Listen up... Glasto sound specialist’s shares are set to kick up a Stormzy!
THE name Michael Ebenazer Kwadjo Omari Owuo may mean little to most people but Stormzy, as he is better known, is one of Britain’s most popular rap artists. When he headlined at Glastonbury this June, therefore, the quality of the music had to be good.
Sound engineers worked with audio visual specialist Midwich for more than a year to design a system that could deliver superb sound on a large scale in the middle of the Somerset countryside.
Their efforts paid off and Stormzy’s set received worldwide acclaim. Midwich however, has fared less well since ‘Glasto’. The company’s shares have fallen by 12 per cent to £5.26 in the past three months alone, tumbling from a high of £6.85 a year ago.
The decline seems undeserved. The business itself has been delivering robust results, boss Stephen Fenby is optimistic about the future and City brokers echo his confidence, expecting the stock to hit £7.20 within the next year or two.
Midwich was founded in 1979 by a husband and wife working out of a barn in Diss, Norfolk. The founders are no longer part of the company but Midwich, still based in Diss, has become the largest independent audio-visual company in the world, with 17,000 customers across the UK, mainland Europe and the Asia Pacific region.
The business provides these firms with equipment from hundreds of manufacturers, including Sony, LG and Samsung, as well as smaller specialists, with expertise in specific areas.
Audio visual equipment is pervasive in the business and entertainment world. Concerts, sports arenas and festivals use huge LED screens so that fans can see what is going on – and top sound systems are also a must at such events. In malls and on the high street, shops use video screens to advertise their wares. Schools and universities use interactive boards to inspire students. Companies use sophisticated kit for conferences, and their reception areas will often feature large screens, providing information and news from the outside world.
Midwich sits at the centre of this industry, helping companies of all shapes and sizes, including Ferrari, which is installing special display screens in 190 showrooms across 51 countries. Closer to home, Midwich provided the audio equipment for the new Tottenham Hotspur stadium, whose acoustics have been much admired by fans.
In some cases, Midwich will simply act as an intermediary between manufacturers and installers or end-users. More often, however, the group provides advice, working with customers to ensure that they receive the kit that will do the best job for them.
The global market is huge, worth almost £150 billion today and expected to grow to more than £180 billion by 2023. Audio visual equipment is increasingly popular as digital technology becomes a growing part of everyday life but it can also help firms to become more efficient and competitive.
Touch screens allow shops, restaurants and hospitals to manage with fewer staff. Attractive displays encourage customers to come into stores and digital signs can be updated quickly offering promotions and cut-price goods. Video conferences mean that employees can travel less, while interactive displays will often grab a child’s attention far more than a static blackboard.
Midwich has a tiny fraction of the global market but it is growing at a fair clip, both organically and through acquisition. In the past year alone, Fenby has bought four businesses, in Switzerland, Norway, Spain and Italy. The firms are not huge but they expand Midwich’s geographic coverage and the range of services that it can offer.
Fenby is eyeing up the US too. It is the biggest audio-visual market in the world but also the most competitive so any moves would have to be undertaken with care. So far, however, Midwich has integrated its acquisitions well. Half-year results, released earlier this month, showed strong growth and the dividend was increased by 5.4 per cent to 4.85p.
Brokers expect full-year sales to increase by 19 per to £685 million, with profits up 11 per cent to £34.2 million and a total dividend of 16p, compared with 15.2p last year.
Encouragingly too, Fenby spent £272,000 in the past fortnight alone, buying shares in the company, because he believes the stock is undervalued. He now owns more than 19 million shares. Other directors and employees are shareholders too, incentivising them to make the business work.
MIDAS VERDICT: Midwich is a focused and well managed business in a growing industry. The business has also increased revenues every year since 2006, even during the financial crisis. At £5.26 the stock is a buy.
Traded on: AIM Ticker: MIDW Contact: midwichgroupplc.com or FTI Consulting on 020 3727 1000