
Materiality was determined as follows:
Materiality measure
Group
Parent company
Materiality for financial
statements as a whole
We define materiality as the magnitude of misstatement in the financial statements that,
individually or in the aggregate, could reasonably be expected to influence the economic
decisions of the users of these financial statements. We use materiality in determining the nature,
timing and extent of our audit work.
Materiality threshold
£ 1,264,000 which is circa 5% of the group’s
profit before taxation.
£ 280,000 which represents 1% of the parent
company’s total assets at the planning stage of
the audit, capped at 22% of group materiality.
Significant judgements
made by auditor in
determining materiality
In determining materiality, we made the
following significant judgements:
In determining materiality, we made the
following significant judgements:
— The selection of the appropriate benchmark.
— Total assets were considered to be the most
Profit before taxation (PBT) is a key
performance indicator (KPI) used to measure
the performance of the group and is of
primary interest to the users of the financial
statements.
— The selection of an appropriate percentage to
apply to that benchmark. 5 % was considered
to be an appropriate percentage as it is in line
with industry practice.
— The consideration of other qualitative factors
such as the group being stable profit
generating and operating in a mature sector.
Materiality for the current year is higher than the
level that we determined for the year ended 31
December 2021 to reflect the increase in group
profit before taxation for the year.
We calculated materiality during the planning
stage of the audit and then during the course of
our audit, we re-assessed initial materiality based
on actual group profit before taxation for the
year ended 31 December 2022. This resulted in a
decrease of materiality to that calculated at the
planning stage of the audit due to a larger than
expected increase in the put option liability. Our
audit procedures were adjusted accordingly as a
result of the commensurate reduction in
materiality for the individual components.
appropriate benchmark as the company does
not undertake any trading activities.
— 1% was considered to be an appropriate
percentage as it is in line with industry
practice.
— We have capped materiality at 22% of Group
materiality.
Materiality for the current year is higher than for
the year ended 31 December 2021 due to an
increase in group materiality.
We calculated materiality during the planning
stage of the audit and then during the course of
our audit, we re-assessed initial materiality
based on actual group profit before taxation for
the year ended 31 December 2022 and adjusted
our parent company materiality accordingly,
which is capped at 22% of group materiality.
Significant revision of our
materiality threshold was
made as the audit
progressed
Performance materiality
used to drive the extent
of our testing
We set performance materiality at an amount less than materiality for the financial statements as
a whole to reduce to an appropriately low level the probability that the aggregate of uncorrected
and undetected misstatements exceeds materiality for the financial statements as a whole.
Performance materiality
threshold
£ 948,000, which is 75% of financial
statement materiality.
£ 210,000, which is 75% of financial
statement materiality.
Significant judgements
made by auditor in
determining performance
materiality
In determining performance materiality, we
made the significant judgement of setting it
at 75% based on the fact that there were no
material adjustments identified in the 2021
audit, and the absence of any significant
control deficiencies.
In determining performance materiality, we
made the significant judgement of setting it at
75% based on the fact that there were no material
adjustments identified in the 2021 audit, and the
absence of any significant control deficiencies.
Specific materiality
Specific materiality
We determine specific materiality for one or more particular classes of transactions, account
balances or disclosures for which misstatements of lesser amounts than materiality for the
financial statements as a whole could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial statements.
We determined a lower level of specific
materiality for directors’ remuneration and
related party transactions (excluding
intercompany transactions).
We determined a lower level of specific
materiality for directors’ remuneration and
related party transactions (excluding
intercompany transactions).
Annual report and financial statements 2022
Midwich Group plc
95
FINANCIAL STATEMENTS INDEPENDENT AUDITOR’S REPORT CONTINUED
To the members of Midwich Group Plc
Materiality measure
Group
Parent company
Communication of
misstatements to the
audit committee
Threshold for
communication
We determine a threshold for reporting unadjusted differences to the audit committee.
£ 63,200 and misstatements below that
threshold that, in our view, warrant reporting on
qualitative grounds.
£ 14,000 and misstatements below that
threshold that, in our view, warrant reporting on
qualitative grounds.
The graph below illustrates how performance materiality interacts with our overall materiality and the tolerance for potential
uncorrected misstatements.
Overall materiality – Group
Overall materiality – Parent company
Profit
before
taxation
£24.9m
FSM
£1.264m
5%
PM
£948k
75%
TFPUM
£316k
25%
Total
assets
£83.7m
PM
£210k
75%
FSM
£280k 1%
capped at
22% of
group
materiality
TFPUM
£70k
25%
FSM: Financial statements materiality, PM: Performance materiality, TFPUM: Tolerance for potential uncorrected misstatements
An overview of the scope of our audit
We performed a risk-based audit that requires an understanding of the group’s and the parent company’s business and in
particular matters related to:
Understanding the group, its components, and their environments, including group-wide controls
— the engagement team obtained an understanding of the group and its environment, including group-wide controls, and
assessed the risks of material misstatement at the group level; and
— the engagement team obtained an understanding of the effect of the group organisational structure on the scope of the
audit, identifying that the group financial reporting system is centralised, and that there is a use of management experts
where required. The group had forty-one subsidiaries as at 31 December 2022. During the period three subsidiaries were
dissolved, one subsidiary was incorporated, one subsidiary was hived-up into another subsidiary in the group, and seven
subsidiaries were acquired through two business combinations. The entities are registered in several countries across
the world.
Identifying significant components
— Five components were identified as significant through assessing their relative share of key financial metrics including
revenue and profit before taxation.
— Additional components were selected based on an assessment of the risk of material misstatement to the group. For these
components either a full-scope audit or an audit of one or more accounts, balances, class of transactions or disclosures
(specific-scope audit) was performed.
Type of work to be performed on financial information of parent and other components (including how
it addressed the key audit matters)
— Performance of full-scope audit procedures on the financial information of the parent company Midwich Group Plc,
Midwich Limited, Staring Marketing Inc., Kern & Stelly Medientechnik GmbH, Sidev SAS, and Nimans Limited. These
full-scope audits included all our audit work on the identified key audit matters as described in the key audit matters
section of our report.
— Specified audit procedures were performed at the components Bauer and Trummer GmbH, Prase Engineering S.p.A., NMK
Technologies Trading LLC, Gebroeders van Domburg B.V., Edge Electronics Trading LLC, Earpro S.A., Network Sales &
Solutions Limited, Yealink (UK) Limited, and Sound Technology Limited.
— Analytical procedures were performed at all other components.
Performance of our audit
— Testing has been performed over 75% of total group revenues, either through full-scope or specified procedures and 78%
of total group profit before taxation, either through full-scope or specified audit procedures.
96
Midwich Group plc
Annual report and financial statements 2022
Audit approach
Full-scope audit
Specified audit procedures
Analytical procedures
No. of
components
% coverage
of revenue
% coverage
of PBT
6
9
13
58
17
25
47
31
22
— The group engagement team visited components in the UK, USA, Germany, and the Netherlands. Visits to the individual
components take place on a rotational basis, with reference to the significance of the component to the group.
Communications with component auditors
— The group engagement team communicated with two component auditors covering two components performing
full-scope procedures, two component auditors covering five components performing full-scope or specified audit
procedures, and five component auditors performing specified audit procedures, throughout the stages of their work,
from planning, through fieldwork and as part of the concluding procedures. All nine component auditors reported to the
group engagement team in relation to the audit procedures communicated.
Changes in approach from previous period
— Our overall scope of the audit has not changed from the prior year other than the inclusion of the newly acquired subsidiaries.
Other information
The other information comprises the information included in the annual report and financial statements 2022, other than the
financial statements and our auditor’s report thereon. The directors are responsible for the other information contained
within the annual report and financial statements 2022. Our opinion on the financial statements does not cover the other
information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance
conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether the other information is materially
inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially
misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine
whether there is a material misstatement in the financial statements themselves. If, based on the work we have performed, we
conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Our opinion on other matters prescribed by the Companies Act 2006 is unmodified
In our opinion, based on the work undertaken in the course of the audit:
— the information given in the strategic report and the directors’ report for the financial year for which the financial
statements are prepared is consistent with the financial statements; and
— the strategic report and the directors’ report have been prepared in accordance with applicable legal requirements.
Matter on which we are required to report under the Companies Act 2006
In the light of the knowledge and understanding of the group and the parent company and their environment obtained in the
course of the audit, we have not identified material misstatements in the strategic report or the directors’ report.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to
report to you if, in our opinion:
— adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been
received from branches not visited by us; or
— the parent company financial statements are not in agreement with the accounting records and returns; or
— certain disclosures of directors’ remuneration specified by law are not made; or
— we have not received all the information and explanations we require for our audit.
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement, the directors are responsible for the preparation of the
financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors
determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether
due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group’s and the parent company’s ability
to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis
of accounting unless the directors either intend to liquidate the group or the parent company or to cease operations, or have
no realistic alternative but to do so.
Annual report and financial statements 2022
Midwich Group plc
97
FINANCIAL STATEMENTS INDEPENDENT AUDITOR’S REPORT CONTINUED
To the members of Midwich Group Plc
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance
is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. The extent to which our procedures
are capable of detecting irregularities, including fraud, is detailed below:
— We obtained an understanding of the legal and regulatory frameworks that are applicable to the group and parent
company through discussions with management. We determined that the most significant frameworks that are directly
relevant to specific assertions in the financial statements are those related to the financial reporting framework, being
UK-adopted international standards (for the group), Financial Reporting Standard 101 ‘Reduced Disclosure Framework’
(for the parent company) and the Companies Act 2006, together with the Quoted Companies Alliance Corporate
Governance Code and the UK tax legislation.
— We enquired of management and the Audit Committee about the Group’s policies and procedures relating to the
identification, evaluation and compliance with laws and regulations and the detection and response to the risks related to
fraud or non-compliance with laws and regulations.
— We enquired of management and the Audit Committee, whether they were aware of any instances of non-compliance with
laws and regulations or whether they had any knowledge of actual, suspected or alleged fraud.
— We assessed whether there is a culture of honesty and ethical behaviour and whether there is a strong emphasis on the
prevention and detection of fraud.
— We assessed the susceptibility of the group’s financial statements to material misstatement, including how fraud might
occur, by evaluating management’s incentives and opportunities for manipulation of the financial statements. This
included the evaluation of risk of management override of controls. We determined that the principal risks were in relation
to areas of increased management judgement, specifically acquisition accounting and the impairment of intangible assets,
all of which could be impacted by management bias, as well as the risk of fraud through the use of journal entries that
increase revenues. We also looked at management’s onboarding process for new customers.
— These audit procedures were designed to provide reasonable assurance that the financial statements were free from fraud
or error. The risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one
resulting from error and detecting irregularities that result from fraud is inherently more difficult than detecting those that
result from error, as fraud may involve collusion, deliberate concealment, forgery, or intentional misrepresentations. Also,
the further removed non-compliance with laws and regulations is from events and transactions reflected in the financial
statements, the less likely we would become aware of it.
— The engagement partner assessed that the engagement team collectively had the appropriate competence and
capabilities to identify or recognise non-compliance with laws and regulations. This was completed through an
understanding of their practical experience with similar engagements, knowledge of the industry, and understanding of
the relevant legal and regulatory frameworks of the group and parent company.
— We communicated relevant laws and regulations and potential fraud risks to all engagement team members, including
internal specialists, and remained alert to any indications of fraud or non-compliance with laws and regulations throughout
the audit.
— We enquired of component auditors whether they were aware of any instances of non-compliance with laws and
regulations or whether they had any knowledge of actual, suspected or alleged fraud.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting
Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies
Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are
required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not
accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit
work, for this report, or for the opinions we have formed.
Sergio Cardoso
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP,
Statutory Auditor, Chartered Accountants
London
13 March 2023
98
Midwich Group plc
Annual report and financial statements 2022
CONSOLIDATED INCOME STATEMENT
For the year ended 31 December 2022
Revenue
Cost of sales
Gross profit
Distribution costs
Administrative expenses
Other operating income
Operating profit
Comprising
Adjusted operating profit
Costs of acquisitions
Share based payments
Employer taxes on share based payments
Amortisation of brands, customer relationships, and supplier relationships
Finance income
Finance costs
Profit before taxation
Taxation
Profit after taxation
Profit for the financial year attributable to:
The Company’s equity shareholders
Non-controlling interest
Basic earnings per share
Diluted earnings per share
The financial statements are also comprised of the notes on pages 104 to 139.
Notes
2022
£’000
3
1,204,049
(1,020,335)
183,714
(109,042)
(45,592)
5,973
35,053
51,108
(435)
(6,031)
(176)
(9,413)
35,053
95
(10,232)
24,916
(8,061)
16,855
15,293
1,562
16,855
17.32p
16.74p
4
5
6
13
8
9
10
10
2021
£’000
855,973
(724,712)
131,261
(80,585)
(34,871)
5,175
20,980
34,012
(486)
(4,416)
(904)
(7,226)
20,980
108
(2,193)
18,895
(5,422)
13,473
12,429
1,044
13,473
14.11p
13.76p
Annual report and financial statements 2022
Midwich Group plc
99
FINANCIAL STATEMENTS CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2022
Profit for the financial year
Other comprehensive income
Items that will not be reclassified subsequently to profit or loss:
Actuarial gains and (losses) on retirement benefit obligations
Items that will be reclassified subsequently to profit or loss:
Foreign exchange gains and (losses) on consolidation
Other comprehensive income for the financial year, net of tax
Total comprehensive income for the year
Attributable to:
Owners of the Parent Company
Non-controlling interests
The financial statements are also comprised of the notes on pages 104 to 139.
2022
£’000
16,855
2021
£’000
13,473
588
254
8,282
8,870
25,725
23,419
2,306
25,725
(4,710)
(4,456)
9,017
8,384
633
9,017
100
Midwich Group plc
Annual report and financial statements 2022
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 December 2022
Non-current assets
Goodwill
Intangible assets
Right of use assets
Property, plant and equipment
Deferred tax assets
Current assets
Inventories
Trade and other receivables
Derivative financial instruments
Cash and cash equivalents
Current liabilities
Trade and other payables
Derivative financial instruments
Put option liabilities over non-controlling interests
Deferred and contingent considerations
Borrowings and financial liabilities
Current tax
Net current assets
Total assets less current liabilities
Non-current liabilities
Trade and other payables
Put option liabilities over non-controlling interests
Deferred and contingent considerations
Borrowings and financial liabilities
Deferred tax liabilities
Other provisions
Net assets
Equity
Share capital
Share premium
Share based payment reserve
Investment in own shares
Retained earnings
Translation reserve
Hedging reserve
Put option reserve
Capital redemption reserve
Other reserve
Equity attributable to owners of the Parent Company
Non-controlling interests
Total equity
Notes
12
13
14
15
9
16
17
20
18
20
21
22
23
18
21
22
23
9
19
30
2022
£’000
35,765
76,002
21,559
14,961
2,567
2021
£’000
21,163
51,972
19,826
11,792
2,725
150,854
107,478
159,823
218,612
4,630
25,855
125,825
124,256
492
15,476
408,920
266,049
(225,899)
(142,546)
(1,483)
—
(9,275)
(44,955)
(3,541)
—
(3,863)
(466)
(34,053)
(2,869)
(285,153)
(183,797)
123,767
274,621
82,252
189,730
(1,872)
(15,975)
(8,157)
(1,418)
(4,287)
(1,468)
(100,324)
(60,399)
(10,576)
(3,583)
(5,066)
(2,696)
(140,487)
(75,334)
134,134
114,396
889
67,047
12,025
(5)
46,023
5,356
—
887
67,047
7,879
(5)
39,078
(2,182)
—
(10,799)
(7,784)
50
150
120,736
13,398
134,134
50
150
105,120
9,276
114,396
The financial statements are also comprised of the notes on pages 104 to 139. The financial statements were approved by the
Board of Directors and authorised for issue on 6 March 2023 and were signed on its behalf by:
Mr S B Fenby
Director
13 March 2023
Company registration number: 08793266
Annual report and financial statements 2022
Midwich Group plc
101
FINANCIAL STATEMENTS CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2022
Share
capital
£’000
(note 30)
Share
premium
£’000
Investment
in own
shares
£’000
Retained
earnings
£’000
Other
reserves
£’000
(note 31)
Equity
attributable
to owners
of the
Parent
£’000
887
67,047
(5)
39,078
(1,887)
105,120
15,293
—
588
7,538
15,293
8,126
Non-
controlling
interests
£’000
9,276
1,562
744
Total
£’000
114,396
16,855
8,870
Balance at 1 January 2022
Profit for the year
Other comprehensive income
Total comprehensive
income for the year
Shares issued (note 30)
Share based payments
Deferred tax on share
based payments
Share options exercised
Acquisition of subsidiaries
(note 21)
Dividends paid (note 36)
Acquisition of non-controlling
interest (note 33)
—
—
—
2
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(2)
—
—
2
—
—
—
15,881
7,538
23,419
2,306
25,725
—
—
—
—
—
6,006
6,006
(1,093)
(1,093)
766
(767)
1
—
—
—
—
—
(6,933)
(6,933)
6,933
—
6,006
(1,093)
1
—
(10,901)
—
(10,901)
—
(10,901)
1,199
3,918
5,117
(5,117)
—
Balance at 31 December 2022
889
67,047
(5)
46,023
6,782
120,736
13,398
134,134
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2021
Share
capital
£’000
(note 30)
Share
premium
£’000
Investment
in own
shares
£’000
Retained
earnings
£’000
Other
reserves
£’000
(note 31)
Equity
attributable
to owners
of the
Parent
£’000
Non-
controlling
interests
£’000
Total
£’000
886
67,047
(6)
30,436
1,976
100,339
12,429
—
12,429
254
(4,299)
(4,045)
(411)
(4,456)
6,148
1,044
106,487
13,473
Balance at 1 January 2021
Profit for the year
Other comprehensive income
Total comprehensive
income for the year
Shares issued (note 30)
Share based payments
Deferred tax on share
based payments
Share options exercised
Acquisition of subsidiaries
(note 21)
Dividends paid (note 36)
Acquisition of non-controlling
interest (note 33)
—
—
—
1
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(1)
—
—
2
—
—
—
12,683
(4,299)
8,384
633
—
—
—
—
—
4,398
4,398
61
1,051
(1,052)
61
1
—
—
—
—
3,866
9,017
—
4,398
61
1
—
—
(3,866)
(5,568)
—
(3,866)
(5,568)
—
(5,568)
476
895
1,371
(1,371)
—
Balance at 31 December 2021
887
67,047
(5)
39,078
(1,887)
105,120
9,276
114,396
The financial statements are also comprised of the notes on pages 104 to 139.
102
Midwich Group plc
Annual report and financial statements 2022
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 December 2022
Cash flows from operating activities
Profit before tax
Depreciation
Amortisation
Loss on disposal of assets
Share based payments
Foreign exchange losses
Finance income
Finance costs
Profit from operations before changes in working capital
Increase in inventories
Increase in trade and other receivables
Increase in trade and other payables
Cash inflow from operations
Income tax paid
Net cash inflow from operating activities
Cash flows from investing activities
Acquisition of businesses net of cash acquired
Purchase of intangible assets
Purchase of plant and equipment
Proceeds on disposal of plant and equipment
Interest received
Net cash used in investing activities
Net cash flows from financing activities
Proceeds on exercise of share options
Deferred consideration paid
Acquisition of non-controlling interest
Dividends paid
Invoice financing inflows/(outflows)
Proceeds from borrowings
Repayment of loans
Interest paid
Interest on leases
Capital element of lease payments
Net cash inflow/(outflow) from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of financial year
Effects of exchange rate changes
Cash and cash equivalents at end of financial year
Comprising:
Cash at bank
Bank overdrafts
The financial statements are also comprised of the notes on pages 104 to 139.
2022
£’000
2021
£’000
24,916
7,039
9,807
141
6,006
3,827
(95)
10,232
61,873
(15,670)
(70,654)
59,779
35,328
(9,142)
26,186
(22,372)
(5,760)
(5,328)
140
95
18,895
5,793
7,502
25
4,398
(1,026)
(108)
2,193
37,672
(36,496)
(12,473)
27,943
16,646
(5,151)
11,495
(16,836)
(2,401)
(3,558)
253
108
(33,225)
(22,434)
1
(198)
(3,974)
(10,901)
14,282
31,304
(4,947)
(5,217)
(602)
(4,126)
15,622
8,583
11,639
716
20,938
25,855
(4,917)
20,938
1
(11,265)
(2,055)
(5,568)
6,261
23,222
(4,660)
(2,087)
(439)
(3,072)
338
(10,601)
23,795
(1,555)
11,639
15,476
(3,837)
11,639
Annual report and financial statements 2022
Midwich Group plc
103
FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. Accounting policies
General information and nature of operations
Midwich Group plc (“the Company”) is a public limited company incorporated in England and Wales and listed on the London
Stock Exchange’s Alternative Investment Market (AIM). The principal activity of Midwich Group plc and its subsidiary companies
(“the Group”) is the distribution of Audio Visual Solutions to trade customers.
Basis of preparation
The consolidated financial statements of Midwich Group plc have been prepared in accordance with UK adopted International
Accounting Standards (“IAS”) in conformity with the requirements of the Companies Act 2006.
The financial statements have been prepared under the historical cost convention as modified for financial instruments at fair
value and in accordance with applicable accounting standards.
The Directors have adopted the going concern basis in preparing the financial information. In assessing whether the going concern
assumption is appropriate, the Directors have taken into account all relevant available information about the foreseeable future.
Basis of consolidation
The Consolidated Financial Statements incorporate the results of Midwich Group plc and entities controlled by the Company
(its subsidiaries). A subsidiary is a company controlled directly by the Group. Control is achieved where the Group has the
power over the investee, rights to variable returns and the ability to use the power to affect the investee’s returns. Income
and expenses of subsidiaries acquired during the year are included in the consolidated income statement from the effective
date of control. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting
policies into line with those used by the Parent Company.
The Group applies the acquisition method of accounting to account for business combinations. The consideration transferred
for the acquisition of a subsidiary is the fair value of the assets transferred, the liabilities incurred, and the equity interests issued
by the Group. Identifiable assets acquired, and liabilities and contingent liabilities assumed in a business combination are
measured initially at their fair values at the acquisition date. The Group recognises identifiable assets acquired and liabilities
assumed in a business combination regardless of whether they have been previously recognised in the acquiree’s financial
statements prior to the acquisition. Goodwill is stated after separate recognition of identifiable intangible assets. It is calculated
as the excess of the sum of a) fair value of consideration transferred, b) the recognised amount of any non-controlling interest in
the acquiree and c) acquisition-date fair value of any existing equity interest in the acquiree, over the acquisition-date fair
values of identifiable net assets. If the fair values of identifiable net assets exceed the sum calculated above, the excess
amount (i.e. gain on a bargain purchase) is recognised in profit or loss immediately.
Non-controlling interests in the net assets of consolidated subsidiaries are identified separately within the Group’s equity.
Non-controlling interests consist of the amount of those interests at the date of the original business combination and the
non-controlling shareholders’ share of changes in equity since the date of the combination. Non-controlling interests are
measured initially at fair value.
Acquisition-related costs are expensed as incurred and all intra-group transactions, balances, income and expenses are
eliminated in full on consolidation.
Acquisition of interests from non-controlling shareholders
Acquisitions of non-controlling interests in subsidiaries are accounted for as transactions between shareholders. There is no
remeasurement to fair value of net assets acquired that were previously attributable to non-controlling shareholders.
Going concern
In considering the going concern basis for preparing the financial statements, the Board considers the Group’s objectives
and strategy, its principal risks and uncertainties in achieving its goals and objectives which are set out in the Strategic
Report. The Board has undertaken a review of going concern under three scenarios: 1) our base plan, 2) a downside scenario
and 3) a reverse stress test for the period to 31 December 2024. The sensitivity stress test is based on a model that allows
the Group to assess its liquidity, solvency and compliance with banking covenants based on inputs for future trading
performance. Varying the inputs into the model allows the Group to assess the impact of potential adverse trading conditions.
The Directors consider the working capital and finance facilities of the business to be adequate to fund its operations and
growth strategy. The Group has a variety of finance facilities available to it including a revolving credit facility which expires
in 2027 and secured invoice discounting facilities which require renewal in the forecast period. The Directors are confident
that they will be able to renew the secured invoice discounting facilities given the secured nature of the facility and state of
the business. Notwithstanding, this represents an uncertainty and further models (base plan and reverse stress test) have
been prepared to assess going concern without the use of on demand facilities. The base case continues to demonstrate
the Group’s ability to continue as a going concern. The reverse stress test demonstrates that the Group can withstand
severe adverse trading conditions. In assessing the ability to withstand severe adverse trading conditions, the Directors
have also considered mitigating actions available to them.
There are no material uncertainties that cast significant doubt on the Group’s ability to continue as a going concern and
the Group continues to adopt the going concern basis in preparing consolidated financial statements. The Group’s strategy
remains unchanged, and we will continue to focus on profitable organic growth complemented by targeted acquisitions.
104
Midwich Group plc
Annual report and financial statements 2022
1. Accounting policies continued
Revenue
Revenue arises from the sale of goods, provision of ancillary services, and the rental of products.
Revenue from the sale of goods is recognised on despatch when control of the products is transferred to the customer.
All performance obligations are met on despatch when the customer obtains control to direct the goods within the sales
channel and incurs the risk of obsolescence.
Ancillary services include support services, managed services, licences, transport, installations, removals, warranties, and
repairs. Where contracts for ancillary services include multiple performance obligations the transaction price is allocated to
each separate performance obligation within the contact based on estimated cost-plus margin. Revenues from support
services, managed services, and warranties are recognised over time as the services are performed. Revenues from all other
ancillary services including licences, transport, installations, removals, and repairs are recognised at a point in time upon
delivery of the service. Revenues from licences comprise the services to arrange for the provision of the licence.
Revenue from the rental of products via an operating lease is recognised on a straight-line basis over the lease term.
Changes in the price or duration of a lease that were not part of the original terms and conditions are accounted for as a lease
modification and recognised as a new lease from the effective date of the modification.
Proceeds from the sale of rental assets are recognised as sales of goods. Revenue for the sale of rental assets is recognised
at the point in time when the control is transferred, at which point the customer obtains the ability to direct the goods in the
channel and incurs the risk of obsolescence.
Finance income and costs
Interest income and expense is recognised using the effective interest method which calculates the amortised cost of a financial
asset or liability and allocates the interest income or expense over the relevant period. The effective interest rate is the rate
that exactly discounts estimated future cash receipts or payments through the expected life of the financial asset or liability
to the net carrying amount of the financial asset or liability. Other finance costs include the changes in fair value of derivatives
and other financial instruments measured at fair value through profit or loss.
Goodwill
Goodwill represents the future economic benefits arising from business combinations which are not individually identified
and separately recognised. Goodwill is carried at cost as established at the date of acquisition of the business less any
accumulated impairment losses.
Intangible assets other than goodwill
Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a
business combination is their fair value as at the date of acquisition. Following initial recognition, intangible assets are carried
at cost less any accumulated amortisation and accumulated impairment losses. The useful lives of other intangible assets are
assessed as finite. Intangible assets with finite lives are amortised over the useful economic life and assessed for impairment
whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation
method for an intangible asset with a finite useful life are reviewed at least at the end of each reporting period. Changes in the
expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are accounted
for by changing the amortisation period or method, as appropriate, and are treated as changes in accounting estimates.
The amortisation expense on intangible assets with finite lives is recognised in profit or loss in administrative expenses.
Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal
proceeds and the carrying amount of the asset and are recognised in profit or loss when the asset is derecognised.
Amortisation is calculated on a straight-line basis over the estimated useful life of the asset as follows:
— Patents and licences
— Software
— Brands
3–10 years
3–10 years
5–15 years
— Customer relationships
5–15 years
— Supplier relationships
5–15 years
Right of use assets
Right of use assets are recognised at the commencement date of the lease when the asset is available for use. Right of use assets
are initially measured at cost including initial direct costs incurred and the initial value of the lease liability. Right of use assets are
subsequently measured at cost less any accumulated depreciation, impairment losses, and adjustments arising from lease
modifications that are not a termination of the lease.
— Land and buildings
Over the period of the lease up to a maximum of 50 years
— Plant and equipment
Over the period of the lease up to a maximum of 10 years
— Rental assets
Over the period of the lease up to a maximum of 10 years
Modifications to leases that decrease the scope of the lease are treated as a partial or full termination of a lease. A gain or
loss on disposal is recognised when there is termination of a lease.
Annual report and financial statements 2022
Midwich Group plc
105
FINANCIAL STATEMENTS
1. Accounting policies continued
Property, plant and equipment
Property, plant and equipment are stated at historical cost less any depreciation and impairment losses. Cost includes
expenditure that is directly attributable to the acquisition or construction of these items. Subsequent costs are included
in the asset’s carrying amount only when it is probable that future economic benefits associated with the item will flow
to the Group and the costs can be measured reliably. All other costs, including repairs and maintenance costs, are charged
to the income statement in the period in which they are incurred.
Depreciation is calculated on a straight-line basis on property, plant and equipment as follows:
— Land
Not depreciated
— Freehold buildings
50 years
— Leasehold improvements
Over the period of the lease up to a maximum of 50 years
— Rental assets
— Plant and equipment
3–10 years
3–10 years
Depreciation is provided on cost less residual value. The residual value, depreciation methods and useful lives are reassessed
annually. Each asset’s estimated useful life has been assessed for limitations in its physical life and for possible future variations
in those assessments. Estimates of remaining useful lives are made on a regular basis for all machinery and equipment, with
annual reassessments for major items. Changes in estimates are accounted for prospectively. The gain or loss arising on
disposal or scrapping of an asset is determined as the difference between the sales proceeds, net of selling costs, and the
carrying amount of the asset and is recognised in the income statement.
Impairment of non-financial assets including goodwill
For the purposes of impairment testing, goodwill is allocated to each of the Group’s cash-generating units that are expected
to benefit from the synergies of the combination. Each unit to which goodwill is allocated represents the lowest level within
the Group that independent cash flows are monitored. A cash-generating unit to which goodwill has been allocated is tested
for impairment annually, or more frequently when there is indication that the unit may be impaired.
At each reporting date, the Group reviews the carrying amounts of non-current assets excluding goodwill to determine
whether there is any indication that they have suffered an impairment loss. If any such indication exists, the recoverable
amount of the asset is estimated to determine the extent of any impairment loss. Where the asset does not generate cash
flows that are independent from other assets, the estimate is the recoverable amount of the cash-generating unit to which
the asset belongs. Recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing value
in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current
market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows
have not been adjusted. If the recoverable amount of an asset or cash-generating unit is estimated to be less than the carrying
amount, then the carrying amount of the asset or cash-generating unit is reduced to the recoverable amount. The impairment
loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit
pro rata based on the carrying amount of each asset in the unit. An impairment loss is recognised as an expense immediately.
An impairment loss recognised for goodwill is not reversed in subsequent periods. Where an impairment loss on other
non-financial assets subsequently reverses, the carrying amount of the asset or cash-generating unit is increased to the
revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount
that would have been determined had no impairment loss been recognised for the asset or cash-generating unit in prior
periods. A reversal of an impairment loss is recognised in the income statement immediately.
Inventory
Inventory is valued at the lower of cost and net realisable value, after making due allowance for obsolete and slow-moving
items. Cost comprises purchase price and directly attributable costs incurred in bringing products to their present location
and condition. Some goods are held on behalf of customers and are not included within the Group’s inventory.
Financial instruments
Financial instruments are contracts that give rise to financial assets or financial liabilities and are recognised when the Group
becomes a party to the contractual provisions of the instrument.
Derivatives are financial instruments that have a value that changes in response to a specific external factor and do not have
a significant initial investment.
106
Midwich Group plc
Annual report and financial statements 2022
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
1. Accounting policies continued
Financial assets
Financial assets include trade and other receivables, cash and cash equivalents, and derivative financial instruments with a
positive market value.
The Group classifies financial assets into two categories:
— financial assets measured at amortised cost; and
— financial assets measured at fair value through profit or loss.
The classification of a financial asset depends on the Group’s business model for managing the asset and the contractual
cash flow characteristics associated with the asset.
Financial assets measured at amortised cost are initially measured at fair value plus directly attributable transaction costs
and subsequently measured using the effective interest method. The effects of discounting within the effective interest
method are omitted if immaterial.
Financial assets measured at fair value through profit and loss are initially and subsequently measured at fair value.
Transaction costs directly attributable to the acquisition of the financial asset are recognised in the profit and loss.
Investments in equity instruments that are not held for trading are classified as financial assets and are measured at fair value
through profit and loss.
Financial assets with embedded derivatives are recognised as hybrid contracts and are classified in their entirety and not in
separate components.
Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire, or when the
financial asset and substantially all the risks and rewards are transferred.
Financial liabilities
Financial liabilities include trade and other payables; deferred considerations; put option liabilities; borrowings; and derivative
financial instruments with a negative market value.
The Group classifies financial liabilities into three categories:
— financial liabilities measured at amortised cost;
— financial liabilities measured at fair value through profit or loss; and
— contingent consideration recognised in a business combination.
Financial liabilities measured at amortised cost are initially measured at fair value minus directly attributable transaction
costs and subsequently measured using the effective interest method. The effects of discounting within the effective interest
method are omitted if immaterial. Where the contractual cash flows of the financial liability are renegotiated or otherwise
modified the financial liability is recalculated at the present value of the modified contractual cash flows discounted at the
financial liability’s original effective interest rate.
Financial liabilities measured at fair value through profit or loss are initially and subsequently measured at fair value.
Transaction costs directly attributable to the issue of the financial liability are recognised in the profit and loss.
Contingent consideration recognised in a business combination is initially and subsequently measured at fair value.
Financial liabilities with embedded derivatives are recognised as hybrid contracts and are classified in their entirety and not
in separate components unless:
— the economic characteristics and risks of the embedded derivative are not closely related to the economic characteristics
and risks of the financial liability;
— a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative; and
— the hybrid contract is not measured at fair value with changes in fair value recognised in profit or loss.
Financial liabilities are derecognised when they are extinguished, discharged, cancelled, or expire.
Trade and other receivables
Trade and other receivables are financial assets recognised when the Group becomes party to the contractual provisions of
the instrument.
Trade and other receivables are initially measured at transaction price plus directly attributable transaction costs. Transaction price
is equivalent to fair value for trade and other receivables that do not contain a significant financing component. Where trade
and other receivables do contain a significant financing component the fair value is equivalent to the transaction price adjusted
for the effects of discounting. The effects of discounting are not adjusted if it is expected at the inception of the contract that
there will be a period of one year or less from when the goods or services are transferred to the customer to the payment date.
Trade and other receivables are subsequently measured at amortised cost using the effective interest method less expected
credit losses. Expected credit losses are calculated based on probability weighted amounts derived from a range of possible
outcomes that are based on reasonable supporting information and discounted for the time value of money. The Group applies
the simplified approach to measure the loss allowance at an amount equal to lifetime expected credit losses including where
trade receivables contain a significant financing component. The effects of expected credit losses are omitted if immaterial.
Annual report and financial statements 2022
Midwich Group plc
107
FINANCIAL STATEMENTS 1. Accounting policies continued
Supplier rebates and other income
Supplier rebates include promotional income and are recognised when the conditions attached to the rebate have been satisfied
and after deducting any probable liability to repay the rebate. Supplier rebates are deducted from inventory or recorded
within cost of sales depending on the contractual terms of the rebate. Promotional income from suppliers does not relate to
the purchase of inventory and is therefore recognised within other income.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand, deposits held at call with banks and other short-term highly liquid investments
with original maturities of three months or less from inception.
Borrowings
Borrowings include bank loans and overdrafts, loan notes, amounts advanced under invoice factoring arrangements, and
leases. Bank loans and overdrafts, loan notes, and amounts advanced under invoice factoring arrangements are financial
liabilities that are recognised when the Group becomes party to the contractual provisions of the instrument. Bank loans and
overdrafts, loan notes, and amounts advanced under invoice factoring arrangements are initially measured at fair value minus
transaction costs directly attributable to the issue of the financial liability. Bank loans and overdrafts, loan notes, and amounts
advanced under invoice factoring arrangements are subsequently measured using the effective interest method. The effects
of discounting within the effective interest method are omitted if immaterial. Where the contractual obligations of financial
instruments (including share capital) are equivalent to a similar debt instrument, those financial instruments are classified as
financial liabilities. Cash inflows from invoice discounting arrangements are classified as financing cash inflows and cash
inflows from receivables are classified as operating cash inflows. The business continues to recognise the receivables and the
amount received from the factor is recorded as a financial liability.
Trade and other payables
Trade and other payables are financial liabilities recognised when the Group becomes party to the contractual provisions of
the instrument. Trade and other payables are initially measured at fair value minus transaction costs directly attributable to
the issue of the financial liability. Trade and other payables are subsequently measured at amortised cost using the effective
interest method.
Derivative financial instruments
Derivative financial instruments are recognised when the Group becomes party to the contractual provisions of the instrument.
Derivative financial instruments are initially and subsequently measured at fair value. Any transaction costs directly attributable
to the acquisition of the financial asset are recognised in the profit and loss. The fair values are determined by reference to
active markets or using a valuation technique where no active market exists.
Put option liabilities
Put options to acquire non-controlling interests of subsidiaries are initially recognised at present value and subsequently measured
at amortised cost, being the present value of future payments discounted at the original effective interest rate. Where the contractual
cash flows of the put option liability are renegotiated or otherwise modified the financial liability is recalculated at the present value
of the modified contractual cash flows discounted at the financial liability’s original effective interest rate. Further details of the
measurement of put options are given in the accounting judgements and key sources of estimation uncertainty accounting policy.
Foreign currency
The presentation currency for the Group’s consolidated financial statements is Sterling. Foreign currency transactions by
group companies are recorded in their functional currencies at the exchange rate at the date of the transaction. Monetary
assets and liabilities are translated at rates in effect at the reporting date with any gain or loss on foreign exchange adjustments
usually being credited or charged to the income statement within administrative expenses. The Parent Company’s functional
currency is Sterling. On consolidation the assets and liabilities of the subsidiaries with a functional currency other than Sterling
are translated into the Group’s presentational currency at the exchange rate at the reporting date and the income and expenditure
account items are translated at the average rate for the period. The exchange difference arising on the translation from functional
currency to presentational currency of subsidiaries is classified as other comprehensive income and is accumulated within
equity as a translation reserve. The balance of the foreign currency translation reserve relating to a subsidiary that is partially
or fully disposed of is recognised in the income statement at the time of disposal.
Current taxation
Current tax payable or recoverable is based on taxable profit for the year. Taxable profit differs from profit as reported in the
income statement because some items of income or expense are taxable or deductible in different years or may never be
taxable or deductible. The Group’s liability for current tax is calculated using UK and foreign tax rates and laws that have
been enacted or substantively enacted by the end of the reporting period date.
108
Midwich Group plc
Annual report and financial statements 2022
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED 1. Accounting policies continued
Deferred taxation
Deferred taxation is calculated using the liability method, on temporary differences arising between the tax bases of assets
and liabilities and their carrying amounts in the consolidated financial statements. However, if the deferred tax arises from the
initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction
affects neither accounting nor taxable profit or loss, it is not accounted for. No deferred tax is recognised on initial recognition
of goodwill or on investment in subsidiaries. Deferred tax is determined using tax rates and laws that have been enacted or
substantively enacted by the reporting date and are expected to apply when the related deferred tax asset is realised, or the
deferred tax liability is settled. Deferred tax liabilities are provided in full and are not discounted. Deferred tax assets are recognised
to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilised.
Changes in deferred tax assets or liabilities are recognised as a component of tax expense in the income statement, except where
they relate to items that are charged or credited directly to equity, in which case the related deferred tax is also charged or credited
directly to equity. Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax
assets against current tax liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the same
taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on
a net basis.
Employment benefits
Provision is made in the financial statements for all employee benefits. Liabilities for wages and salaries, including non-monetary
benefit and annual leave obliged to be settled within 12 months of the reporting date, are recognised in accruals. Contributions
to defined contribution pension plans are charged to the income statement in the period to which the contributions relate. The
Group operates defined benefit pension plans in the Netherlands and Switzerland, which require contributions to a separately
managed funds. Both defined benefit pension plans are final salary pension schemes which provide members with a guaranteed
income on retirement. Defined benefit pension scheme surpluses or deficits are calculated by independent qualified actuaries
using actuarial assumptions applied to actual pension contributions and salaries. The actuarial assumptions include return on
assets, inflation, life expectancy, mortality rates and expected retirement ages. Actuarial assumptions are updated annually
to reflect changes in market conditions and all actuarial gains and losses are recognised in other comprehensive income.
Leases
Assets and liabilities arising from a lease are initially measured at present value. The present value is comprised of fixed and
variable payments discounted using the interest rate implicit in the lease unless it can’t be readily determined, in which case
payments are discounted using the incremental borrowing rate. Variable payments are payments that depend on a rate or index
and are initially measured using the appropriate rate or index at the commencement date of the lease. Where a material variation
to the initial measurement of lease payments occurs the lease liability is reassessed with a corresponding adjustment to the value
of right of use asset.
Lease payments beyond a break clause or within an extension option are included in the measurement of present value provided
it is reasonably certain that the lease will not be terminated before the respective break point or lease extension and there is no
active plan to do so.
Finance costs are added to the lease liabilities at amounts that produce a constant periodic rate of interest on the remaining
balance of the lease liabilities using the interest rates used to calculate the present value of the leases. Lease payments are
deducted from the lease liability.
Short-term leases of less than 12 months or leases for low value assets are recognised on a straight-line basis as an expense
in the income statement.
Government grants
Government grants are recognised when the conditions attached to the grant have been satisfied and after deducting any
probable liability to repay the grant.
Government grants relating to costs incurred are offset against the cost to which the grant relates in the income statement.
Government grants in relation to employment support are offset against the employee costs in the income statement.
Government grants relating to the purchase of property, plant and equipment are deducted from the purchase price of the
asset and credited to the income statement on a systematic basis over the expected useful life of the related asset.
Annual report and financial statements 2022
Midwich Group plc
109
FINANCIAL STATEMENTS 1. Accounting policies continued
Equity
Equity comprises the following:
— “Share capital” represents the nominal value of equity shares issued.
— “Share premium” represents the amounts subscribed for share capital, net of issue costs, above the nominal value.
— “Investment in own shares” represents amounts of the Parent Company’s own shares held within an Employee Benefit Trust.
— “Share based payment reserve” represents the accumulated value of share based payments expensed in the income statement,
along with any accumulated deferred tax credits or charges recognised in other comprehensive income in respect of options
that have yet to exercise.
— “Retained earnings” represents the accumulated profits and losses attributable to equity shareholders.
— “Translation reserve” represents the exchange differences arising from the translation of the financial statements of subsidiaries
into the Group’s presentational currency.
— “Put option reserve” represents the initial present value of put options over shares in a subsidiary held by non-controlling
interest shareholders that have not been exercised.
— “Capital redemption reserve” represents the nominal value of shares repurchased by the Parent Company.
— “Other reserve” relates to the Employee Benefit Trusts.
— “Non-controlling interest” represents the share of a subsidiary’s profit or loss and net assets that is not held by the Group.
The Group attributes total comprehensive income or loss of subsidiaries between the owners of the Parent and the
non-controlling interests based on their respective ownership interests.
Share based payments
Equity-settled share based payments are measured at the fair value of the equity instrument. The fair value of the
equity-settled transactions is recognised as an expense over the vesting period. The fair values of the equity instruments
are determined at the date of grant incorporating market based vesting conditions. The fair value of goods and services
received is measured by reference to the fair value of options. The fair values of share options are measured using the
Black Scholes model. The expected life used in the models is adjusted, based on management’s best estimate of the effects
of non-transferability, exercise restrictions and behavioural considerations. The cost of equity-settled transactions is
recognised, together with a corresponding increase in equity, over the period in which the performance or service
conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (“the vesting
date”). The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date reflects
the extent to which the vesting period has expired and the Group’s best estimate of the number of equity instruments that
will ultimately vest. The income statement charge or credit for a period represents the movement in cumulative expense
recognised as at the beginning and end of that period. No expense is recognised for awards that do not ultimately vest,
except for awards where vesting is conditional upon a market condition, which are treated as vesting irrespective of whether
the market condition is satisfied, provided that all other performance or service conditions are satisfied. Where the terms of
an equity-settled award are modified, the minimum expense recognised is the expense as if the terms had not been modified.
An additional expense is recognised for any modification, which increases the total fair value of the share based payment
arrangement, or is otherwise beneficial to the employee as measured at the date of modification. Where an equity-settled award
is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the award is
recognised immediately. However, if a new award is substituted for the cancelled award, and designated as a replacement
award on the date that it is granted, the cancelled and new awards are treated as if they were a modification of the original
award. Where an equity-settled award is forfeited during the vesting period, the cumulative charge expensed up to the
date of forfeiture and is credited to the income statement.
Employee Benefit Trust
The assets and liabilities of the Employee Benefit Trusts (EBT) have been included in the Group and Company financial
statements. Any assets held by the EBT cease to be recognised on the statement of financial position when the assets vest
unconditionally in identified beneficiaries. The costs of purchasing own shares held by the EBT are shown as a deduction
within shareholders’ equity. The proceeds from the sale of own shares are recognised in shareholders’ equity. Neither the
purchase nor sale of own shares leads to a gain or loss being recognised in the income statement.
Segment reporting
An operating segment is a component of an entity that engages in business activities from which it may earn revenues and
incur expenses (including revenues and expenses related to transactions with other components of the same entity), whose
operating results are regularly reviewed by the entity’s Chief Operating Decision Maker to make decisions about resources to
be allocated to the segment and assess its performance, and for which discrete financial information is available. The Chief
Operating Decision Maker has been identified as the Managing Director, at which level strategic decisions are made. Details
of the Group’s reporting segments are provided in note 2.
110
Midwich Group plc
Annual report and financial statements 2022
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED 1. Accounting policies continued
New and amended International Accounting Standards adopted by the Group
The Group adopted the following standards, amendments to standards and interpretations, which are effective for the first
time this year:
Amendments to IFRS 3 Business combinations – References to the conceptual framework;
Amendments to IAS 16 Property, plant and equipment – Proceeds before intended use; and
Amendments to IAS 37 Provisions, contingent liabilities and contingent assets – Costs of fulfilling an onerous contract.
The new standards have not had a material impact on the reported results and there is no adjustment to previously reported
equity due to the implementation of the new standards.
International Accounting Standards in issue but not yet effective
The Group intends to adopt new and amended standards and interpretations, if applicable, when they become effective.
The new and amended standards and interpretations that are issued, but not yet effective, up to the date of issuance of the
Group’s financial statements are not expected to have an impact on the Group’s reported financial position or performance.
Use of alternative performance measures
The Group has defined certain measures that it uses to understand and manage performance. These measures are not defined
under IAS and they may not be directly comparable with other companies’ adjusted measures. These non-GAAP measures are
not intended to be a substitute for any IAS measures of performance, but management has included them as they consider
them to be key measures used within the business for assessing the underlying performance.
Growth at constant currency: This measure shows the year on year change in performance after eliminating the impact of
foreign exchange movement, which is outside of management’s control.
Organic growth: This is defined as growth at constant currency excluding acquisitions until the first anniversary of their
consolidation.
Adjusted operating profit: Adjusted operating profit is disclosed to indicate the Group’s underlying profitability. It is defined as profit
before acquisition related expenses, share based payments and associated employer taxes and amortisation of brand, customer
relationship, and supplier relationship intangible assets. Share based payments are adjusted to the provide transparency over
the costs.
Adjusted EBITDA: This represents operating profit before acquisition related expenses, share based payments and
associated employer taxes, depreciation and amortisation.
Adjusted profit before tax: This is profit before tax adjusted for acquisition related expenses, share based payments and
associated employer taxes, amortisation of brand, customer relationship, and supplier relationship intangible assets, changes in
deferred or contingent considerations and put option liabilities over non-controlling interests, foreign exchange gains or
losses on borrowings for acquisitions, fair value movements on derivatives for borrowings, and financing fair value
remeasurements.
Adjusted profit after tax: This is profit after tax adjusted for acquisition related expenses, share based payments and associated
employer taxes, amortisation of brand, customer and supplier relationship intangible assets, changes in deferred or contingent
considerations and put option liabilities over non-controlling interests, foreign exchange gains or losses on borrowings for
acquisitions, fair value movements on derivatives for borrowings, and financing fair value remeasurements and the tax thereon.
Adjusted EPS: Adjusted EPS is EPS calculated using the basis of adjusted profit after tax instead of profit after tax after deducting
adjustments to profit after tax due to non-controlling interests.
Adjusted net debt: Net debt is borrowings less cash and cash equivalents. Adjusted net debt excludes leases.
Accounting judgements and sources of estimation uncertainty
The preparation of financial statements in accordance with the principles of the IASs requires the Directors to make judgements
and use estimation techniques to provide a fair presentation of the Group’s financial position and performance. Accounting
judgements represent the accounting decisions made by the Directors that have the most significant effect on amounts recognised
in the financial statements. Sources of estimation uncertainty represent the assumptions made by management that carry
significant risks of a material adjustment to the value of assets and liabilities within the next financial year. Judgements and
estimates are evaluated based on historical experience, continuing developments within the Group, and reasonable
expectations of future events. Judgements and estimates are subject to regular review by the Directors.
The following are the significant accounting judgements made by the Group in preparing the financial statements:
Annual report and financial statements 2022
Midwich Group plc
111
FINANCIAL STATEMENTS 1. Accounting policies continued
Put options over non-controlling interests
Where the Group has acquired less than 100% ownership of a subsidiary it has always issued put and call options over the remaining
non-controlling interests. The significant accounting judgement is whether the Group has 100% control despite not having 100%
ownership. If the Group judges that it has 100% control, there would be no recognition of a put option liability or non-controlling
interest. If the Group judges that it does not have 100% control, it recognises a put option liability and non-controlling interest. The
key judgements to determine the proportion of control are assessments of the level of risks and rewards, the proportionate right
to dividends, and the exposure to changes in the value of shares.
The following are the significant sources of estimation uncertainty facing the Group in preparing the financial statements:
Inventory write down
Inventory is written down to the lower of cost and net realisable value. To determine inventory write downs the Group is required
to estimate the future sales volumes, sales prices, costs to sell inventory, and shrinkage. The gross value and write down of
inventories, as well as cost of inventory write downs in the period, are disclosed in note 16.
The Group uses a range of different techniques to write down inventory to the lower of cost and net realisable value including a
formulaic methodology based on the age of inventory. The aged inventory methodology writes down inventory by a specific
percentage based on time elapsed from purchase date and these specific percentages are based on historical data.
The only uncertainty associated with estimating the write down of inventory is whether the realisable value on sale or disposal of
inventory approximates the value of inventory after write downs have been applied. The ultimate sale or disposal of inventory
results in a reversal of the write down against the cost of inventory disposed with a potential gain or loss depending upon the
accuracy of the estimation.
If each write down percentage applied to inventory were increased by ten percentage points the total write down against
inventory held at the reporting date would increase by £5,657k. This increase excludes inventory on which no write down has been
applied and is subject to an increase up to a maximum write down of 100%.
If each write down percentage applied to inventory were decreased by ten percentage points the total write down against
inventory held at the reporting date would decrease by £5,474k. This decrease is subject to a minimum write down of 0%.
Fair value of separately identifiable intangible assets in business combinations
The Group is required to calculate the fair value of identifiable assets and liabilities acquired in business combinations.
To estimate the fair value of separately identifiable assets in business combinations certain assumptions must be made about
future trading performance, royalty rates, customer attrition rates, and supplier contract renewal rates. The fair values of
assets and liabilities acquired in business combinations are disclosed in note 34 and the carrying values of separately
identifiable intangible assets initially measured at fair value are disclosed in note 13.
Contingent considerations and put option liabilities
The Group is required to record contingent considerations at fair value. The Group initially measures put option liabilities
at present value and subsequently measures put option liabilities at amortised cost using the effective interest rate method.
The Group use a range of present valuation techniques including both the discount rate adjustment technique and the expected
present value technique to determine the fair values of contingent considerations and the present values of put option liabilities.
The fair value of contingent consideration is disclosed in note 22 and the amortised cost of put option liabilities is disclosed in note 21.
2. Segmental reporting
Operating segments
For the purposes of segmental reporting, the Group’s Chief Operating Decision Maker (“CODM”) is the Managing Director.
The Group is a distributor of audio visual solutions to trade customers. The Board reviews attributable revenue, expenses,
assets and liabilities by geographic region and makes decisions about resources and assesses performance based on this
information. Therefore, the Group’s operating segments are geographic in nature.
2022
Revenue
Gross profit
Gross profit %
Adjusted operating profit
Costs of acquisitions
Share based payments
Employer taxes on share based payments
Amortisation of brands, customer and
supplier relationships
Operating profit
Interest
Profit before tax
UK & Ireland
£’000
EMEA
£’000
Asia Pacific
£’000
492,203
534,962
53,763
79,104
16.1%
26,500
—
(2,260)
(56)
78,014
14.6%
22,718
—
(1,911)
(57)
(4,201)
(3,566)
19,983
17,184
9,312
17.3%
1,378
—
(469)
3
(282)
630
North
America
£’000
123,121
17,284
14.0%
6,437
—
(96)
(4)
Other
£’000
Total
£’000
— 1,204,049
—
—
(5,925)
(435)
(1,295)
(62)
183,714
15.3%
51,108
(435)
(6,031)
(176)
(1,364)
4,973
—
(9,413)
(7,717)
35,053
(10,137)
24,916
112
Midwich Group plc
Annual report and financial statements 2022
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED 2. Segmental reporting continued
Operating segments continued
2022
Segment assets
Segment liabilities
Segment net assets
Depreciation
Amortisation
Other segmental information
Non-current assets
Deferred tax asset
Non-current assets excluding deferred tax
2021
Revenue
Gross profit
Gross profit %
Adjusted operating profit
Costs of acquisitions
Share based payments
Employer taxes on share based payments
Amortisation of brands, customer and
supplier relationships
Operating profit
Interest
Profit before tax
2021
Segment assets
Segment liabilities
Segment net assets
Depreciation
Amortisation
Other segmental information
Non-current assets
Deferred tax asset
Non-current assets excluding deferred tax
UK & Ireland
£’000
EMEA
£’000
Asia Pacific
£’000
235,716
245,321
27,024
North
America
£’000
51,002
Other
£’000
Total
£’000
711
559,774
(196,934)
(187,802)
(19,013)
(20,985)
(906)
(425,640)
38,782
2,731
4,290
57,519
3,294
3,652
8,011
443
297
30,017
571
1,568
(195)
134,134
—
—
UK & Ireland
£’000
EMEA
£’000
Asia Pacific
£’000
286,060
455,434
45,384
45,333
15.8%
12,720
—
(1,599)
(249)
67,000
14.7%
21,356
—
(1,384)
(401)
(2,371)
(3,356)
8,501
16,215
7,958
17.5%
926
—
(366)
(33)
(273)
254
UK & Ireland
£’000
EMEA
£’000
Asia Pacific
£’000
106,426
203,066
(74,564)
(148,943)
21,489
(17,357)
31,862
2,064
2,391
54,123
2,761
3,446
4,132
563
288
UK
£’000
International
£’000
68,547
1,051
67,496
North
America
£’000
69,094
10,969
15.9%
4,556
—
(45)
(5)
82,307
1,516
80,791
Other
£’000
—
—
—
(5,546)
(486)
(1,022)
(216)
7,039
9,807
Total
£’000
150,854
2,567
148,287
Total
£’000
855,972
131,260
15.3%
34,012
(486)
(4,416)
(904)
(1,226)
3,280
—
(7,226)
(7,270)
20,980
North
America
£’000
41,987
(17,454)
24,533
405
1,377
UK
£’000
25,575
1,268
24,307
Other
£’000
559
(813)
(254)
—
—
International
£’000
81,903
1,457
80,446
(2,085)
18,895
Total
£’000
373,527
(259,131)
114,396
5,793
7,502
Total
£’000
107,478
2,725
104,753
Revenue from the UK, being the domicile of the Parent Company, amounted to £470,930k (2021: £270,954k). Revenue from
Germany amounted to £249,570k (2021: £228,487k) and revenue from the USA amounted to £123,121k (2021: £69,094k).
There was no other revenue from a country that amounted to more than 10% of total revenue. Included within the
international non-current assets excluding deferred tax is £19,108k (2021: £12,531k) for Germany and £16,181k (2021: £15,709k)
for the USA. There were no other non-current assets excluding deferred tax in any country that amounted to more than 10%.
Segment revenues above are generated from external customers. The accounting policies of the reportable segments have
been consistently applied. Segment operating profits include the costs of share based payments arising from both cash and
equity settled share options, and the amortisation of intangible assets measured at fair value acquired in business combinations.
In addition to the external revenue reported by segment the UK & Ireland segment made £17,647k (2021: £6,149k) of intercompany
sales and the EMEA segment made £20,084k (2021: £3,739k) of intercompany sales. The North America segment made £nil (2021:
£274k) of intercompany sales. There were no intercompany sales made by the Asia Pacific segments for the current and prior year.
Annual report and financial statements 2022
Midwich Group plc
113
FINANCIAL STATEMENTS 2. Segmental reporting continued
Sales to the largest customer
Included in revenue is £12.4m (2021: £21.5m) that arose from sales to the Group’s largest customer based in Germany.
No single customer contributed 10% or more to the Group’s revenue in any period presented.
3. Revenue
Revenue is all derived from continuing operations. The analysis of revenue by category:
Sale of goods and ancillary services
Rental of goods (operating lease income)
4. Other operating income
Promotional receipts
Other income
5. Operating profit
Operating profit is stated after charging:
Auditor’s remuneration
− audit service in relation to the Company
− audit services in relation to the subsidiaries
− audit related assurance services
− all non-audit services not covered above
Net loss/(gain) on foreign exchange
Short term lease cost
2022
£’000
2021
£’000
1,200,435
855,308
3,614
665
1,204,049
855,973
2022
£’000
5,914
59
5,973
2022
£’000
106
390
24
8
1,882
1,016
2021
£’000
5,119
56
5,175
2021
£’000
84
231
20
8
(1,026)
1,000
6. Administrative expenses
Administrative expenses in the period include £435k of acquisition related costs (2021: £486k). For details of acquisitions in the
year see note 34.
7. Directors and employees
The aggregate payroll costs of the employees were as follows:
Staff costs
Wages and salaries
Social security costs
Pension costs
2022
£’000
2021
£’000
71,085
8,705
2,329
82,119
54,392
6,786
1,571
62,749
Average monthly number of persons, including Directors, employed by the Group during the year was as follows:
By activity:
Administration
Sales and distribution
Remuneration of Directors
Remuneration
Gain on the exercise of share options
Employer contribution to defined contribution schemes
2022
Number
2021
Number
286
1,217
1,503
2022
£’000
2,450
—
—
208
887
1,095
2021
£’000
1,794
324
—
114
Midwich Group plc
Annual report and financial statements 2022
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED 7. Directors and employees continued
Emoluments of highest paid Director
Remuneration
Employer contribution to defined contribution scheme
2022
£’000
1,855
—
2021
£’000
958
—
No retirement benefits were accruing to Directors (2021: nil) under a money purchase pension scheme. During the year
108,898 (2021: 51,500) share options were granted to Directors under the Long Term Incentive Plan.
Details of key management personnel and their remuneration is disclosed within note 35. The Directors’ remuneration report
forms part of these financial statements.
8. Finance costs
Interest on overdraft and invoice discounting
Interest on leases
Interest on loans
Foreign exchange derivative costs
Other interest costs
Borrowings derivative costs
Foreign exchange losses/(gains) on borrowings for acquisitions
Interest, foreign exchange and other finance costs of deferred and contingent considerations
Interest, foreign exchange and other finance costs of put option liabilities
9. Taxation on ordinary activities
Analysis of charge
Current tax
UK corporation tax for the current year
Adjustment in respect of prior years
Total UK current tax
Overseas tax for the current year
Adjustment in respect of prior years
Total overseas current tax
Total current tax
Deferred tax
Deferred tax for the current year
Adjustment in respect of prior years
Total deferred tax
Tax on profit on ordinary activities
2022
£’000
2,221
602
2,470
733
26
2021
£’000
867
439
810
77
15
(2,888)
(1,244)
1,694
508
4,866
10,232
2022
£’000
3,614
(215)
3,399
6,054
56
6,110
9,509
(1,448)
—
(1,448)
8,061
(814)
347
1,696
2,193
2021
£’000
652
167
819
6,682
46
6,728
7,547
(2,125)
—
(2,125)
5,422
The reasons for the differences between the actual tax charge for the year and the standard rate of corporation tax in the
United Kingdom applied to profits/(losses) for the year are as follows:
Annual report and financial statements 2022
Midwich Group plc
115
FINANCIAL STATEMENTS 9. Taxation on ordinary activities continued
Reconciliation of the effective tax charge
Profit on ordinary activities before taxation
Profit on ordinary activities multiplied by the standard rate of corporation tax in the UK of 19%
(2021: 19%)
Factors affecting tax expense for the year:
Adjustment in respect of prior years
Tax losses with no available relief
Expenses not deductible for tax purposes
Effects of different tax rates in foreign jurisdictions
Effects of different tax rates in the UK
Effects of changes in tax rates in all jurisdictions
Total amount of tax
2022
£’000
24,916
2021
£’000
18,895
4,734
3,590
(159)
282
1,558
368
305
973
213
50
456
1,080
—
33
8,061
5,422
Included within expenses not deductible for tax purposes are the effects of the increases in foreign exchange losses/
(gains) on borrowings for acquisitions and interest, foreign exchange and other finance costs of put option liabilities that
are included in note 8. The foreign exchange losses/(gains) on borrowings for acquisitions have increased by £2,508k when
compared to the prior year. The interest, foreign exchange and other finance costs of put option liabilities have increased
by £3,170k when compared to the prior year. Applying the standard rate of corporation tax of 19% to the increases compared
to the prior year for these items provides an increase in the factors affecting the tax expense for the year of £1,078k, which
broadly equates to the increase in expenses not deductible for tax purposes.
The main UK Corporation tax rate for the current and prior year has remained at 19%. On 24 May 2021 the Finance Act 2021
was substantively enacted increasing the UK corporation tax rate from 19% to 25% from 1 April 2023. The increase in UK tax
rate from 19% to 25% has increased both deferred tax assets and liabilities for all UK companies within the Group.
Deferred tax
At 1 January 2021
Acquired in business combinations
Credited to income statement
Charged to equity
Foreign exchange movements
At 31 December 2021
Acquired in business combinations
Credited to income statement
Credited to equity
Foreign exchange movements
At 31 December 2022
Deferred tax asset
Deferred tax liability
Net deferred liability
Losses
available
for relief
£’000
(96)
—
96
—
—
—
—
—
—
—
—
Accelerated
capital
allowances
liabilities
£’000
7,011
81
(1,762)
—
(264)
5,066
6,096
(678)
—
92
Accelerated
capital
allowances
assets
£’000
(1,741)
—
323
—
85
Company
share
schemes
£’000
(549)
—
(782)
(61)
—
(1,333)
(1,392)
(165)
497
—
—
—
(1,267)
1,093
—
Total
£’000
4,625
81
(2,125)
(61)
(179)
2,341
5,931
(1,448)
1,093
92
10,576
(1,001)
(1,566)
8,009
2022
£’000
2,567
(10,576)
(8,009)
2021
£’000
2,725
(5,066)
(2,341)
116
Midwich Group plc
Annual report and financial statements 2022
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED 10. Earnings per share
Basic earnings per share is calculated by dividing the profit after tax attributable to equity shareholders of the Company by the
weighted average number of shares outstanding during the year. Shares outstanding is the total shares issued less the own shares
held in employee benefit trusts. Diluted earnings per share is calculated by dividing the profit after tax attributable to equity
shareholders of the Company by the weighted average number of shares in issue during the year adjusted for the effects of
all dilutive potential Ordinary Shares.
Profit attributable to equity holders of the Group (£’000)
Weighted average number of shares in issue
Potentially dilutive effect of the Group’s share option schemes
Weighted average number of diluted Ordinary Shares
Basic earnings per share
Diluted earnings per share
2022
15,293
2021
12,429
88,299,098
88,101,300
3,064,305
2,204,110
91,363,403
90,305,410
17.32p
16.74p
14.11p
13.76p
Diluted earnings per share excludes the antidilutive effects of potential Ordinary Shares that result in a decrease in the loss per share.
Annual report and financial statements 2022
Midwich Group plc
117
FINANCIAL STATEMENTS 11. Subsidiaries
The following subsidiary undertakings have been included within the consolidated financial statements and are all held
indirectly unless otherwise stated:
Country of
incorporation
% ownership held
by the Group
2022
2021
England and Wales
England and Wales
100%
100%
England and Wales
England and Wales
N/A
N/A
100%
100%
100%
100%
100%
100%
100%
100%
100%
Name
Address
Midwich Limited1
Vince's Rd, Diss IP22 4YT
Midwich Employees’
Trustees Limited
True Colours Distribution2 Limited Vince's Rd, Diss IP22 4YT
Invision UK Ltd3
Vince's Rd, Diss IP22 4YT
Vince's Rd, Diss IP22 4YT
Square One Distribution Limited Bray South Business Park, Unit 9, Killarney Rd,
Republic of Ireland
100%
Bray, Co. Wicklow, A98 D7V2
Sidev SAS
183 Av. de l'Industrie, 69143 Rillieux-la-Pape
France
Midwich Australia Pty Limited
Parklands Estate, 4/23 South St, Rydalmere NSW 2116 Australia
Midwich Limited
7a 19 Edwin Street, Mount Eden, Auckland 1024
New Zealand
Sportallee 8, 22335 Hamburg
Germany
100%
100%
100%
100%
Kern Und Stelly Medientechnik
GmbH
Holdan Limited
Midwich Iberia S.A.U.4
Brookfield House, Brookfield Industrial Estate,
Peakdale Road, Glossop SK13 6LQ
Carrer Miguel Hernández, 69, 08908
L'Hospitalet de Llobregat, Barcelona
England and Wales
100%
100%
Spain
100%
88%
Gebroeders van Domburg B.V.
Kolenbranderstraat 10, 2984 AT Ridderkerk
van Domburg Partners B.V.
Kolenbranderstraat 10, 2984 AT Ridderkerk
Transport en Opslagbedrijf
van Domburg B.V.
Kolenbranderstraat 10, 2984 AT Ridderkerk
van Domburg Services B.V.
Kolenbranderstraat 10, 2984 AT Ridderkerk
Dutch Light Pro B.V.
Kolenbranderstraat 10, 2984 AT Ridderkerk
Netherlands
Netherlands
Netherlands
Netherlands
Netherlands
Sound Technology Limited
17 Letchworth Point, Letchworth Garden City SG6 1ND England and Wales
Bauer Und Trummer GmbH
Pirnaer Strasse 20, 90411 Nuremberg
Holdan Benelux B.V.
Kolenbranderstraat 10, 2984 AT Ridderkerk
Germany
Netherlands
Blonde Robot Pty Limited5
Blonde Robot Pte Limited5
51 Goldhill Plaza, 308900
8 Theobald St, Thornbury, Melbourne, Victoria 3071 Australia
MobilePro AG
Europa-Strasse 19a, 8152 Opfikon
Midwich Asia Pte Limited
Prase Engineering SpA6
229 Mountbatten Rd, 1-19 Mountbatten Square, 398007 Singapore
Via Nobel, 10, 30020 Noventa di Piave VE
AV Partner AS
Ole Deviks v. 18, 0666 Oslo
Entertainment Equipment
Supplies SL7
Pol. Bidebitarte, Donostia Ibilbidea, 118, 20115
Astigarraga, Gipuzkoa
New Tension Inc
Starin Marketing Inc
136 Venturi Drive, Chesterton, Indiana 46304
136 Venturi Drive, Chesterton, Indiana 46304
Think Fast Holdings LLC
136 Venturi Drive, Chesterton, Indiana 46304
Singapore
Switzerland
Italy
Norway
Spain
USA
USA
USA
Midwich International Limited
Vince's Rd, Diss IP22 4YT
England and Wales
Midwich UCD B.V.
NMK Technologies Trading LLC8
NMK Electronics Trading LLC8
NMK Middle East FZE8,9
Edge Electronics Trading LLC8
Van Domburg Belgie B.V. 10
NMK International FZE11
NMK Middle East Trading LLC12
Cooper Projects Limited13
DVS Ltd13
Edge CCTV Ltd13
Nimans Limited14
Network Sales & Solutions
Limited14
Interquartz (UK) Limited14
Yealink (UK) Limited14
118
Midwich Group plc
Kolenbranderstraat 10, 2984 AT Ridderkerk
Netherlands
Showroom 2-3, Building MJ Al-Falasi, Al Quoz 1, Dubai UAE
Showroom 2-3, Building MJ Al-Falasi, Al Quoz 1, Dubai UAE
Showroom 2-3, Building MJ Al-Falasi, Al Quoz 1, Dubai UAE
Porto Holding Group Building, 2nd floor, Office 9,
C-Ring Road, Doha
Qatar
Kolenbranderstraat 10, 2984 AT Ridderkerk, Netherlands Belgium
Showroom 2-3, Building MJ Al-Falasi, Al Quoz 1, Dubai UAE
Showroom 2-3, Building MJ Al-Falasi, Al Quoz 1, Dubai UAE
Unit 3, Neptune Point, Vanguard Way, Cardiff, CF24 5PG England and Wales
Unit 3, Neptune Point, Vanguard Way, Cardiff, CF24 5PG England and Wales
Unit 3, Neptune Point, Vanguard Way, Cardiff, CF24 5PG England and Wales
Agecroft Road, Pendlebury, Manchester, M27 8SB
England and Wales
Agecroft Road, Pendlebury, Manchester, M27 8SB
England and Wales
Agecroft Road, Pendlebury, Manchester, M27 8SB
England and Wales
Agecroft Road, Pendlebury, Manchester, M27 8SB
England and Wales
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
N/A
100%
100%
100%
80%
100%
80%
80%
N/A
80%
100%
80%
80%
65%
65%
65%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
80%
100%
88%
100%
100%
100%
80%
100%
80%
80%
80%
80%
100%
80%
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Annual report and financial statements 2022
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED 11. Subsidiaries continued
1 Investments held directly by Midwich Group plc.
2 Dissolved 4 October 2022.
3 Dissolved 4 October 2022.
8 Acquired 1 January 2021. See “NMK” acquisition in note 34.
9 Dissolved 24 March 2022.
10 Incorporated 1 January 2021.
4 Acquired remaining shares on 29 April 2022. See note 33.
11 Incorporated 16 December 2021.
5 Acquired remaining shares on 13 October 2021. See note 33.
12 Incorporated 5 October 2022.
6 Acquired remaining shares on 5 July 2022. See note 33.
13 Acquired 7 January 2022. See “DVS” acquisition in note 34.
7 Company hived-up into Midwich Iberia S.A.U. on 1 January 2022.
14 Acquired 7 February 2022. See “Nimans” acquisition in note 34.
12. Goodwill
Cost
At 1 January 2021
On acquisition of NMK
On acquisition of eLink
On acquisition of Intro 2020
Foreign exchange movements
At 31 December 2021
On acquisition of DVS
On acquisition of Nimans
Foreign exchange movements
At 31 December 2022
Total
£’000
15,350
3,769
2,634
20
(610)
21,163
5,055
8,388
1,159
35,765
Allocation of goodwill to cash generating units
Goodwill is not amortised but tested for impairment annually with the recoverable amount being determined from value in use
calculations. Goodwill has been allocated for impairment testing to groups of Cash Generating Units (CGUs) for each operating
segment, as follows:
Allocation of goodwill to groups of CGUs
United Kingdom & Ireland
EMEA
Asia Pacific
North America
Other
2022
£’000
18,356
14,748
2,103
558
—
35,765
2021
£’000
4,893
13,768
2,003
499
—
21,163
The value in use calculation is based on cash flow projections from a formally approved 12-month forecast which has been
extrapolated using an individual growth rate expected for each group of CGUs over a five-year period from the reporting
date and cash flows beyond this period exclude growth. Management has concluded that there are no reasonably possible
changes in any key assumptions that would cause the carrying amount of goodwill to exceed the value in use.
Other major assumptions are as follows:
Forecast profitability assumptions
Management’s key assumptions are the achievement of the forecast profits for the 12-month period after the reporting date
and stable long-term profit margins. The 12-month forecast data is based on the most recent annual financial statements
adjusted for management’s best estimates of reasonable growth.
Growth rates
The annual growth rates used to extrapolate the approved forecast for years 2 to 5 within the value in use calculation are between
0%–2.0% (2021: 0%–2.0%). The growth rates are based on economic data for the wider economy and represent a prudent
expectation of growth.
Annual report and financial statements 2022
Midwich Group plc
119
FINANCIAL STATEMENTS 12. Goodwill continued
Discount rates
Discount rates are based on management’s assessment of the specific risks relating to the groups of CGUs within each
operating segment. The risks included with the discount factors include both systematic risks and unsystematic risks. The
discount factors vary by segment based on the country specific risk premium and the asset specific risks that are assessed
according to the expected growth in the management budgets and forecasts. Discount rates used in the value in use
calculation for assessing the recoverable amount of goodwill for each operating segment are as follows:
Operating segment
United Kingdom & Ireland
EMEA
Asia Pacific
North America
Other
2022
£’000
13.0%
12.7%
12.2%
12.0%
N/A
2021
£’000
13.6%
11.4%
11.5%
10.8%
N/A
The recoverable amounts for each operating segment’s group of CGUs exceed the carrying amounts by the following
amounts in each year assessed:
Amount by which recoverable amount exceeds carrying amount
United Kingdom & Ireland
EMEA
Asia Pacific
North America
Other
Total
2022
£’000
81,072
67,879
3,859
22,943
—
2021
£’000
70,241
82,055
7,910
11,888
—
175,753
172,094
The Directors believe that any reasonable change in the key assumptions on which recoverable amount is based would not cause
the aggregate carrying amount to exceed the aggregate recoverable amount for any of the Groups of cash-generating units.
13. Intangible assets
Cost
At 1 January 2021
On acquisition
Additions
Transfer
Disposals
Foreign exchange movements
At 31 December 2021
On acquisition
Additions
Foreign exchange movements
Assets
arising from
development
£’000
Patents and
software
£’000
Brands
£’000
Customer
relationships
£’000
Supplier
relationships
£’000
3,702
—
1,608
(216)
—
—
5,094
—
5,338
—
970
—
793
216
(333)
(41)
1,605
103
422
186
9,722
893
—
—
—
32,953
2,672
22,087
10,934
—
—
—
—
—
—
(107)
(866)
(448)
10,508
4,238
—
740
34,759
5,608
—
1,304
32,573
14,539
—
2,623
Total
£’000
69,434
14,499
2,401
—
(333)
(1,462)
84,539
24,488
5,760
4,853
At 31 December 2022
10,432
2,316
15,486
41,671
49,735
119,640
Amortisation
At 1 January 2021
Charge for year
Disposals
Foreign exchange movements
At 31 December 2021
Charge for year
Foreign exchange movements
At 31 December 2022
Net book value
At 31 December 2021
At 31 December 2022
120
Midwich Group plc
—
—
—
—
—
—
—
—
5,094
10,432
427
276
(128)
(26)
549
394
95
1,038
1,056
1,278
3,439
1,072
—
(49)
4,462
1,558
207
6,227
6,046
9,259
17,285
3,546
—
(414)
20,417
3,893
521
4,652
2,608
—
(121)
7,139
3,962
441
25,803
7,502
(128)
(610)
32,567
9,807
1,264
24,831
11,542
43,638
14,342
16,840
25,434
38,193
51,972
76,002
Annual report and financial statements 2022
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
13. Intangible assets continued
Intangible assets arising from development includes £10,432k (2021: £5,094k) relating to the development of an Enterprise
Resource Planning system. The Enterprise Resource Planning system is considered a corporate asset with cash flows derived
from the entire trading Group.
Intangible assets arising from development are tested for impairment annually with the recoverable amount being
determined from value in use calculations. The value in use calculation is based on cash flow projections from a formally
approved 12-month forecast which has been extrapolated using a 2% growth rate over a ten-year period from the reporting
date. Management has concluded that there are no reasonably possible changes in any key assumptions that would cause
the carrying amount of intangible assets arising from development to exceed the value in use. The value in use exceeded cost
by £12,407k (2021: £23,964k) using a discount rate of 8.9% (2021: 8.0%). An element of the price of uncertainty and to a
lesser extent the risk of variability over the timing of cash flows has been included in the cash flows. The discount rate does
not include risks which have been reflected in the cash flows. Therefore, the discount factor applied does not reflect the full
premium for these risks.
Included within intangible assets are £64,292k of separately identifiable intangible assets that were measured at fair value on
acquisition in business combinations. These assets have subsequently been measured at cost less accumulated amortisation.
The fair value of separately identifiable intangible assets is calculated based on the estimation of future trading performance,
royalty rates, customer attrition rates, and supplier contract renewal rates. If the estimated fair values of intangible assets on
acquisition were 10% higher or 10% lower the effect would be a decrease or increase of £941k respectively in profit before tax
for the year.
14. Right of use assets
Cost
At 1 January 2021
Additions
Disposals
Foreign exchange movements
At 31 December 2021
On acquisition
Additions
Disposals
Foreign exchange movements
At 31 December 2022
Depreciation
At 1 January 2021
Charge for year
Disposals
Foreign exchange movements
At 31 December 2021
Charge for year
Disposals
Foreign exchange movements
At 31 December 2022
Net book value
At 31 December 2021
At 31 December 2022
Land and
buildings
£’000
Rental
assets
£’000
Plant and
equipment
£’000
20,514
5,994
(1,405)
(816)
24,287
1,924
1,434
(1,069)
1,496
82
500
—
8
590
—
1,017
—
78
2,524
259
(452)
(290)
2,041
—
332
(598)
98
Total
£’000
23,120
6,753
(1,857)
(1,098)
26,918
1,924
2,783
(1,667)
1,672
28,072
1,685
1,873
31,630
4,723
2,507
(1,141)
(229)
5,860
2,993
(1,059)
596
8,390
7
113
—
—
120
449
—
21
590
18,427
19,682
470
1,095
1,288
604
(555)
(225)
1,112
514
(598)
63
1,091
929
782
6,018
3,224
(1,696)
(454)
7,092
3,956
(1,657)
680
10,071
19,826
21,559
Annual report and financial statements 2022
Midwich Group plc
121
FINANCIAL STATEMENTS 15. Property, plant and equipment
Land and
buildings
£’000
Leasehold
improvements
£’000
Rental
assets
£’000
Plant and
equipment
£’000
Cost
At 1 January 2021
On acquisition
Additions
Disposals
Foreign exchange differences
At 31 December 2021
On acquisition
Additions
Disposals
Foreign exchange differences
At 31 December 2022
Depreciation
At 1 January 2021
Charge for year
Disposals
Foreign exchange differences
At 31 December 2021
Charge for year
Disposals
Foreign exchange differences
At 31 December 2022
Net book value
At 31 December 2021
At 31 December 2022
5,058
2,597
3,375
—
57
—
(147)
4,968
—
24
—
116
—
328
(20)
(25)
2,880
190
785
(195)
61
—
717
(1,095)
—
2,997
—
1,129
(936)
—
5,108
3,721
3,190
363
80
—
(5)
438
90
—
6
534
545
314
(20)
(13)
826
357
(104)
18
2,295
708
(910)
—
2,093
684
(935)
—
1,097
1,842
4,530
4,574
2,054
2,624
904
1,348
Included in land and buildings is land at £607k (2021: £607k) that is not depreciated.
16. Inventories
Finished goods for resale
Gross inventory
Write down
Amounts of inventories recognised as an expense during the period as cost of sales (gross of
vendor rebates) are:
Total movement in inventory write down (credited)/charged for the period:
Total
£’000
18,180
97
3,558
(2,289)
(807)
18,739
752
5,328
7,150
97
2,456
(1,174)
(635)
7,894
562
3,390
(2,796)
(3,927)
805
9,855
3,771
1,467
(1,150)
(498)
3,590
1,952
982
21,874
6,974
2,569
(2,080)
(516)
6,947
3,083
(2,607)
(3,646)
505
3,440
4,304
6,415
529
6,913
11,792
14,961
2022
£’000
2021
£’000
178,668
(18,845)
159,823
2022
£’000
141,024
(15,199)
125,825
2021
£’000
1,042,095
741,636
2022
£’000
877
2021
£’000
(10,324)
During the prior year the Group experienced an economic recovery from the pandemic, which resulted in a decrease in aged
inventory and a release in the write down offset by the cost of inventory sold.
122
Midwich Group plc
Annual report and financial statements 2022
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
17. Trade and other receivables
Trade receivables
Other receivables
Prepayments
2022
£’000
193,027
6,500
19,085
218,612
2021
£’000
109,088
3,270
11,898
124,256
The Directors consider the carrying value of trade and other receivables is approximate to its fair value.
The Group incurs a small incidence of credit losses and as a result the receivables are impaired for expected credit losses.
Where management views that there is a significant risk of non-payment, an additional specific provision for impairment is
made and recognised as a deduction from receivables.
Trade receivables includes a total of £84,157k (2021: £66,077k) subject to a receivables financing agreement.
Included within prepayments and accrued income is £4k (2021: £nil) of accrued income. The accrued income arises from the
issue of sales invoices after revenue can be recognised. The revenue is recognised as the performance obligations are
satisfied over time. The performance obligations relate to the rental of products, provision of warranties and services.
I
F
I
N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S
Impairments at 1 January
Increase in impairments on acquired businesses
Increase in impairments in the year
Release of impairments against receivables written off
Foreign exchange variance
Impairments at 31 December
18. Trade and other payables
Amounts falling due within one year:
Trade payables
Other taxation and social security
Other payables
Accruals and deferred income
Amounts falling due after one year:
Trade payables
Accruals
2022
£’000
2,500
921
951
(190)
160
2021
£’000
2,906
137
321
(766)
(98)
4,342
2,500
2022
£’000
175,634
18,230
213
31,822
2021
£’000
106,376
11,907
348
23,915
225,899
142,546
2022
£’000
12
1,860
1,872
2021
£’000
—
1,418
1,418
Included within accruals and deferred income is £1,667k (2021: £991k) of deferred income. The deferred income arises from
the issue of sales invoices before the revenue can be recognised. The revenue is recognised as the performance obligations
are satisfied over time. The performance obligations relate to the rental of products, provision of warranties, and services.
All significant performance obligations for deferred income are satisfied within 12 months of the invoice date.
19. Provisions
Dilapidations provision
Defined benefit obligations (see note 29)
Agency contract severance provisions
2022
£’000
2,140
1,225
218
3,583
2021
£’000
897
1,633
166
2,696
Annual report and financial statements 2022
Midwich Group plc
123
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
19. Provisions continued
Dilapidations and other provision
Provision at 1 January
Increase in impairments on acquired businesses
Increase in provision
Amortised interest cost
Release of provision
Foreign exchange variance
Provision at 31 December
2022
£’000
2021
£’000
897
897
326
5
(27)
42
2,140
587
50
287
3
(28)
(2)
897
Dilapidations provision comprises liabilities in respect of future expected repair and restoration costs that the Group has
obligations for under the terms of lease contracts.
Agency contract severance provision
Provision at 1 January
Increase/(decrease) in provision
Foreign exchange variance
Provision at 31 December
2022
£’000
166
41
11
218
2021
£’000
171
6
(11)
166
Agency contract severance provision (“FISC”) comprises liabilities in respect of future expected agency costs that the Group
is required to settle on conclusion of the agent’s contract in accordance with the terms and conditions of the contract and as
required by statutory obligations for engaging agency workers in Italy.
20. Derivative financial instruments
Derivative financial assets/(liabilities)
Foreign currency forward contract and call options (see note 24)
Interest rate swaps (see note 24)
Net derivative financial instruments
Derivative financial assets
Derivative financial liabilities
Net derivative financial instruments
2022
£’000
(1,483)
4,630
3,147
2022
£’000
4,630
(1,483)
3,147
2021
£’000
130
362
492
2021
£’000
492
—
492
During the year the Group entered into foreign currency call options and forward exchange contracts in relation to foreign
currencies. Details of the Group’s management of foreign exchange risk are included in note 25.
21. Put option liabilities
Current
Non-current
The reconciliation of the carrying amounts of the put options is as follows:
Brought forward
Recognition of put options over non-controlling interest acquired
Subsequent remeasurement to present value
Interest cost amortised
Loss/(gain) on foreign exchange
Extinguished on acquisition of non-controlling interest
At 31 December
2022
£’000
—
15,975
15,975
2022
£’000
8,150
6,933
3,140
1,033
693
(3,974)
15,975
2021
£’000
3,863
4,287
8,150
2021
£’000
4,643
3,866
1,375
590
(269)
(2,055)
8,150
During the year the Group entered into a symmetrical put and call option contract to acquire the non-controlling interests
created by the DVS acquisition (see note 34). The non-controlling interests are due to be acquired when the put and call
options are timed to be exercised in 2024.
124
Midwich Group plc
Annual report and financial statements 2022
21. Put option liabilities continued
During the prior year the Group entered into a symmetrical put and call option contract to acquire the non-controlling interests
created by the NMK acquisition (see note 34). The non-controlling interests are due to be acquired when the put and call
options are timed to be exercised in 2024.
During 2019 the Group entered into a symmetrical put and call option contract to acquire the non-controlling interests
created by the acquisition of Prase Engineering SpA. The put and call option to acquire the non-controlling interest in Prase
Engineering SpA was exercised during the year and further detail is provided in note 33.
During 2018 the Group entered into a symmetrical put and call option contract to acquire the non-controlling interests created
by the acquisition of Blonde Robot Pty Limited. The put and call option to acquire the non-controlling interests was exercised
during the prior year and further detail is provided in note 33.
During 2017 the Group entered into symmetrical put and call option contracts to acquire the non-controlling interests that
were created by the acquisition of Earpro SA. The put and call option to acquire the non-controlling interest in Earpro SA
was exercised during the year and further detail is provided in note 33.
The classification between current and non-current liabilities is based on management’s best estimates of when the options
will be exercised.
The present value of put option liabilities is based on estimations of future trading performance. The discount factors for an
item recognised at present value are measured on initial recognition of the item. The discount factor is required to remain
constant if the amount is remeasured due to modifications in the contractual cash flows. If the estimated future trading
performance were 10% higher or 10% lower the effect would be an increase of £291k or decrease of £277k respectively in the
present value of the put option liabilities.
22. Deferred consideration
Current:
— Deferred consideration at amortised cost
— Contingent consideration
Total current deferred and contingent considerations
Non-current:
— Deferred consideration at amortised cost
— Contingent consideration
Total non-current deferred and contingent considerations
Total deferred consideration at amortised cost
Total contingent consideration
Total deferred and contingent considerations
2022
£’000
9,275
—
9,275
6,139
2,018
8,157
15,414
2,018
17,432
2021
£’000
—
466
466
—
1,468
1,468
—
1,934
1,934
During the year the Group recognised deferred considerations in respect of the DVS and Nimans acquisitions (see note 34).
Deferred considerations for both the DVS and Nimans acquisitions are due to be part settled in 2023 and fully settled in
2024.
During the prior year the Group recognised deferred consideration in respect of the NMK acquisition and contingent consideration
in respect of the eLink acquisition (see note 34). Deferred consideration in relation to the NMK acquisition was settled during
the prior year. Contingent consideration in relation to eLink acquisition is due to be settled in 2024.
During 2020 the Group recognised deferred consideration in respect of the acquisition of Statin Marketing Inc and contingent
consideration in respect of the acquisition of the trade and assets of Vantage Systems Pty Limited. Deferred consideration in
relation to the acquisition of Statin Marketing Inc was settled during the prior year. Contingent consideration in relation to the
acquisition of the trade and assets of Vantage Systems Pty Limited was settled during the year.
During 2019 the Group recognised deferred consideration in relation to the acquisition of Prase Engineering SpA. The deferred
consideration was partially settled during 2020 with the remaining deferred consideration settled during the prior year.
During 2018 the Group recognised contingent consideration in relation to the acquisition of Bauer Und Trummer GmbH,
which was settled during the prior year.
The total fair value of contingent consideration has been valued at £2,018k as at 31 December 2022 (2021: £1,934k). The final
payments depend upon the future profitability of the subsidiaries acquired.
The fair value of contingent consideration is based on estimations of future trading performance and discount factors. If the
estimated future trading performance were 10% higher or 10% lower the effect would be an increase or decrease of £91k
respectively in the fair value of the deferred contingent consideration liability.
If the estimated discount factors were 1 percentage point higher or lower the effect would be a decrease or increase of £23k
respectively in the fair value of the deferred contingent consideration liability.
Annual report and financial statements 2022
Midwich Group plc
125
FINANCIAL STATEMENTS 23. Borrowings
Secured borrowings
— Bank overdrafts and invoice discounting
— Bank loans
— Leases (see note 27)
Current
Non-current
2022
£’000
2021
£’000
47,052
74,782
23,445
145,279
44,955
100,324
145,279
30,856
42,604
20,992
94,452
34,053
60,399
94,452
Summary of borrowing arrangements
The Group has overdraft borrowings which comprised £4,917k at the end of 2022 (2021: £3,837k). The facilities are uncommitted
and secured with fixed and floating charges over the assets of the Group.
At the reporting date the Group had drawn down £42,135k (2021: £27,019k) on invoice discounting and short-term borrowing
facilities. The total amount drawn down on invoice discounting facilities was £30,352k (2021: £20,628k). The short-term borrowing
facilities are secured with floating charges over the assets of the Group. The invoice discounting facilities comprise fully revolving
receivables financing agreements which are secured on the underlying receivables. The facilities have no fixed repayment dates
and receivables are automatically offset against the outstanding amounts of the facility on settlement of the receivable. The Group
retains the credit risk associated with the receivables. Invoice discounting arrangements included within acquisitions completed
during the year totalled £3,968k.
At the reporting date the Group had drawn down £74,782k (2021: £42,604k) of its long-term loan facilities. The loans are
secured with fixed and floating charges over the assets of the Group. The Group is subject to covenants under its Revolving
Credit Facility and if the Group defaults under these covenants, it may not be able to meet its payment obligations.
The Group has lease liabilities of £23,445k at the end of 2022 (2021: £20,992k). Lease obligations included within acquisitions
completed during the year totalled £2,720k. There were no lease obligations included within acquisitions in the prior year.
For details of leases please refer to note 27.
Borrowings
Borrowings due within 1 year
Borrowings due after 1 year
Leases (see note 27)
Reconciliation of liabilities arising from financing activities
At 1 January
Cash flows:
Invoice financing inflows/(outflows)
Proceeds from borrowings
Repayment of loans
Capital element of leases
Non-cash:
Acquisitions
New liabilities arising on leases
Disposals on modification or termination of leases
Foreign exchange gain or loss
At 31 December
2022
£’000
40,900
80,934
23,445
145,279
2022
£’000
94,452
14,282
32,384
(4,947)
(4,126)
6,689
2,783
(10)
3,772
2021
£’000
30,900
42,560
20,992
94,452
2021
£’000
64,764
6,261
25,369
(4,660)
(3,072)
—
6,753
(297)
(666)
145,279
94,452
126
Midwich Group plc
Annual report and financial statements 2022
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED I
F
I
N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S
24. Financial instruments
Classification of financial instruments
The fair value hierarchy allocates financial assets and liabilities to groups according to three levels based on the significance
of inputs used in measuring the fair value of the financial assets and liabilities.
The fair value hierarchy has the following levels:
— Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;
— Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly
(i.e. as prices) or indirectly (i.e. derived from prices); and
— Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
The level within which the financial asset or liability is classified is determined based on the lowest level of significant input to the fair
value measurement. There were no transfers between Level 1 and Level 2 of the fair value hierarchy during the year (2021: none).
Financial instruments measured at fair value through profit or loss comprise interest forward contracts and contingent consideration.
As at 31 December 2022 the Group had interest rate swaps and foreign exchange options which were measured at fair value.
The valuation of the interest rate swap and foreign exchange options contracts is based on observable inputs other than
quoted prices and hence is a Level 2 valuation.
The contingent consideration in relation to the acquisition of eLink (see note 22) has been measured at fair value. The valuation
of the contingent consideration is based on unobservable inputs and hence is a Level 3 valuation. The fair value has been calculated
using the expected present value technique using a discount factor based on the risk-free rate that has been adjusted to include
systematic risk. A discount factor of 10.4% has been applied to probability weighted cash flows that are not certainty-equivalent
because they have not been adjusted to exclude systematic risk.
The contingent consideration in relation to the acquisition of the trade and assets of Vantage Systems Pty Limited in 2020
was measured at fair value. The present value was calculated using the discount rate adjustment technique using a discount
rate derived from market data for comparable assets. The discount rate of 15.5% was applied to the most likely cash flows.
Put option liabilities over the remaining non-controlling interests that arose in the NMK acquisition (see note 34) and the
acquisitions Prase Engineering SpA in 2019 and Earpro SA in 2017 were initially measured at present value.
A discount factor of 2.5% was applied to certainty equivalent cash flows that were adjusted to exclude systematic risk to discount
the put option liability over the non-controlling interest for the acquisition of Prase Engineering SpA. Discount factors of 9.4% and
10.2% were applied to the most likely cash flows to calculate the put option liabilities over the non-controlling interests of Earpro
SA and the NMK acquisition respectively.
Put option liabilities over non-controlling interests are subsequently measured at amortised cost using the effective interest
method. However, when contractual cash flows relating to the put option are modified the put option liability is remeasured
at present value using the original effective interest rate. Due to modifications in the contractual cash flows the put option
liabilities were subsequently remeasured to present value at the year end.
During the year the Group exercised put and call options in relation to Prase Engineering SpA and Earpro SA to acquire the
remaining non-controlling interest (see note 33). During the prior year the Group exercised the put and call option in relation
to Blonde Robot Pty Limited to acquire the remaining non-controlling interest (see note 33).
The expected cash flows in relation to the put option liabilities are provided in note 25. The maximum amount payable under
all put option liabilities over non-controlling interests is £30,518k (2021: £18,518k).
The contracts for put options over non-controlling interest state they are to be settled in cash and the amounts vary depending
upon the results of the acquired subsidiary.
The tables below set out the Group’s accounting classification of each class of its financial assets and liabilities.
Financial assets
Financial assets at amortised cost
Trade and other receivables (note 17)
Cash and cash equivalents
2022
£’000
199,527
25,855
225,382
2021
£’000
112,358
15,476
127,834
All of the above financial assets’ carrying values are approximate to their fair values, as at each reporting date disclosed.
Annual report and financial statements 2022
Midwich Group plc
127
24. Financial instruments continued
Financial assets continued
Financial assets at fair value through profit or loss
Derivative financial instruments (note 20)
Financial liabilities at amortised cost
Trade and other payables (note 18)
Accruals (note 18)
Lease payables (note 27)
Put option liabilities (note 21)
Bank loans, overdrafts and invoice discounting (note 23)
Deferred consideration (note 22)
2022
£’000
4,630
2022
£’000
175,859
33,682
23,445
15,975
121,834
15,414
2021
£’000
492
2021
£’000
106,724
25,333
20,992
8,150
73,460
—
386,209
234,659
All of the above financial liabilities’ carrying values are considered by management to be approximate to their fair values,
as at each reporting date disclosed.
Financial liabilities at fair value through profit or loss
Derivative financial instruments (note 20)
Contingent consideration
Contingent consideration (note 22)
2022
£’000
1,483
2022
£’000
2,018
2021
£’000
—
2021
£’000
1,934
25. Financial instrument risk exposure and management
The Group’s operations expose it to degrees of financial risk that include liquidity risk, credit risk, interest rate risk, and foreign
currency risk.
This note describes the Group’s objectives, policies and process for managing those risks and the methods used to measure
them. Further quantitative information in respect of these risks is presented in notes 17 to 24.
Credit risk
The Group’s credit risk is primarily attributable to its cash balances and trade receivables. The Group does not have a significant
concentration of risk, with exposure diversified over a substantial number of third parties. The risk is further mitigated by insurance
of the trade receivables. Some specifically identified receivables have been provided for at 100%.
The credit risk on liquid funds is limited because the third parties are large international banks with a credit rating of at least A.
The Group’s total credit risk amounts to the total of the sum of the trade receivables and cash and cash equivalents. At 31 December
2022 total credit risk amounted to £216,735k (2021: £124,564k).
Interest rate risk
The interest on the Group’s overdrafts, invoice discounting facilities and Revolving Credit Facility borrowings are variable. Since
2019 the Group has entered into interest rate swap contracts in respect of the Group’s variable interest rates in order to achieve
a fixed rate of interest. Rising interest rates present an increased cash flow risk associated with the high cost of servicing debt.
Rising interest rates also increase the finance costs of working capital. The Group manages the increased cost of working capital
by focusing on profitability margins and working capital arrangements of the business.
128
Midwich Group plc
Annual report and financial statements 2022
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED 25. Financial instrument risk exposure and management continued
Foreign exchange risk
The Group is largely able to manage the exchange rate risk arising from operations through the natural matching of payments
and receipts denominated in the same currencies. Any exposure tends to be on the payment side and is mainly in relation to
the Sterling strength relative to the Euro or US Dollar. This transactional risk is considered manageable as the proportion of
Group procurement that is not sourced in local currency is small. However, on occasions the Group does buy foreign currency
call options and forward contracts to mitigate this risk.
The Group holds certain borrowings in the currencies of foreign acquired operations to reduce the Group’s exposure to fluctuations
in the value of foreign currencies that have a negative effect on the value of foreign operations. The Group does not adopt
hedge accounting and recognises gains and losses on foreign exchange in both the income statement and translation reserve.
The total value of borrowings held in foreign currencies by companies whose functional currency is GBP relating to overseas
acquired operations is as follows:
EUR
AUD
USD
2022
£’000
20,578
—
17,600
2021
£’000
17,574
3,925
15,722
At the reporting date the Group was in the process of renewing its borrowing facilities and repaid the AUD borrowing facility
relating to the overseas operations in the APAC segment for renewal. A 10% increase or decrease in the strength of sterling
against all borrowings held in foreign currencies by companies whose functional currency is GBP would increase or decrease
profit before tax by £3,818k (2021: £3,722k).
The Group reports in Pounds Sterling (GBP) but has significant revenues and costs as well as assets and liabilities that are
denominated in Euros (EUR), Dollars (USD) and Australian Dollars (AUD). The table below sets out the exchange rates in the
periods reported.
EUR/GBP
AUD/GBP
NZD/GBP
USD/GBP
CHF/GBP
NOK/GBP
AED/GBP
QAR/GBP
Annual average
Year end
2022
1.170
1.777
1.946
1.231
1.173
11.832
4.525
4.485
2021
1.166
1.839
1.950
1.374
1.257
11.864
5.049
5.004
2022
1.128
1.771
1.897
1.204
1.111
11.846
4.435
4.396
2021
1.191
1.859
1.973
1.348
1.231
11.893
4.971
4.927
The following tables illustrate the effect of changes in foreign exchange rates in the EUR, AUD, NZD, USD, CHF, and NOK relative
to the GBP on the profit before tax and net assets. The amounts are calculated retrospectively by applying the current year
exchange rates to the prior year results so that the current year exchange rates are applied consistently across both periods.
Changing the comparative result illustrates the effect of changes in foreign exchange rates relative to the current year result.
Applying the current year exchange rates to the results of the prior year has the following effect on profit before tax and net assets:
Profit/(loss) before tax
EUR
AUD
NZD
USD
CHF
NOK
AED
QAR
All currencies
2021
£’000
18,895
18,895
18,895
18,895
18,895
18,895
18,895
18,895
18,895
Revised
2021
£’000
18,774
18,899
18,895
19,261
18,875
18,896
19,268
19,008
19,611
Impact
£’000
(121)
4
—
366
(20)
1
373
113
716
Impact
%
(0.6)%
0.0%
0.0%
1.9%
(0.1)%
0.0%
1.9%
0.6%
3.7%
Annual report and financial statements 2022
Midwich Group plc
129
FINANCIAL STATEMENTS 25. Financial instrument risk exposure and management continued
Net assets
EUR
AUD
NZD
USD
CHF
NOK
AED
QAR
All currencies
2021
£’000
114,396
114,396
114,396
114,396
114,396
114,396
114,396
114,396
114,396
Revised
2021
£’000
117,541
114,514
114,408
115,604
114,352
114,404
115,252
114,627
119,930
Impact
£’000
3,145
118
12
1,208
(44)
8
856
231
5,534
Impact
%
2.7%
0.1%
0.0%
1.0%
(0.0)%
0.0%
0.7%
0.2%
4.6%
Liquidity risk
Prudent liquidity risk management includes maintaining sufficient cash balances to ensure the Group can meet liabilities as they
fall due, and ensuring adequate working capital using bank borrowing arrangements.
In managing liquidity risk, the main objective of the Group is therefore to ensure that it has the ability to pay all of its liabilities
as they fall due. The Group monitors its levels of working capital to ensure that it can meet its liability payments as they fall due.
See note 23 for details of borrowing arrangements.
The tables below show the undiscounted cash flows on the Group’s financial liabilities as at 31 December 2022 and 2021,
on the basis of their earliest possible contractual maturity:
At 31 December 2022
Trade payables
Other payables
Deferred consideration
Put option liabilities
Leases
Accruals
Bank overdrafts, loans
and invoice discounting
At 31 December 2021
Trade payables
Other payables
Deferred consideration
Put option liabilities
Leases
Accruals
Bank overdrafts, loans
and invoice discounting
Total
£’000
175,646
213
17,902
17,499
25,817
33,682
Within
2 months
£’000
167,753
153
3,800
—
764
26,277
Within
2–6 months
£’000
Between
6–12 months
£’000
Between
1–2 years
£’000
After than
2 years
£’000
7,878
53
5,500
—
1,602
4,488
3
7
—
—
2,263
1,057
—
—
8,602
17,499
4,120
191
121,834
39,901
531
468
72,970
392,593
238,648
20,052
3,798
103,382
12
—
—
—
17,068
1,669
7,964
26,713
Within
2 months
£’000
96,167
Within
2–6 months
£’000
10,209
Total
£’000
106,376
348
2,372
9,234
23,107
25,333
321
—
—
635
20,980
73,460
28,273
240,230
146,376
Between
6–12 months
£’000
Between
1–2 years
£’000
After than
2 years
£’000
—
—
538
—
1,752
349
1,125
3,764
—
—
—
—
3,048
23
1,967
5,038
—
—
1,834
5,331
16,481
1,395
40,593
65,634
27
—
3,903
1,191
2,586
1,502
19,418
130
Midwich Group plc
Annual report and financial statements 2022
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED 26. Capital management
The Group’s capital management objectives are:
— to ensure the Group’s ability to continue as a going concern; and
— to provide long-term returns to shareholders.
The Group defines and monitors capital based on the carrying amount of equity plus its outstanding loan notes, less cash and
cash equivalents as presented on the face of the statement of financial position and as follows:
Equity
Borrowings
Cash and cash equivalents
2022
£’000
120,736
145,279
(25,855)
2021
£’000
105,120
94,452
(15,476)
240,160
184,096
The Board of Directors monitors the level of capital as compared to the Group’s commitments and adjusts the level of capital
as is determined to be necessary by issuing new shares or adjusting the level of debt. The Group is not subject to any externally
imposed capital requirements.
27. Leases
Lease liabilities minimum lease payments
Not later than one year
Later than one year and not later than five years
Less: future finance charges
Present value of minimum lease payments
Lease liabilities are included in liabilities
Current
Non-current
2022
£’000
4,629
21,188
25,817
(2,372)
2021
£’000
3,578
19,529
23,107
(2,115)
23,445
20,992
2022
£’000
4,055
19,390
23,445
2021
£’000
3,153
17,839
20,992
The Group classifies its right of use assets associated with lease liabilities consistently with its classification of property, plant,
and equipment. The Group has leases in respect of land and buildings, plant and machinery, and rental assets. Leases in respect
of land and buildings relate to sales offices and warehouses and leases in respect and plant and machinery relate to motor vehicles.
Leases in respect of rental assets relate to products that are held for use by the Group to generate rental income under operating leases.
28. Guarantees and other financial commitments
The Group has provided a cross guarantee to HSBC Bank plc in respect of borrowings due by companies within the Group
headed by Midwich Group plc. The liabilities covered by these guarantees at the year end were £108,562k (2021: £67,859k).
29. Retirement benefit plans
The Group contributes to several retirement benefit pension schemes according to service contracts of employees working in
the various countries in which the Group operates. The retirement benefit pension schemes include both defined contribution
and defined benefit pension schemes.
Defined contribution retirement benefit pension schemes
Most of the Group’s retirement benefits are provided in the form of defined contribution pension schemes. The Group
contributions to these schemes are charged as an expense to the consolidated income statement as they fall due.
The assets of these schemes are held separately from those of the Group in independently administered funds.
Expenses for retirement benefit pension schemes recognised as defined contribution schemes are as follows:
Defined contribution pension schemes expense
2022
£’000
2,116
2021
£’000
1,545
Annual report and financial statements 2022
Midwich Group plc
131
FINANCIAL STATEMENTS 29. Retirement benefit plans
Defined benefit retirement obligations
The Group participates in the “Pensioenfonds Vervoer”, an industry-wide pension fund in the Netherlands, “Swiss Life”, a
defined benefit pension scheme in Switzerland, and has statutory obligations to pay employee severance in Italy, UAE and
Qatar, which are recognised as defined benefit obligations.
Pensioenfonds Vervoer is a defined benefit pension scheme offering beneficiaries an average wage retirement benefit plan.
The investment risk is shared collectively among the members of the scheme and the employers. The employer is only required
to make a fixed contribution for current employees. Fixed contributions could be increased or decreased in future but it is
legally prohibited for the pension fund to require any additional contribution in excess of the fixed contributions. Equally the
Group has no claim to any excess pension scheme assets. The Group has accounted for the pension scheme as a defined
contribution pension scheme because the records of the industry-wide pension fund are not able to provide the sufficient
satisfactory information to enable reporting a defined benefit pension scheme.
Swiss Life is a defined benefit pension scheme offering beneficiaries an average wage retirement benefit plan. The scheme is
funded by payments to an independently managed fund. Contributions are calculated by qualified actuaries using projected unit
credit method valuations and are charged to the income statement. The liabilities of the scheme are measured by discounting the
future cash flows to participants estimated by actuaries using the projected unit credit method. Changes in the value of
assets and liabilities in the scheme excluding contributions charged to the income statement are recognised in other
comprehensive income.
Employee severance is payable to employees in Italy under a scheme called TFR. In addition to TFR there are also amounts payable
to Directors under a scheme called TFM. In the UAE and Qatar gratuity benefits are provided to employees as an end of service
benefit.
The obligations for TFR, TFM and gratuity benefits are recognised as defined benefit obligations in accordance with IAS 19.
Defined benefit retirement obligations
Present value of defined benefit pension obligations
Fair value of plan assets
Net defined benefit pension liability
At 1 January 2022
Service cost
Current service cost
Past service cost
Net interest
Interest income on plan assets
Interest cost on defined benefit obligation
Total defined benefit cost recognised in income statement
Cash flows
Plan participants’ contributions
Employer contributions
Benefits paid
Unfunded benefits paid
Expected closing position
Remeasurements
Changes in demographic assumptions
Changes in financial assumptions
Other experience
Return on assets excluding amounts included in net interest
Foreign exchange gain/(loss) recognised in translation reserve
Total remeasurements recognised in other comprehensive income
2022
£’000
(3,003)
1,778
(1,225)
2021
£’000
(3,027)
1,394
(1,633)
Defined
benefit
obligation
£’000
Fair value
of plan
assets
£’000
Net defined
benefit
liability
£’000
(3,027)
1,394
(1,633)
(289)
29
(260)
—
(21)
(21)
(281)
(96)
—
(52)
144
—
—
—
5
—
5
5
96
86
52
—
(289)
29
(260)
5
(21)
(16)
(276)
—
86
—
144
(3,312)
1,633
(1,679)
29
712
(153)
—
(279)
309
—
—
—
(17)
162
145
29
712
(153)
(17)
(117)
454
At 31 December 2022
(3,003)
1,778
(1,225)
132
Midwich Group plc
Annual report and financial statements 2022
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED 29. Retirement benefit plans continued
Defined benefit retirement obligations continued
At 1 January 2021
On acquisition
Service cost
Current service cost
Past service cost
Net interest
Interest income on plan assets
Interest cost on defined benefit obligation
Total defined benefit cost recognised in income statement
Cash flows
Plan participants’ contributions
Employer contributions
Benefits paid
Unfunded benefits paid
Expected closing position
Remeasurements
Changes in demographic assumptions
Changes in financial assumptions
Other experience
Return on assets excluding amounts included in net interest
Foreign exchange gain/(loss) recognised in translation reserve
Total remeasurements recognised in other comprehensive income
At 31 December 2021
Plan assets
Cash and cash equivalents
Insurance contracts with a quoted market price
Actuarial assumptions
Salary increase rate
Discount rate
Inflation rate
Life expectancy
Defined
benefit
obligation
£’000
(3,083)
(319)
(284)
115
(169)
—
(12)
(12)
(181)
(81)
—
246
11
(3,407)
111
83
79
—
107
380
Fair value
of plan
assets
£’000
1,538
—
—
—
—
3
—
3
3
81
76
(246)
—
1,452
—
—
—
(20)
(38)
(58)
Net defined
benefit
liability
£’000
(1,545)
(319)
(284)
115
(169)
3
(12)
(9)
(178)
—
76
—
11
(1,955)
111
83
79
(20)
69
322
(3,027)
1,394
(1,633)
2022
£’000
—
1,778
1,778
2022
£’000
0.5-3.0%
2.3-5.3%
1.5-3.0%
2021
£’000
—
1,394
1,394
2021
£’000
2.0–3.0%
0.3–2.3%
0.8–3.0%
BVG 2020
BVG 2020
Sensitivity analysis
The defined benefit obligation would increase/(decrease) by the following amounts due to the respective changes in the
following actuarial assumptions:
0.5% increase in discount rate
0.5% decrease in discount rate
0.5% increase in salary increase rate
0.5% decrease in salary increase rate
2022
£’000
(148)
169
40
(38)
2021
£’000
(198)
229
49
(46)
Annual report and financial statements 2022
Midwich Group plc
133
FINANCIAL STATEMENTS 29. Retirement benefit plans continued
Funding
The total amount of contributions expected to be paid during the financial year ending 31 December 2023 is £336k.
30. Share capital
The total allotted share capital of the Parent Company is:
Allotted, issued and fully paid
Issued and fully paid Ordinary Shares of £0.01 each
At 1 January
Shares issued
At 31 December
2022
2021
Number
£’000
Number
£’000
88,735,612
144,300
88,879,912
887
2
889
88,604,712
130,900
88,735,612
886
1
887
During the year the Company issued 144,300 shares to the Group’s employee benefit trusts (2021: 130,900).
Employee benefit trust
The Group’s employee benefit trusts were allocated the following shares to be issued on exercise of share options:
At 1 January
Allocated during the year
Shares issued on exercise of options
At 31 December
2022
2021
Number
£’000
Number
£’000
518,300
144,300
(161,140)
501,460
5
2
(2)
5
593,600
130,900
(206,200)
518,300
6
1
(2)
5
31. Other reserves
Movement in other reserves for the year ended 31 December 2022
Share based
payment
reserve
£’000
Translation
reserve
£’000
Put option
reserve
£’000
Capital
redemption
reserve
£’000
Balance at 1 January 2022
Other comprehensive income
Total comprehensive income for the year
Share based payments
Deferred tax on share based payments
Share options exercised
Acquisition of subsidiary (note 34)
Acquisition of non-controlling interest
(note 33)
7,879
(2,182)
(7,784)
—
—
6,006
(1,093)
(767)
—
—
7,538
7,538
—
—
—
—
—
—
—
—
—
—
(6,933)
3,918
Balance at 31 December 2022
12,025
5,356
(10,799)
Movement in other reserves for the year ended 31 December 2021
Balance at 1 January 2021
Other comprehensive income
Total comprehensive income for
the year
Share based payments
Deferred tax on share based payments
Share options exercised
Acquisition of subsidiary (note 34)
Acquisition of non-controlling interest
(note 33)
Share based
payment
reserve
£’000
4,472
—
—
4,398
61
(1,052)
—
—
Translation
reserve
£’000
2,117
(4,299)
(4,299)
—
—
—
—
—
Put option
reserve
£’000
(4,813)
—
—
—
—
—
(3,866)
895
Balance at 31 December 2021
7,879
(2,182)
(7,784)
50
—
—
—
—
—
—
—
50
Capital
redemption
reserve
£’000
50
—
—
—
—
—
—
—
50
Other
reserve
£’000
150
—
—
—
—
—
—
—
150
Other
reserve
£’000
150
—
—
—
—
—
—
—
Total
£’000
(1,887)
7,538
7,538
6,006
(1,093)
(767)
(6,933)
3,918
6,782
Total
£’000
1,976
(4,299)
(4,299)
4,398
61
(1,052)
(3,866)
895
150
(1,887)
134
Midwich Group plc
Annual report and financial statements 2022
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED 32. Share based payments
The Group operates two share option plans, the Long Term Incentive Plan (“LTIP”) and the Share Incentive Plan (“SIP”). The Group has
made a grant under each plan during the year and made three awards under the LTIP and one award under the SIP in the prior year.
Share Incentive Plan
The Group operates a SIP to which the employees of the Group may be invited to participate by the Remuneration Committee.
Under the SIP, free shares granted to employees are issued and held in trust in during a conditional vesting period. The SIP
shares vest 3 years after the date of grant. The SIP share are settled in equity once exercised.
Long Term Incentive Plan
The Group also operates an LTIP to which the employees of the Group may be invited to participate by the Remuneration Committee.
Options issued under the LTIP are exercisable at £0.01 per share but the Group has the option to provide an exemption for this payment.
The options vest 3 years after the date of grant, subject to certain service and non-market performance conditions. The Group has the
option to require an extended holding period in relation to specific options. The options are settled in equity once exercised except
for options issued to employees in certain jurisdictions where settlement in equity is prohibited. For options issued to employees
in jurisdictions in which settlement in equity is prohibited the options are issued on the same basis except they are settled in cash.
If the options remain unexercised after a period of 10 years from the date of grant, the options expire. Options are forfeited
if the employee leaves the Group before the options vest.
LTIP options and SIP shares were valued using the Black-Scholes option-pricing model. The fair value of the 2022 Options
granted and the assumptions used in the calculation are as follows:
Date of grant
Number granted
Share price at date of grant (£)
Exercise price (£)
Expected volatility
Expected life (years)
Risk free rate
Expected dividend yield excluded from option
Fair value at date of grant
Earliest vesting date
Expiry date
LTIP
SIP
21 Jun 2022
8 Apr 2022
1,017,141
106,800
£5.96
£0.01
18.1%
1.5-2.75
1.53%
2.7%
£6.32
—
18.1%
3
1.18%
0.0%
£4,919,088
£482,083
1 Jan 2024
8 Apr 2025
21 Jun 2032
8 Apr 2032
Included within the LTIP issue in 2022 are 13,000 options issued to employees in jurisdictions where settlement in equity is
prohibited and the options will be settled in cash.
LTIP options and SIP shares were valued using the Black-Scholes option-pricing model. The fair value of the 2021 Options
granted and the assumptions used in the calculation are as follows:
Date of grant
Number granted
Share price at date of grant (£)
Exercise price (£)
Expected volatility
Expected life (years)
Risk free rate
Expected dividend yield excluded from option
Fair value at date of grant
Earliest vesting date
Expiry date
LTIP
SIP
5 Jul 2021
3 Jun 2021
812,700
£5.89
£0.01
17.7%
3–5
0.02%
2.7%
111,900
£5.14
—
17.7%
3
0.02%
0.0%
£3,713,918
£405,484
31 Mar 2024
3 Jun 2024
5 Jul 2031
3 Jun 2031
Included within the LTIP issue in 2021 are 18,000 options issued to employees in jurisdictions where settlement in equity is
prohibited and the options will be settled in cash.
The expected volatility is based on the volatility of similar companies in the industry. The expected life is the average expected period to
exercise. The risk-free rate of return is the yield on zero-coupon UK government bonds of a term consistent with the assumed option life.
The Group recognised total expenses of £6,006k (2021: £4,398k) related to equity-settled share based payment transactions.
In addition to equity settled share based payment transactions the Group recognised £25k (2021: £18k) related to cash-settled
share based payment transactions and £176k (2021: £904k) related to employer taxes on share options for the above schemes
during the year.
Annual report and financial statements 2022
Midwich Group plc
135
FINANCIAL STATEMENTS 32. Share based payments continued
Long Term Incentive Plan continued
A reconciliation of LTIP option movements over the current and prior year excluding any options to be settled in cash is shown below:
Outstanding at start of year
Granted
Lapsed
Exercised
Outstanding at end of year
Weighted average remaining contractual life
As at 31 December 2022
As at 31 December 2021
Number
of LTIP
options
Weighted
average
exercise price
Number
of LTIP
options
Weighted
average
exercise price
3,284,374
1,004,141
(89,458)
(83,740)
4,115,317
3.0 years
0.01
0.01
0.01
0.01
0.01
2,691,676
794,700
(61,202)
(140,800)
3,284,374
2.6 years
0.01
0.01
0.01
0.01
0.01
A reconciliation of SIP movements over the current and prior year is shown below:
Outstanding at 1 January
Granted
Lapsed
Exercised
Outstanding at 31 December
Weighted average remaining contractual life
As at 31 December 2022
As at 31 December 2021
Number
of SIP
shares
Weighted
average
exercise price
Number
of SIP
shares
Weighted
average
exercise price
267,900
106,800
(16,500)
(77,400)
280,800
3.6 years
—
—
—
—
—
254,700
111,900
(33,300)
(65,400)
267,900
2.7 years
—
—
—
—
—
As at the year end there were 167,000 (2021: 199,500) equity settled share options that had vested and had yet to be exercised.
33. Acquisition of non-controlling interest
During the current year the Group acquired the remaining 12% non-controlling interest in Earpro SA and the remaining 20%
non-controlling interest in Prase Engineering SpA. The non-controlling interest in Earpro SA had a value of £1,309k and was
acquired for a consideration of £1,062k. The non-controlling interest in Prase Engineering SpA had a value of £3,808k and
was acquired for a consideration of £2,912k. £1,033k of the put option reserve was transferred to retained earnings when the
Earpro SA element of the put option was extinguished and £2,885k of the put option reserve was transferred to retained
earnings when the Prase Engineering SpA element of the put option was extinguished.
During the prior year the Group acquired the remaining 35.0% non-controlling interest in Blonde Robot Pty Limited, which
had a value of £1,371k, for a consideration of £2,055k. £895k of the put option reserve was transferred to retained earnings
when this element of the put option was extinguished.
34. Business combinations
Acquisitions have been completed by the Group to increase scale, broaden its addressable market and widen the product offering.
Subsidiaries acquired
Acquisition1
Principal activity
Date of
acquisition
Proportion
acquired (%)
Fair value of
consideration
£’000
Nimans
DVS
NMK
Distribution of audio visual products and telephone
network services
7 February 2022
Distribution of audio visual and security products to trade
customers
7 January 2022
100%
27,271
65%
12,877
Distribution of audio visual products to trade customers
1 January 2021
80%
15,463
1 See note 11 for details of companies acquired during the current and prior year.
136
Midwich Group plc
Annual report and financial statements 2022
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED 34. Business combinations continued
Trade and assets acquired
In addition to the acquisition of subsidiaries listed above during 2021 the Group also acquired trade and assets from eLink Distribution
AG (“eLink”), a company registered in Germany and Intro 2020 Limited (“Intro 2020”), a company registered in England and Wales.
Fair value of consideration transferred 2022
Cash
Deferred consideration
Total
DVS
£’000
8,580
4,297
12,877
Nimans
£’000
16,500
10,771
27,271
Acquisition costs of £376k were expensed to the income statement during the year in relation to the acquisition of DVS and
Nimans. £59k of acquisition costs were expensed to the income statement during the year in relation to acquisitions not
completed by the reporting date.
Fair value of acquisitions 2022
Non-current assets
Goodwill
Intangible assets – patents and software
Intangible assets – brands
Intangible assets – customer relationships
Intangible assets – supplier relationships
Right of use assets
Property, plant and equipment
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Current liabilities
Trade and other payables
Borrowings and financial liabilities
Current tax
Non-current liabilities
Borrowings and financial liabilities
Deferred tax
Other provisions
Non-controlling interests
Fair value of net assets acquired attributable to equity shareholders of the
Parent Company
DVS
£’000
5,055
103
1,288
799
5,948
314
242
Nimans
£’000
8,388
—
2,950
4,809
8,591
1,610
510
13,749
26,858
6,513
7,841
643
14,997
11,815
15,861
2,065
29,741
(2,297)
(22,308)
(4,119)
(142)
(275)
—
(6,558)
(22,583)
(256)
(2,057)
(65)
(2,378)
(6,933)
(2,039)
(3,874)
(832)
(6,745)
—
12,877
27,271
Goodwill acquired in 2022 relates to the workforce, synergies, sales and purchasing knowledge and experience. Goodwill arising
on the DVS and Nimans acquisitions has been allocated to the UK and Ireland segment.
Net cash outflows of acquisitions 2022
Consideration paid in cash
Less: cash and cash equivalent balances acquired
Net cash outflow
Plus: borrowings acquired
Net debt outflow
DVS
£’000
8,580
(643)
7,937
4,375
12,312
Nimans
£’000
16,500
(2,065)
14,435
2,314
16,749
Annual report and financial statements 2022
Midwich Group plc
137
FINANCIAL STATEMENTS 34. Business combinations continued
Post-acquisition contribution 2022
Acquired subsidiaries made the following contributions to the Group’s results for the year in which they were acquired, from
their respective acquisition dates:
Date acquired
Post-acquisition contribution to Group revenue
Post-acquisition contribution to Group profit after tax
DVS
£’000
7 Jan
38,600
762
Nimans
£’000
7 Feb
115,055
4,245
Proforma full year contribution 2022
Acquired subsidiaries would have made the following contributions to the Group’s results for the year in which they were
acquired if they were acquired on 1 January 2022:
Date acquired
Post-acquisition contribution to Group revenue1
Post-acquisition contribution to Group profit after tax1
DVS
£’000
7 Jan
38,600
762
Nimans
£’000
7 Feb
125,703
4,738
As the acquisition of DVS occurred on 7 January 2022 the acquired subsidiary made a full year contribution to the Group’s results
for the year. The revenue and profit after tax1 for the Group would have been no different if the DVS were acquired earlier.
1
These amounts have been calculated using the results of subsidiaries and adjusting them for differences between the accounting policies and Generally Accepted
Accounting Principles applicable to the subsidiaries and the accounting policies and IAS reporting requirements of the Group. The translation adjustments to
modify the reported results of the subsidiaries have been applied as if the Group’s accounting policies and IAS reporting requirements had always been applied.
The translation adjustments include the additional depreciation and amortisation charges relating to the fair value adjustments to property, plant and equipment
and intangible assets assuming the fair values recognised on acquisition were valid on 1 January 2021, together with the consequential tax effects.
Fair value of consideration transferred 2021
Cash
Deferred contingent consideration
Total
NMK
£’000
11,350
4,113
15,463
eLink
£’000
7,441
1,334
8,775
Intro 2020
£’000
702
—
702
Acquisition costs of £53k in relation to the acquisition of NMK, £29k in relation to the eLink acquisition of trade and assets, £199k in
relation to the Intro 2020 acquisition of trade and assets, and £205k in relation to acquisitions not completed by the year end were
expensed to the income statement during the year ended 31 December 2021.
Fair value of acquisitions 2021
Non-current assets
Goodwill
Intangible assets – brands
Intangible assets – customer relationships
Intangible assets – supplier relationships
Property, plant and equipment
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Current liabilities
Trade and other payables
Non-current liabilities
Deferred tax
Other provisions
Non-controlling interests
NMK
£’000
3,769
721
1,700
8,289
77
14,556
2,325
4,673
2,657
9,655
(4,432)
(4,432)
(81)
(369)
(450)
(3,866)
eLink
£’000
2,634
172
972
2,197
—
5,975
2,800
—
—
2,800
—
—
—
—
—
—
Intro 2020
£’000
20
—
—
448
20
488
209
28
—
237
(23)
(23)
—
—
—
—
Fair value of net assets acquired attributable to equity shareholders
of the Parent Company
15,463
8,775
702
138
Midwich Group plc
Annual report and financial statements 2022
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED 34. Business combinations continued
Goodwill acquired in 2021 relates to the workforce, synergies and sales know how. Goodwill arising on the NMK acquisition and
eLink acquisition of trade and assets has been allocated to the EMEA segment. Goodwill arising on the Intro 2020 acquisition of
trade and assets has been allocated to the United Kingdom and Ireland segment.
Net cash outflows of acquisitions 2021
Consideration paid in cash
Less: cash and cash equivalent balances acquired
Net cash outflow
Plus: borrowings acquired
Net debt outflow
NMK
£’000
11,350
(2,657)
8,693
—
8,693
eLink
£’000
7,441
—
7,441
—
7,441
Intro 2020
£’000
702
—
702
—
702
Post-acquisition contribution 2021
Acquired subsidiaries made the following contributions to the Group’s results for the year in which they were acquired, from
their respective acquisition dates:
Date acquired
Post-acquisition contribution to Group revenue
Post-acquisition contribution to Group profit after tax
NMK
£’000
1 Jan
24,140
3,093
Proforma full year contribution 2021
As the acquisition occurred on 1 January 2021 the acquired subsidiaries made a full year contribution to the Group’s results for the
year and the revenue and profit after tax1 for the Group would have been no different if the subsidiaries were acquired earlier.
1
These amounts have been calculated using the results of subsidiaries and adjusting them for differences between the accounting policies and Generally Accepted
Accounting Principles applicable to the subsidiaries and the accounting policies and IAS reporting requirements of the Group. The translation adjustments to
modify the reported results of the subsidiaries have been applied as if the Group’s accounting policies and IAS reporting requirements had always been applied.
The translation adjustments include the additional depreciation and amortisation charges relating to the fair value adjustments to property, plant and equipment
and intangible assets assuming the fair values recognised on acquisition were valid on 1 January 2021, together with the consequential tax effects.
35. Related party transactions
Transactions and outstanding balances between the Group companies have been eliminated on consolidation.
For transactions between the Company and subsidiaries see note 9 of the separate company financial statements.
Key management personnel are identified as the executive and Non-executive Directors and other members of the senior
management team, and their remuneration is disclosed as follows:
Remuneration of key management
Remuneration cost
Share Based Payment cost
Employer taxes
Company pension contributions to defined contributions scheme
2022
£’000
1,843
1,325
521
17
3,706
2021
£’000
2,977
1,268
327
35
4,607
The definition of key management personnel for 2022 includes the board of Directors and executive leadership team. In the prior
year the definition of key management personnel also included a representative of the senior management team from each
reporting segment. Share options for 214,345 (2021: 157,500) shares were awarded to members of the senior management
team. There were no share options exercised by key management personnel during the year. During the prior year 50,000
share options were exercised by key management personnel.
There were no related party borrowing or share transactions during the current or prior year.
36. Dividends
On the 17 June 2022 the Company paid a final dividend of £6,910k. Excluding the effects of waived dividends this equated to
7.80 pence per share. On 25 October 2022 the Company paid an interim dividend of £3,991k. Excluding the effects of waived
dividends this equated to 4.50 pence per share. During the prior year the Company paid a special dividend of £2,650k and an
interim dividend of £2,918k. Excluding the effects of waived dividends this equated to 3.00 and 3.30 pence per share respectively.
The Board is recommending a final dividend of 10.5 pence per share which, if approved, will be paid on 16 June 2023 to shareholders
on the register on 5 May 2023.
37. Events after the reporting date
As at 31 December 2022, Midwich Group plc had no ultimate controlling party.
Annual report and financial statements 2022
Midwich Group plc
139
FINANCIAL STATEMENTS COMPANY STATEMENT OF FINANCIAL POSITION
As at 31 December 2022
Assets
Non-current assets
Investments
Deferred tax
Current assets
Receivables
Current liabilities
Payables
Net current assets
Total assets less current liabilities
Non-current liabilities
Net assets
Share capital
Share premium
Share based payment reserve
Investment in own shares
Retained earnings:
Opening retained earnings
Profit/(loss) for the year
Dividends paid
Transfers into retained earnings
Total retained earnings
Capital redemption reserve
Other reserve
Shareholders’ funds
Notes
2022
£’000
2021
£’000
3
4
5
6
6
7
44,343
643
44,986
38,715
38,715
(548)
38,167
83,153
(359)
82,794
889
67,047
13,412
39,633
532
40,165
37,396
37,396
(514)
36,882
77,047
(300)
76,747
887
67,047
8,311
(5)
(5)
307
11,069
(10,901)
776
1,251
50
150
2,314
2,536
(5,568)
1,025
307
50
150
82,794
76,747
The financial statements are also comprised of the notes on pages 142 to 146. The financial statements were approved by
the Board of Directors and authorised for issue on 6 March 2023 and were signed on its behalf by:
Mr S B Fenby
Director
13 March 2023
Company registration number: 08793266
140
Midwich Group plc
Annual report and financial statements 2022
COMPANY STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2022
Share
capital
£’000
Share
premium
£’000
Share
based
payment
reserve
£’000
Investment
in own
shares
£’000
Balance at 1 January 2022
Profit for the year
Total comprehensive
income for the year
Shares issued
Share based payments
Deferred tax on share based
payments
Share options exercised
Dividends paid (note 8)
887
67,047
8,311
—
—
2
—
—
—
—
—
—
—
—
—
—
—
—
—
—
6,006
(128)
(777)
—
(5)
—
—
(2)
—
—
2
—
Retained
earnings
£’000
307
11,069
11,069
—
—
—
776
(10,901)
Capital
redemption
reserve
£’000
50
—
—
—
—
—
—
—
Other
reserve
£’000
150
—
—
—
—
—
—
—
Total
£’000
76,747
11,069
11,069
—
6,006
(128)
1
(10,901)
Balance at 31 December 2022
889
67,047
13,412
(5)
1,251
50
150
82,794
COMPANY STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2021
Share
capital
£’000
Share
premium
£’000
Share
based
payment
reserve
£’000
Investment
in own
shares
£’000
Balance at 1 January 2021
Profit for the year
Total comprehensive
income for the year
Shares issued
Share based payments
Deferred tax on share based
payments
Share options exercised
Dividends paid (note 8)
886
67,047
4,716
—
—
1
—
—
—
—
—
—
—
—
—
—
—
—
—
—
4,398
223
(1,026)
Balance at 31 December 2021
887
67,047
8,311
(5)
The financial statements are also comprised of the notes on pages 142 to 146.
—
(5,568)
Retained
earnings
£’000
2,314
2,536
2,536
—
—
—
1,025
—
307
Capital
redemption
reserve
£’000
50
—
—
—
—
—
—
—
Other
reserve
£’000
150
—
—
—
—
—
—
(5,568)
Total
£’000
75,157
2,536
2,536
—
4,398
223
1
—
50
150
76,747
6
—
—
(1)
—
—
2
Annual report and financial statements 2022
Midwich Group plc
141
FINANCIAL STATEMENTS NOTES TO THE COMPANY FINANCIAL STATEMENTS
1. Accounting policies
Basis of preparation
The annual financial statements of Midwich Group plc (the parent company financial statements) have been prepared
in accordance with Financial Reporting Standard 100 Application of Financial Reporting Requirements (“FRS 100”) and
Financial Reporting Standard 101 Reduced Disclosure Framework (“FRS 101”).
Disclosure exemptions adopted
In preparing these financial statements the Company has taken advantage of all disclosure exemptions conferred by FRS 101.
Therefore, these financial statements do not include:
— certain comparative information as otherwise required by IAS;
— certain disclosures regarding the Company’s capital;
— a statement of cash flows;
— the effect of future accounting standards not yet adopted;
— the disclosure of the remuneration of key management personnel; and
— disclosure of related party transactions with the Company’s wholly owned subsidiaries.
In addition, and in accordance with FRS 101 further disclosure exemptions have been adopted because equivalent disclosures
are included in the Company’s Consolidated Financial Statements. These financial statements do not include certain disclosures
in respect of:
— financial instruments (other than certain disclosures required as a result of recording financial instruments at fair value); and
— fair value measurement (other than certain disclosures required as a result of recording financial instruments at fair value).
As permitted by Section 408 of the Companies Act 2006, a separate income statement for the Company has not been
included in these financial statements.
The principal accounting policies adopted in the preparation of the financial statements as set out below have been consistently
applied to all periods presented.
Finance income and costs
Interest income and expense is recognised using the effective interest method which calculates the amortised cost of a financial
asset or liability and allocates the interest income or expense over the relevant period. The effective interest rate is the rate that
exactly discounts estimated future cash receipts or payments through the expected life of the financial asset or liability to the
net carrying amount of the financial asset or liability. Other finance costs include the changes in fair value of financial derivatives
and financial instruments at fair value through profit or loss.
Investments
Investments are valued at cost less provision for any permanent impairment.
Financial instruments
Financial instruments are contracts that give rise to financial assets or financial liabilities and are recognised when the Company
becomes a party to the contractual provisions of the instrument.
Derivatives are financial instruments that have a value that changes in response to a specific external factor and do not have
a significant initial investment.
Financial assets
Financial assets include trade and other receivables, cash and cash equivalents, and derivative financial instruments with a positive
market value.
The Company classifies financial assets into two categories:
— financial assets measured at amortised cost; and
— financial assets measured at fair value through profit or loss.
The classification of a financial asset depends on the Company’s business model for managing the asset and the contractual
cash flow characteristics associated with the asset.
Financial assets measured at amortised cost are initially measured at fair value plus directly attributable transaction costs and
subsequently measured using the effective interest method. The effects of discounting within the effective interest method are
omitted if immaterial.
Financial assets measured at fair value through profit and loss are initially and subsequently measured at fair value.
Transaction costs directly attributable to the acquisition of the financial asset are recognised in the profit and loss.
Investments in equity instruments that are not held for trading are classified as financial assets and are measured at fair value
through profit and loss.
Financial assets with embedded derivatives are recognised as hybrid contracts and are classified in their entirety and not in
separate components.
142
Midwich Group plc
Annual report and financial statements 2022
NOTES TO THE COMPANY FINANCIAL STATEMENTS CONTINUED
1. Accounting policies continued
Financial assets continued
Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire, or when the
financial asset and substantially all the risks and rewards are transferred.
Financial liabilities
Financial liabilities include trade and other payables; deferred considerations; put option liabilities; borrowings; and derivative
financial instruments with a negative market value.
The Company classifies financial liabilities into three categories:
— financial liabilities measured at amortised cost;
— financial liabilities measured at fair value through profit or loss; and
— contingent consideration recognised in a business combination.
Financial liabilities measured at amortised cost are initially measured at fair value minus directly attributable transaction costs
and subsequently measured using the effective interest method. The effects of discounting within the effective interest method
are omitted if immaterial. Where the contractual cash flows of the financial liability are renegotiated or otherwise modified the
financial liability is recalculated at the present value of the modified contractual cash flows discounted at the financial liability’s
original effective interest rate.
Financial liabilities measured at fair value through profit or loss are initially and subsequently measured at fair value.
Transaction costs directly attributable to the issue of the financial liability are recognised in the profit and loss.
Contingent consideration recognised in a business combination is initially and subsequently measured at fair value.
Financial liabilities with embedded derivatives are recognised as hybrid contracts and are classified in their entirety and not
in separate components unless:
— the economic characteristics and risks of the embedded derivative are not closely related to the economic characteristics
and risks of the financial liability;
— a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative; and
— the hybrid contract is not measured at fair value with changes in fair value recognised in profit or loss.
Financial liabilities are derecognised when they are extinguished, discharged, cancelled, or expire.
Trade and other receivables
Trade and other receivables are financial assets recognised when the Company becomes party to the contractual provisions
of the instrument.
Trade and other receivables are initially measured at transaction price plus directly attributable transaction costs. Transaction
price is equivalent to fair value for trade and other receivables that do not contain a significant financing component. Where trade
and other receivables do contain a significant financing component the fair value is equivalent to the transaction price adjusted
for the effects of discounting. The effects of discounting are not adjusted if it is expected at the inception of the contract that
there will be a period of one year or less from when the goods or services are transferred to the customer to the payment date.
Trade and other receivables are subsequently measured at amortised cost using the effective interest method less expected
credit losses. Expected credit losses are calculated based on probability weighted amounts derived from a range of possible
outcomes that are based on reasonable supporting information and discounted for the time value of money. The Company
applies the simplified approach to measure the loss allowance at an amount equal to lifetime expected credit losses including
where trade receivables contain a significant financing component. The effects of expected credit losses are omitted if immaterial.
Trade and other payables
Trade and other payables are financial liabilities recognised when the Company becomes party to the contractual provisions
of the instrument. Trade and other payables are initially measured at fair value minus transaction costs directly attributable to
the issue of the financial liability. Trade and other payables are subsequently measured at amortised cost using the effective
interest method.
Foreign currency
The presentation currency for the Company’s financial statements is Sterling. Foreign currency transactions are recorded in
their functional currencies at the exchange rate at the date of the transaction. Monetary assets and liabilities have been
translated at rates in effect at the reporting date, with any exchange adjustments being charged or credited to the income
statement, within administrative expenses. The Parent Company’s functional currency is Sterling.
Current taxation
Current taxation for the Company is based on the local taxable income at the local statutory tax rate enacted or substantively
enacted at the reporting date and includes adjustments to tax payable or recoverable in respect of previous periods.
Annual report and financial statements 2022
Midwich Group plc
143
FINANCIAL STATEMENTS NOTES TO THE COMPANY FINANCIAL STATEMENTS CONTINUED
1. Accounting policies continued
Deferred taxation
Deferred taxation is calculated using the liability method, on temporary differences arising between the tax bases of assets and
liabilities and their carrying amounts in the financial statements. However, if the deferred tax arises from the initial recognition of
an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting
nor taxable profit or loss, it is not accounted for. No deferred tax is recognised on initial recognition of goodwill or on investment in
subsidiaries. Deferred tax is determined using tax rates and laws that have been enacted or substantively enacted by the reporting
date and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled. Deferred tax
liabilities are provided in full and are not discounted. Deferred tax assets are recognised to the extent that it is probable that future
taxable profits will be available against which the temporary differences can be utilised. Changes in deferred tax assets or liabilities
are recognised as a component of tax expense in the income statement, except where they relate to items that are charged or
credited directly to equity, in which case the related deferred tax is also charged or credited directly to equity. Deferred income
tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax
liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation authority
where there is an intention to settle the balances on a net basis.
Equity
Equity comprises the following:
— “Share capital” represents the nominal value of equity shares issued.
— “Share premium” represents the amounts subscribed for share capital, net of issue costs, above the nominal value.
— “Share based payment reserve” represents the accumulated value of share based payments expensed in the income statement.
— “Investment in own shares” represents amounts of the Parent Company’s own shares held within an Employee Benefit Trust.
— “Retained earnings” represents the accumulated profits and losses attributable to equity shareholders.
— “Capital redemption reserve” represents the nominal value of shares repurchased by the Parent Company.
— “Other reserve” relate to the Employee Benefit Trust.
Employee benefit trust
The assets and liabilities of the employee benefit trust (EBT) have been included in the Company financial statements. Any
assets held by the EBT cease to be recognised when the assets vest unconditionally in identified beneficiaries. The costs of
purchasing own shares held by the EBT are shown as a deduction within shareholders’ equity. The proceeds from the sale
of own shares are recognised in shareholders’ equity. Neither the purchase nor sale of own shares leads to a gain or loss
being recognised in the income statement.
Share based payments
Equity-settled share based payments are measured at the fair value of the equity instrument. The fair value of the equity-settled
transactions is recognised as an expense over the vesting period. The fair values of the equity instruments are determined at
the date of the grant incorporating market based vesting conditions. The fair value of goods and services received is measured by
reference to the fair value of options. The fair values of share options are measured using the Black Scholes model. The expected
life used in the models is adjusted, based on management’s best estimate of the effects of non-transferability, exercise restrictions
and behavioural considerations. The cost of equity-settled transactions is recognised, together with a corresponding increase in
equity, over the period in which the performance and/or service conditions are fulfilled, ending on the date on which the relevant
employees (or other beneficiaries) become fully entitled to the award (“the vesting date”). The cumulative expense recognised for
equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has
expired and the Company’s best estimate of the number of equity instruments that will ultimately vest. The income statement
charge or credit for a period represents the movement in cumulative expense recognised as at the beginning and end of that
period. No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional
upon a market condition, which are treated as vesting irrespective of whether the market condition is satisfied, provided that
all other performance and/or service conditions are satisfied. Where the terms of an equity-settled award are modified, the
minimum expense recognised is the expense as if the terms had not been modified. An additional expense is recognised for
any modification, which increases the total fair value of the share based payment arrangement, or is otherwise beneficial to
the employee as measured at the date of modification. Where an equity-settled award is cancelled, it is treated as if it had
vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. However, if
a new award is substituted for the cancelled award, and designated as a replacement award on the date that it is granted,
the cancelled and new awards are treated as if they were a modification of the original award, as described in the previous
paragraph. Where an equity-settled award is forfeited, the cumulative charge expensed up to the date of forfeiture is
credited to the income statement.
144
Midwich Group plc
Annual report and financial statements 2022
NOTES TO THE COMPANY FINANCIAL STATEMENTS CONTINUED
2. Directors and employees
The aggregate payroll costs of the employees were as follows:
Staff costs
Wages and salaries
Social security costs
Pension costs
2022
£'000
3,360
436
72
3,868
2021
£’000
4,179
579
55
4,813
The Directors’ remuneration is as stated in the Directors’ remuneration disclosure in the Directors’ Report and in note 7 to the
consolidated financial statements.
Average monthly number of persons, including Directors, employed by the Company during the year was as follows:
By activity
Administration
3. Investments
At 1 January
Additions
Disposals
At 31 December
2022
Number
33
2022
£’000
39,633
4,710
—
2021
Number
22
2021
£’000
36,421
3,377
(165)
44,343
39,633
The Company holds 100% of the share capital of Midwich Limited, a company incorporated in England and Wales. Indirect
share interests in the Midwich Group of companies are disclosed in note 11 of the consolidated financial statements. Additions
in the year represent the capital contributions to subsidiaries in respect of share option schemes. See note 31 of the
consolidated financial statements for details of share options.
4. Deferred tax
Deferred tax asset on temporary differences
5. Receivables
Prepayments
Amounts due from Group undertakings
6. Payables
Amounts falling due within one year:
Accruals
Amounts falling due after one year:
Accruals
2022
£’000
643
643
2022
£’000
67
38,648
38,715
2022
£’000
548
2022
£’000
359
2021
£’000
532
532
2021
£’000
26
37,370
37,396
2021
£’000
514
2021
£’000
300
Annual report and financial statements 2022
Midwich Group plc
145
FINANCIAL STATEMENTS NOTES TO THE COMPANY FINANCIAL STATEMENTS CONTINUED
7. Share capital
The total allotted share capital of the Company is:
Allotted, issued and fully paid
Issued and fully paid Ordinary Shares of £0.01 each
At start of year
Shares issued
At end of year
2022
Number
£’000
2021
Number
88,735,612
144,300
88,879,912
887
2
889
88,604,712
130,900
88,735,612
During the year the Company issued 144,300 shares to the Group’s employee benefit trusts (2021: 130,900).
Employee benefit trust
The Company’s employee benefit trusts were allocated the following shares to be issued on exercise of share options:
At 1 January
Allocated during the year
Shares issued on exercise of options
At 31 December
2022
Number
518,300
144,300
(161,140)
501,460
£’000
5
2
(2)
5
2021
Number
593,600
130,900
(206,200)
518,300
£’000
886
1
887
£’000
6
1
(2)
5
8. Dividends
On the 17 June 2022 the Company paid a final dividend of £6,910k, excluding the effects of waived dividends this equated to
7.80 pence per share. On 25 October 2022 the Company paid an interim dividend of £3,991k, excluding the effects of waived
dividends this equated to 4.50 pence per share. During the prior year the Company paid a special dividend of £2,650k and an
interim dividend of £2,918k, excluding the effects of waived dividends this equated to 3.00 and 3.30 pence per share respectively.
The Board is recommending a final dividend of 10.5 pence per share which, if approved, will be paid on 16 June 2023 to shareholders
on the register on 5 May 2023.
9. Related parties and transactions with Directors
There were no related party transactions or transactions with the Directors during the current or prior year. The Directors are
remunerated by subsidiary entities and recharged to the Company.
Other related party transactions
Included within other debtors are the following transactions and outstanding amounts with Midwich Limited, a wholly
owned subsidiary:
Outstanding at 1 January
Amounts advanced
Management charges
Amounts repaid
Outstanding at 31 December
Audit fees for the entity are borne by subsidiary entities and recharged to the Company.
10. Ultimate controlling party
As at 31 December 2022, Midwich Group plc had no ultimate controlling party.
2022
£’000
37,370
7,000
204
(5,926)
38,648
2021
£’000
39,124
4,000
204
(5,958)
37,370
146
Midwich Group plc
Annual report and financial statements 2022
RESOLUTIONS SUMMARY
Annual General Meeting
The notice convening the Annual General Meeting (the “AGM”) is set out on pages 149 to 150. Resolutions 1 to 9 set out in the
notice of the AGM deal with the ordinary business to be transacted at the AGM. The special business to be transacted at the
meeting is set out in Resolutions 10 to 12.
Resolutions 1 to 10 are being proposed as ordinary resolutions (and therefore need the approval of a simple majority of those
shareholders who are present and voting in person or by proxy at the AGM) and Resolutions 11 and 12 are being proposed as
special resolutions (and therefore need the approval of at least 75 per cent of those shareholders who are present and voting
in person or by proxy at the AGM).
Presentation of the Company’s annual accounts (Resolution 1)
Resolution 1 deals with the adoption of the Company’s annual accounts for the financial year ending 31 December 2022.
Re-election of Directors (Resolutions 2 to 6)
The Company’s Articles of Association require the number nearest to one third of the Board to retire by rotation at each
Annual General. The UK Corporate Governance Code provides that all Directors should be subject to re-election by their
shareholders every year. In accordance with this provision of the UK Corporate Governance Code and in keeping with the
Board’s aim of following best corporate governance practice, the Board has decided that, as at recent Annual General
Meetings of the Company, all Directors should retire at each Annual General Meeting and offer themselves for re-election.
Information about the Directors is set out on pages 64 to 65.
Re-appointment and remuneration of auditors (Resolution 7)
Resolution 7 proposes the re appointment of Grant Thornton UK LLP as auditors of the Company and authorises the
Directors to set the auditors’ remuneration.
Declaration of dividend (Resolution 8)
The Directors are recommending a final dividend for the financial year ended 31 December 2022 of 10.5p per ordinary share,
which requires the approval of the shareholders.
Directors’ Remuneration Report (Resolution 9)
This Resolution seeks shareholder approval for the Directors’ Remuneration Report (excluding the remuneration policy). The
Directors’ Remuneration Report can be found on pages 77 to 83 (inclusive) of the Annual Report and Financial Statements.
In accordance with regulations which came into force on 1 October 2013, Resolution 9 offers shareholders an advisory vote on
the Directors’ Remuneration Report (which reflects the implementation of the Company’s existing remuneration policy).
Although the requirement to put this report to a shareholder vote does not apply to the Company directly, the Directors
believe that they should give the shareholders an advisory vote on this matter in the interests of good corporate governance.
Authority to allot shares (Resolution 10)
Under section 551 of the Companies Act 2006 (the “CA 2006”), the Directors may only allot shares or grant rights to
subscribe for or convert any securities into shares if authorised by the shareholders to do so.
Resolution 10, which complies with new guidance issued by the Investment Association in 2023, will, if passed, authorise the
Directors to allot ordinary shares or grant rights to subscribe for or convert any securities into ordinary shares, up to an
aggregate nominal value of £303,974 (corresponding to approximately one-third of the issued share capital at 29 March 2023
and up to an aggregate nominal value of £607,949 (corresponding to approximately two-thirds of the issued share capital at
29 March 2023) in the case of allotments only in connection with a fully pre-emptive offer. Previously, the Investment
Association’s guidelines recommended that the second one-third of the issued share capital authorised by shareholder
resolution be used only in connection with a fully pre-emptive rights issue. The Directors have no present intention to exercise
the authority sought under this Resolution. However, the Directors may consider doing so if they believe it would be
appropriate in respect of business opportunities that may arise consistent with the Company’s strategic objectives.
This authority will expire at the conclusion of the next Annual General Meeting of the Company, or, if earlier, the date which is
15 months after the date of passing of the Resolution.. It is the Board’s current intention to seek renewal of such authority at
each future Annual General Meeting of the Company.
As at 29 March 2023, the Company does not hold any shares in the Company in treasury.
Annual report and financial statements 2022
Midwich Group plc
147
FINANCIAL STATEMENTS RESOLUTIONS SUMMARY CONTINUED
Disapplication of pre-emption rights (Resolutions 11 and 12)
Under section 561(1) of the CA 2006, if the Directors wish to allot equity securities (as defined in section 560 of the CA
2006) for cash they must in the first instance offer them to existing shareholders in proportion to their holdings. There may
be occasions, when the Directors will need the flexibility to finance business opportunities by the issue of shares for cash
without a pre-emptive offer to existing shareholders. This cannot be done under the CA 2006 unless the shareholders have
first waived their pre-emption rights.
Resolutions 11 and 12 are special resolutions to renew the Directors’ authority to allot shares for cash without first offering
them to existing shareholders on a pro-rata basis. Although there is currently no intention to make use of this authority, the
Directors consider that it is in the interests of the Company, in certain circumstances, for the Directors to have limited
flexibility so as to be able to allot shares without having first to offer them to existing shareholders. These resolutions are
consistent with the Pre-Emption Group 2022 Statement of Principles for the disapplication of pre-emption rights (the “2022
Statement of Principles”), which have increased the thresholds in relation to the disapplication of pre-emption rights. In
accordance with institutional guidelines, under Resolution 11, to be proposed as a special resolution, authority is sought to
allot shares for cash:
i.
ii.
in relation to a pre-emptive rights issue, open offer or other pre-emptive issue only, up to an aggregate nominal
amount of £607,949 (being the nominal value of approximately two thirds of the issued share capital of the
Company); and
in any other case, up to an aggregate nominal amount of £91,192 (representing 10% of the issued share capital of the
Company at 29 March 2023).
In addition, Resolution 12, again in accordance with the 2022 Statement of Principles and which is also to be proposed as a
special resolution, asks the shareholders to waive their pre-emption rights in relation to the allotment of equity securities or
sale of treasury shares up to a further aggregate nominal amount of £91,192 (representing 10% of the issued share capital of
the Company at 29 March 2023), but where such authority may only be used in connection with an acquisition or specified
capital investment of a kind contemplated by the 2022 Statement of Principles.
The Directors confirm that the additional ten per cent. authority will only be used in connection with an acquisition or
specified capital investment which is announced contemporaneously with the issue, or which has taken place in the
preceding twelve-month period and is disclosed in the announcement of the issue.
If Resolutions 11 and 12 are passed, the authorities will expire at the conclusion of the next Annual General Meeting of the
Company, or, if earlier, the date which is 15 months after the date of passing of the Resolutions. It is the Board’s current
intention to seek renewal of such authorities at each future Annual General Meeting of the Company.
148
Midwich Group plc
Annual report and financial statements 2022
NOTICE OF AGM
Notice of Annual General Meeting
Notice is hereby given that the Annual General Meeting (the “Meeting”) of Midwich Group plc (the “Company”) will be held
at the offices of the Company at Vinces Road, Diss, Norfolk, IP22 4YT on Tuesday 09 May 2023 at 10.00 am. Noting the
location of the Meeting, for those shareholders unable to attend, but who would like to follow its progress and potentially ask
questions, the Company intends to take advantage of the flexibility that has become standard practice in recent years and
will provide a conference call link to enable such shareholders to follow the Meeting remotely. Any shareholders who wish to
listen to the meeting by such means, should contact the Company Secretary prior to the day of the meeting at Stephen.
Lamb@midwich.com in order to request conference dial-in details. However, please note that shareholders joining the
conference call will not be able to vote on the day or form part of the quorum for the meeting and must appoint a proxy
in advance in order to ensure their vote is counted.
At the Meeting you will be asked to consider and vote on the resolutions below. Resolutions 1 to 10 will be proposed as
ordinary resolutions and resolutions 11 and 12 will be proposed as special resolutions.
Ordinary business
Report and accounts
1.
THAT the Company’s annual accounts for the financial year ended 31 December 2022, together with the Directors’ report
and auditor’s report on those accounts, be received and adopted.
Re-election of Directors
2. THAT Stephen Fenby be re-elected as a Director of the Company.
3. THAT Andrew Herbert be re-elected as a Director of the Company.
4. THAT Mike Ashley be re-elected as a Director of the Company.
5. THAT Stephen Lamb be re-elected as a Director of the Company.
6. THAT Hilary Wright be re-elected as a Director of the Company.
Reappointment and remuneration of auditors
7.
THAT Grant Thornton UK LLP be reappointed as the Company’s auditors to hold office from the conclusion of this
meeting until the conclusion of the next meeting at which accounts are laid before the Company and that the Directors be
authorised to agree the remuneration of the auditors.
Dividend
8 THAT a final dividend recommended by the Directors of the Company for the financial year ended 31 December 2022 of
10.5p per ordinary share of £0.01 each in the capital of the Company (“Ordinary Share”) be declared.
Directors’ remuneration report
9. THAT the Directors’ remuneration report which is set out on pages 77 to 83 of the Company’s annual report and accounts
for the financial year ended 31 December 2022 (excluding the Directors’ remuneration policy which is set out on pages 77
to 79 of the Directors’ remuneration report), be approved.
Special business
Issue of Ordinary Shares
10. THAT the Directors of the Company be hereby generally and unconditionally authorised and empowered pursuant to and
in accordance with Section 551 of the Companies Act 2006 (the “CA 2006”), to exercise all the powers of the Company
to allot shares and or grant rights to subscribe for or to convert any security into shares (“Rights”):
i.
ii.
up to an aggregate nominal value of £303,974 (being the nominal value of approximately one third of the issued
share capital of the Company); and
up to an aggregate nominal value of £607,949 (being the nominal value of approximately two thirds of the issued
share capital of the Company) (such amount to be reduced by the nominal amount of any shares allotted or Rights
granted under paragraph (i)) in connection with an offer by way of a rights issue or other pre-emptive offer to:
a.
the holders of Ordinary Shares in proportion (as nearly as may be practicable) to the respective numbers of
Ordinary Shares held by them; and
b. holders of other equity securities, as required by the rights of those securities or, subject to such rights, as the
Directors otherwise consider necessary,
and so that, in each case, the Directors of the Company may impose any limits or restrictions or exclusions or other
arrangements that they consider necessary or appropriate to deal with treasury shares, fractional entitlements,
record dates, legal, regulatory or practical problems in, or under the laws of, any territory or the requirements of
any regulatory body or stock exchange or any other matter,
Annual report and financial statements 2022
Midwich Group plc
149
FINANCIAL STATEMENTS
NOTICE OF AGM CONTINUED
Special business continued
Issue of Ordinary Shares continued
such authorities to expire on the earlier of the next Annual General Meeting of the Company held after the date on which
this resolution becomes unconditional and the date 15 months after the passing of this resolution, save that the Company
may at any time before such expiry make any offer(s) or enter into any agreement(s) which would or might require shares
to be allotted or Rights to be granted after such expiry and the Directors may allot shares or grant Rights in pursuance of
any such offer(s) or agreement(s) as if the authority conferred hereby had not expired. This resolution revokes and replaces
all unexercised authorities previously granted to the Directors to allot shares or grant Rights but without prejudice to any
allotment of shares or grant of Rights already made, offered or agreed to be made pursuant to such authorities.
11.
THAT, subject to the passing of resolution 10, the Directors of the Company be authorised in accordance with section 570
of the CA 2006 to allot equity securities (as defined in Section 560 of the CA 2006) for cash under the authority conferred
by that resolution and/or to sell Ordinary Shares held by the Company as treasury shares as if Section 561 of the CA 2006
did not apply to any such allotment or sale, provided that such authority shall be limited to:
i.
the allotment of equity securities in connection with an offer of equity securities by way of a rights issue or other
pre-emptive offer to:
a.
the holders of Ordinary Shares in proportion (as nearly as may be practicable) to the respective numbers of
Ordinary Shares held by them; and
b. holders of other equity securities, as required by the rights of those securities or, subject to such rights, as the
Directors otherwise consider necessary,
but subject to such limits or restrictions or exclusions or other arrangements, which the Directors of the Company
may consider necessary or appropriate to deal with treasury shares, fractional entitlements, record dates, legal,
regulatory or practical problems in, or under the laws of, any territory or the requirements of any regulatory body or
stock exchange or any other matter; and
ii.
the allotment of equity securities or sale of treasury shares (otherwise than pursuant to paragraph (i) of this
resolution) to any person up to an aggregate nominal amount of £91,192 (being the nominal value of approximately
ten per cent. of the issued share capital of the Company),
such authorities granted by this resolution to expire at the conclusion of the Company’s next Annual General Meeting
after the passing of this resolution or, if earlier, at the close of business on the date 15 months after the passing of this
resolution, save that the Company may, before such expiry make offers or agreements that would or might require equity
securities to be allotted (or treasury shares to be sold) after the authority expires and the Directors of the Company may
allot equity securities (or sell treasury shares) in pursuance of any such offer or agreement as if the authority had not expired.
12.
THAT, subject to the passing of resolution 10, the Directors of the Company be authorised in accordance with section 570
of the CA 2006, in addition to any authority granted under resolution 11, to allot equity securities (as defined in Section
560 of the CA 2006) for cash under the authority conferred by resolution 10 and/or to sell Ordinary Shares held by the
Company as treasury shares as if Section 561 of the CA 2006 did not apply to any such allotment or sale, provided that
such authority shall be:
i.
ii.
limited to the allotment of equity securities or sale of treasury shares up to an aggregate nominal amount of £91,192;
and
used only for the purpose of financing (or refinancing, if the authority is to be used within twelve months after the
original transaction) a transaction which the Directors of the Company determine to be an acquisition or other
capital investment of a kind contemplated by the Statement of Principles on Disapplying Pre-Emption Rights most
recently published by the Pre-Emption Group prior to the date of this notice,
such authority granted by this resolution to expire at the conclusion of the Company’s next Annual General Meeting after
this resolution is passed or, if earlier, at the close of business on the date 15 months after the passing of this resolution,
save that the Company may, before such expiry make offers or agreements that would or might require equity securities
to be allotted (or treasury shares to be sold) after the authority expires and the Directors of the Company may allot equity
securities (or sell treasury shares) in pursuance of any such offer or agreement as if the authority had not expired.
Dated 29 March 2023
By order of the Board
Stephen Lamb
Company Secretary
Registered Office
Vinces Road
Diss
Norfolk
IP22 4YT
150
Midwich Group plc
Annual report and financial statements 2022
Notes:
Entitlement to attend and vote
1.
Pursuant to Regulation 41 of the Uncertificated Securities Regulations 2001, the Company specifies that only those
members registered on the Company’s register of members:
— at the time which is 48 hours prior to the Meeting; or
— if this Meeting is adjourned, at the time which is 48 hours prior to the adjourned meeting,
shall be entitled to attend and vote at the Meeting.
Appointment of proxies
2.
If you are a member of the Company at the time set out in note 1 above, you are entitled to appoint a proxy to exercise all
or any of your rights to attend, speak and vote at the Meeting and you should have received a proxy form with this notice
of meeting. You can only appoint a proxy using the procedures set out in these notes and the notes to the proxy form.
3. If you are not a member of the Company but you have been nominated by a member of the Company to enjoy
information rights, you do not have a right to appoint any proxies under the procedures set out in this “Appointment of
proxies” section.
4. A proxy does not need to be a member of the Company but must attend the Meeting to represent you. Details of how to
appoint the Chairman of the Meeting or another person as your proxy using the proxy form are set out in the notes to the
proxy form. If you wish your proxy to speak on your behalf at the Meeting you will need to appoint your own choice of
proxy (not the Chairman) and give your instructions directly to them.
5. You may appoint more than one proxy provided each proxy is appointed to exercise rights attached to different shares.
You may not appoint more than one proxy to exercise rights attached to any one share. To appoint more than one proxy,
you may photocopy the proxy form. Please indicate the proxy holder’s name and the number of shares in relation to
which they are authorised to act as your proxy (which, in aggregate, should not exceed the number of shares held by
you). Please also indicate if the proxy instruction is one of multiple instructions being given. All forms must be signed and
should be returned together in the same envelope. Failure to specify the number of shares to which each proxy
appointment relates or specifying more shares than the number of shares held by you at the time set out in note 1 above
will result in the proxy appointments being invalid.
6. A vote withheld is not a vote in law, which means that the vote will not be counted in the calculation of votes for or against
the resolution. If no voting indication is given, your proxy will vote or abstain from voting at their discretion. Your proxy
will vote (or abstain from voting) as they think fit in relation to any other matter which is put before the Meeting.
Appointment of proxies using hard copy form
7.
You will not receive a hard copy form of proxy for the Meeting in the post. Instead, you will be able to vote electronically
using the link www.signalshares.com. You will need to log into your Signal Shares account, or register if you have not
previously done so. To register you will need your Investor Code. This is detailed on your share certificate or available
from our Registrar, Link Group. If you need help with voting online, please contact the portal team of our Registrar,
Link Group, on 0371 664 0391. Calls are charged at the standard geographic rate and will vary by provider. Calls outside
the United Kingdom will be charged at the applicable international rate. Lines are open between 09.00 – 17:30, Monday
to Friday excluding public holidays in England and Wales or via email at shareholderenquiries@linkgroup.co.uk.
Proxy votes must be received no later than 10 am on 4 May 2023 (or, in the case of an adjournment of the General
Meeting, not later than 48 hours before the time fixed for the holding of the adjourned meeting).
You may request a hard copy form of proxy directly from the Registrars, Link Group, on 0371 664 0321. Calls are charged
at the standard geographic rate and will vary by provider. Calls outside the United Kingdom will be charged at the
applicable international rate. Lines are open between 09.00 – 17:30, Monday to Friday, excluding public holidays in
England and Wales.
CREST members should use the CREST electronic proxy appointment service and refer to note 9 below in relation to the
submission of a proxy appointment via CREST.
Appointment of proxies via the web
8. As an alternative, shareholders may cast their vote online via the registrars’ website at www.signalshares.com.
Appointment of Proxies via Proxymity
9. If you are an institutional investor, you may be able to appoint a proxy electronically via the Proxymity platform. For further
information regarding Proxymity, please go to www.proxymity.io. Your proxy must be lodged 48 hours prior to the time
appointed for the Meeting in order to be considered valid. Before you can appoint a proxy via this process, you will need
to have agreed to Proxymity’s associated terms and conditions. It is important that you read these carefully as you will be
bound by them and they will govern the electronic appointment of your proxy.
Annual report and financial statements 2022
Midwich Group plc
151
FINANCIAL STATEMENTS
NOTICE OF AGM CONTINUED
Appointment of proxies through CREST
10. CREST members who wish to appoint a proxy or proxies by utilising the CREST electronic proxy appointment service
may do so for the Meeting and any adjournment(s) of it by using the procedures described in the CREST Manual. CREST
Personal Members or other CREST sponsored members, and those CREST members who have appointed a voting service
provider(s), should refer to their CREST sponsor or voting service provider(s), who will be able to take the appropriate
action on their behalf.
In order for a proxy appointment made by means of CREST to be valid, the appropriate CREST message (a “CREST Proxy
Instruction”) must be properly authenticated in accordance with Euroclear UK & International (“EUI”) specifications and
must contain the information required for such instructions, as described in the CREST Manual. The message, regardless
of whether it constitutes the appointment of a proxy or an amendment to the instruction given to a previously appointed
proxy, must, in order to be valid, be transmitted so as to be received by the Company’s agent (ID: RA10) by not later than
48 hours prior to the time appointed for the Meeting or adjourned meeting. For this purpose, the time of receipt will be
taken to be the time (as determined by the timestamp applied to the message by the CREST Applications Host) from
which the Company’s agent is able to retrieve the message by enquiry to CREST in the manner prescribed by CREST.
After this time, any change of instructions to proxies appointed through CREST should be communicated to the
appointee through other means.
CREST members and, where applicable, their CREST sponsors or voting service providers, should note that EUI does
not make available special procedures in CREST for any particular messages. Normal system timings and limitations will
therefore apply in relation to the input of CREST Proxy Instructions. It is the responsibility of the CREST member concerned
to take (or, if the CREST member is a CREST personal member or sponsored member or has appointed a voting service
provider(s), to procure that his CREST sponsor or voting service provider(s) take(s)) such action as shall be necessary to
ensure that a message is transmitted by means of the CREST system by any particular time. In this connection, CREST
members and, where applicable, their CREST sponsors or voting service providers, are referred, in particular, to those
sections of the CREST Manual concerning practical limitations of the CREST system and timings.
The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in Regulation 35(5)(a) of the
Uncertificated Securities Regulations 2001.
Appointment of proxy by joint members
10. In the case of joint holders, where more than one of the joint holders purports to appoint a proxy, only the appointment
submitted by the most senior holder will be accepted. Seniority is determined by the order in which the names of the joint
holders appear in the Company’s register of members in respect of the joint holding (the first named being the most senior).
Changing proxy instructions
11. To change your proxy instructions, simply submit a new proxy appointment using the methods set out above. Note that
the cut-off time for receipt of proxy forms (see above) also apply in relation to amended instructions; any amended proxy
form received after the relevant cut-off time will be disregarded.
If you submit more than one valid proxy appointment, the appointment received last before the latest time for the receipt
of proxies will take precedence. If the Company is unable to determine which was last deposited or received, none of
them shall be treated as valid.
Termination of proxy appointments
12. In order to revoke a proxy instruction, you will need to inform the Company by sending a signed hard copy notice clearly
stating your intention to revoke your proxy appointment to the Company’s registrars, Link Group, PXS1, 10th Floor, Central
Square, 29 Wellington Street, Leeds LS1 4DL. In the case of a member that is a company, the revocation notice must be
executed under its common seal or signed on its behalf by an officer of the company or an attorney for the company. Any
power of attorney or any other authority under which the revocation notice is signed (or a duly certified copy of such
power or authority) must be included with the revocation notice.
The revocation notice must be received by the Company’s registrars not less than 48 hours before the time for holding
the Meeting or adjourned meeting.
If you attempt to revoke your proxy appointment but the revocation is received after the time specified then, subject
to the paragraph directly below, your proxy appointment will remain valid.
Appointment of a proxy does not preclude you from attending the Meeting and voting in person. If you have appointed
a proxy and attend the Meeting in person, your proxy appointment will automatically be terminated.
Corporate representatives
13. A corporation that is a member can appoint one or more corporate representatives who may exercise, on its behalf, all
its powers as a member provided that no more than one corporate representative exercises powers over the same share.
152
Midwich Group plc
Annual report and financial statements 2022
Issued shares and total voting rights
14. As at 5.00 pm on 29 March 2023, the Company’s issued share capital comprised 91,192,388 Ordinary Shares of £0.01
each. Each Ordinary Share carries the right to one vote at a general meeting of the Company and, therefore, the total
number of voting rights in the Company as at 5.00 pm on the 29 March 2023 is 91,192,388.
Communication
15. Except as provided above, members who have general queries about the Meeting should use the following means
of communication:
— calling the Company Secretary on +44 (0) 1379 774 661; or
— calling our shareholder helpline provided by the Company’s registrars, Link Group, on 0371 664 0300 (calls are
charged at the standard geographic rate and will vary by provider) or +44 (0) 371 664 0300 from outside the UK.
Lines are open Monday to Friday, 9.00 am to 5.30 pm; or
— emailing the Company Secretary at stephen.lamb@midwich.com.
You may not use any electronic address provided either:
— in this Notice of Annual General Meeting; or
— any related documents (including the proxy form),
to communicate with the Company for any purposes other than those expressly stated.
Annual report and financial statements 2022
Midwich Group plc
153
FINANCIAL STATEMENTS
DIRECTORS, OFFICERS AND ADVISERS
Directors
Mr S B Fenby
Mr S Lamb
Mr M Ashley
Mr A C Herbert
Mrs H Wright
Independent auditor
Grant Thornton UK LLP
Chartered Accountants
Statutory Auditor
101 Cambridge Science Park
Milton Road
Cambridge
CB4 0FY
Bankers
HSBC Bank plc
19 Midsummer Place
Milton Keynes
Buckinghamshire
MK9 3GB
Nominated advisers and brokers
Investec
30 Gresham Street
London
EC2V 7QP
Company registration number
08793266
Company Secretary
Mr S Lamb
Registered office
Vince’s Road
Diss
Norfolk
IP22 4YT
Solicitors
Mills and Reeve LLP
Botanic House
100 Hills Road
Cambridge
CB2 1PH
Berenberg
60 Threadneedle Street
London
EC2R 8HP
154
Midwich Group plc
Annual report and financial statements 2022
Midwich Group Plc
Vinces Road
Diss
Norfolk
IP22 4YT
T: 01379 649200
midwichgroupplc.com