Good morning, everyone. In 2023 we continued to deliver on our strategic objectives of increased specialization, improved geographical presence, and growing scale. We achieved record, record revenues, gross margins, and also operating and net profits. All of this was against a much tougher market backdrop, which saw reduced demand for mainstream products due to a mix of corporate uncertainty and education budget pressures, and this tough market has continued into 2024. By continuing to focus on our value-add model, we achieved further market share gains, which is something we do well at in tough markets. We completed seven acquisitions, the most we've done in a year, and we're very grateful to shareholders for their support in, the fundraise that we did in June. And finally, we made good progress in the sustainability plans and engagements.
So looking at the numbers in a little bit more detail, our global revenue of GBP 1.3 billion represented a total growth of 7%, of which organic growth was just under 1%. The overall growth was a combination of a reduction in mainstream product sales at displays and projectors of 7%, but an increase in technical product sales of 18%. Our gross margin of 16.8% was up 1.5% on 2022 and is a new record for the group. We achieved strong profit growth and cash generation, our operating profit increased by 17%, and the adjusted operating margin increased from 4.2%-4.6%. Our adjusted EPS was up 4%, and cash conversion was high at 114%, and we're proposing to increase our dividend by 10% for the year. So the next slide gives a high-level view of the group as of today.
We have strong global coverage with 43 locations spread across 22 countries. Our 1,800 staff traded with over 24,000 customers last year. We have 27 showrooms and demo facilities, which are an important part of our value-add offering to customers and vendors alike. I've made a bold statement at the bottom of the page, but it's one I believe passionately, that we have the best team in the industry. We live and breathe AV. So in terms of our long-term strategy, the benefits of this strategy are that they drive growth, defensibility, efficiency, and profitability in the business. Ultimately, from a financial perspective, this strategy delivers long-term, strong, predictable, and defensible EPS growth. For investors not so familiar with our industry, the next slide looks at what we think makes our industry special. At a basic level, AV technology turns digital content into experiences.
In broad terms, our technology either drives improved performance or supports creativity and fun. I've given several examples of applications of AV technology in different market sectors. So where does our business fit into this exciting industry? Well, we see our purpose as being to help our customers win and then deliver successful projects and our manufacturers to reach a broad market. I then honed in on what I think are the four key differentiators of our business. These are what give us competitive advantage in the market. Firstly, our vendor relationships are broad. They're long-standing, close, symbiotic in that they are we are mutually reliant on each other, and unique in that no one else has this strength of relationship with manufacturers. One of the results of our vendor relationships is that we're exclusive or number one distributor in 80% of the relationships with our top 40 vendors.
These 40 vendors account for 80% of group sales, so you can see the vast majority of our revenue is where we have an exclusive or number one distribution relationship. Secondly, we're experts in portfolio management, managing different products, technologies, geographies. This has resulted in a seamless revenue growth every year since 2005, doubling of our GP percentage and PBT 50 x higher than it was in 2005. We also have an unrivaled depth of specialist knowledge across our 1,800-strong team. This expertise helps support customers to win and deliver great projects. Our specialist knowledge has meant that technical product sales have grown from 21% of revenue in 2016 to 59% of revenue in 2023. That's a compound growth rate of 41%. And finally, consistently high customer service is an important differentiator. Our teams are responsive, knowledgeable, understanding, effective operators.
One result of this consistency of service is that we have had relationships with all of our top 50 customers for over 10 years and many of them for over 20 years. So looking at the current landscape, there's been little change since the interim presentation. Many markets remain tough, with currently no consistent indicators of short-term improvement. The UK and Ireland and Australian markets have been particularly impacted, with some lesser impact in the U.S. and mainland Europe. We've seen continued strength in the Middle East. The corporate markets demonstrating weakness with impact on demand, particularly for unified communications solutions. Unusually, we've seen some weakness in the discretionary education spend, with some funding diverted to pay for higher salaries and energy costs. However, the live events and entertainment sectors continue to be strong. Our business remains strong and stable.
The 7 acquisitions that we made last year are bedding in well. We've completed 1 acquisition in the U.S. so far this year, with a number of others in the pipeline. This slide looks at the scale of our market opportunity. This table is the same as the one we delivered at the Capital Markets Day in late 2022. This shows that we think we have a 3%-4% share of what we believe is our addressable market. A particularly interesting market for us is the U.S., which is the biggest market in the world. We've seen strong organic growth in this market, but still have only a 1%-2% share. The bottom right shows the size of the business under different market share assumptions in 2027 and shows the scale of the opportunity that we could have.
This next slide looks at our growth and particularly how we've consistently exceeded market growth rates. The table on the left shows our long-term revenue and GP percentage trend. I think this table speaks for itself. The table on the top right shows our total percentage revenue growth in yellow of each in each of the past five years, and how much of this is organic in dark blue and what the growth rate of the market was. You can see that we've consistently outperformed the market. This is, however, only part of our story. This measures our total revenue against that market, whereas we focused in growing, particularly in certain parts of the market. Namely, more technical product areas. I'll look at this again in a little bit more detail on the next slide.
Finally, the bottom right, you can see what the projected market growth by end user segment is to 2028. All segments are expected to increase, with key growth areas being corporate, media, entertainment, and venues and events. So the next slide has, well, I think it's some very interesting analysis of the business. The graph at the top left-hand side looks at annual revenue growth since 2019. Over that five-year period, the compound growth rate of revenue was 18%, with the organic annual rate averaging 7%. However, as this middle graph shows, we've deliberately changed the mix of our sales from mainstream to technical pro products. The table at the right shows we've increased mainstream product sales at an annual compound rate of 5% in 2019, but technical products by 38%.
The table at the bottom left looks at our gross margin development and highlights the record GP percentage that we achieved in 2023. The middle graph shows that we've achieved a compound growth rate of EPS of 7% a year since 2019, and that's with two fundraisers and a pandemic to deal with. And finally, the bottom right, we look at the cash conversion and shows that we've achieved an average of 87% a year over the period. We're still guiding to an expected 70%-80% ongoing. Stephen.
Thank you. So just turning to the group P&L. As noted by Stephen, we are really pleased with our revenue growth and market share gains against a tough market backdrop in 2023. In context, we have roughly doubled sales over the last five years. Gross margins of 16.8% reflect a strategic focus on shifting our sales mix, both organically and through M&A, towards higher margin technical products. As we grow, we continue to invest in the business, but we look to do so in a measured way, with the aim to improve our net margin over time. We saw good progress on this in 2023, with adjusted operating profit margin increasing by 40 basis points to 4.6%. Interest costs have increased in recent years, obviously despite strong cash management. We saw adjusted finance costs increase from GBP 9.6 million a year.
About GBP 40 million of our debt is at fixed interest rates, with the rest floating. We'll look to fix more rates, more interest rates as the rates come down. With a conservative approach to tax planning and the reduction in the effective rate in the year to 23.1%, simply reflects a higher portion of profits being generated in the lower tax Middle East. We expect this to go up towards 26%-27% in the year ahead, as tax rates, corporation tax is introduced in the UAE, and we also get a full-year impact of the 2023 M&A, which is in higher tax rate jurisdictions. We raised a net GBP 50 million through the successful equity placing in June 2023. This increased our overall number of shares by just over 13% and obviously impacts our EPS calculations in both 2023 and 2024.
After this effect, EPS increased by 4% in 2023. Although we have a strong pipeline of acquisition opportunities, we also recognize the importance of dividends. Final dividend of GBP 0.11, which is payable in June, takes a full-year dividend of GBP 0.165, which means we've now fully recovered beyond our pre-pandemic dividend level of GBP 0.159. Going forward, we will look to pursue a progressive dividend policy, albeit with dividend per share growth expected to be a little bit slower than EPS growth on average going forward. Our balance sheet over the page was impacted by the acquisition of seven businesses throughout the year, a record for us. Including cash and debt acquired, we paid out about GBP 47 million in the year for these companies, with a further GBP 9 million paid for deferred consideration on prior year deals. Therefore, we fully deployed the GBP 50 million fundraise proceeds as expected.
As noted in previous updates, when our growth rates are a bit calmer, we expect to generate good operating cash flows. In 2023, we combined that with strong working capital discipline and achieved an operating cash conversion of 114% of adjusted EBITDA. As Stephen said, over the last five years, the average has been 87%, and I typically expect 70%-80% cash conversion, although this will be impacted by the levels of growth in any given year. This year, we've chosen to report our adjusted return on capital employed for the first time. This reflects our operating adjusted operating profit divided by total debt and equity, adjusted for acquisition related liabilities and also adding back accumulated amortization of acquired intangibles. We consider this to be a relatively conservative definition, and the overall return in 2023 was a very healthy 17.5% despite a big impact of acquisitions in the year.
As a reminder, we've now done 27 acquisitions since our IPO in 2016. Our strong cash flow reduced our net debt levels below our expectations and resulted in a leverage ratio of just over 1.1 x adjusted EBITDA. As guidance, we remain comfortable with a 1.5-2 x leverage. We believe our cash generation and long-term bank facilities can support up to GBP 50 million further M&A. And as noted on the slide, we've got about GBP 30 million of deferred M&A payments due in 2024, which also includes acquiring the remaining 20% of our Middle East business. I've added some modeling assumptions and the more detailed cash flow in the appendix if anyone wants to click. Over the page, just looking at the regional performances, to start with the UK and Ireland.
The UK and Ireland had an exceptional year in 2022 with 18% organic growth and 72% total growth, despite it being our most mature market with the highest overall market share of any region in the group. In 2023, market conditions are more challenging. Data from Futuresource shows that flat panel sales are down about 26% in 2023 and high-end projection down about 22%. Mainstream products represent about a third of our UK and Ireland activity, with our sales dropping by 15%, still indicating overall market share gains. Our strong technical brand lineup compensated for this and continued to grow by about 5% in the year. Overall, UK and Ireland revenue reduced by about 4% in 2023, but gross margins increased by 200 basis points to a record 18.1%.
This also resulted in a record adjusted operating profit of GBP 27.1 million, with net margins increasing by 30 basis points to 5.7%. The acquisitions of HHB and Pulse Cinemas were complete in the year. In the UK and Ireland, they had broadcast and high-end residential solutions to the portfolio. The integration with those is progressing really well. Just to add, if you count up the dots, you'll only see 11, but there are three offices in London on the chart on the top right. Turning to EMEA, our biggest region, we're delighted with the growth in EMEA in 2023. Despite experiencing similar headwinds to the UK market on mainstream products, we saw organic revenue growth of 8% with total growth of 9% in constant currency. This reflects further market share gains and a particularly strong performance in our Southern European and Middle East pro audio businesses.
We believe this continues to demonstrate the strength of diversity both by product and geography within the group. Over the last 2 years, we've also obtained a license to operate in Saudi Arabia. We believe we're the only pro AV business with one of those. And we are building a leading brand lineup for that market. It's early days, but the business contributed well in 2023 and is perfectly positioned for future growth in this exciting and developing country. Strong technical product growth helped to increase overall gross margins in EMEA to 15.7%, up from 14.6% the year before, and resulted in record regional EBIT at GBP 28.1 million. This represents over 28% growth and a net margin increase of 60 basis points to 4.8%. Turning to Asia. So APAC is our smallest region in the group with only 4% of revenue.
It's also the region with the highest mix of mainstream products, about 55% of overall sales. Our business in this region has faced headwinds over the last two years, both from slower post-pandemic recovery in large high-margin projects, which is something our business down there does really well, and wider market challenges, particularly towards the end of 2023. So although gross margins remain strong at 16.8%, the lack of revenue growth, which was down 7% organically, resulted in a small EBIT loss for the year of GBP 0.3 million. We've taken action. We've strengthened both our local leadership team and our global support for the region. We've made some targeted cost reductions, streamlined operations, and we're also making great progress on adding some new brand relationships and expanding the ones we've got. We're confident in the quality of our regional offering in APAC.
For example, in Australia, the mainstream market fell by 20%, over 20% in 2023, while our comparable sales only fell by 11%. It's not expected to be a big contributor as a region to the overall group revenue in the medium term, but we do believe it will return to profitability in time. Final region, North America. North America is our single biggest strategic market for the group's future growth plans, and we've made excellent progress in the year. Starin, our U.S. business, continued to expand both its vendor relationships and increase its share of wallet with its customers, resulting in organic growth of 8% in 2023. In June, we added SFM to the group. SFM is a high value-add pro audio-focused business, the market-leading brand portfolio and nearly 150 team members. Integrations exceeded all of our expectations, with deep collaboration taking place from day one.
Some really exciting brand opportunities flowing both from the group to SFM, but also from SFM back to the group. Combined revenue in North America is GBP 177 million in 2023, representing 14% of overall sales, or about 16% if you annualize the impact of SFM. As a reminder, it was zero in this region in 2019. SFM helped improve the gross margin to 17.2% for North America and adjusted operating profit increased by 49% in dollars to GBP 9.5 million. Finally, just to touch on sustainability. We've made great progress in sustainability in the year, as Stephen said. We established a clear sustainability strategy in 2022 and have been executing on it in 2023. Things we've achieved in the year include record levels of community support by our teams and amounts raised for our nominated charities. We've completed a group-wide climate risk and scenario assessment and developed our response.
We've also captured all of our direct emissions data for the group for the first time and targeting controllable emissions to be net zero by 2035. We've also stepped up engagement with the wider AV channel on long-term climate action planning, and we're developing some interesting pilots around circular economy, for the year ahead. Our teams are passionate about sustainability. They're committed to doing the right things, and we've chosen to invest more in that team in the year ahead.
Thank you. So now just a quick look at our M&A overview and our investment case for the business. So we acquire businesses, in order to either access new geographical markets or to add new technical product areas into existing businesses. After having acquired nearly 40 businesses over the years, we now have a very experienced team involved throughout the M&A program, from deal origination to integration. We completed a record number of deals in 2023, and they're bedding in well. Also, in January this year, we acquired a business called The Farm. It's a small business on the West Coast of the U.S., a very technical sales representative business. I'm very excited that they've joined the group. We have a healthy pipeline of future transactions coming through as well.
When we're looking at M&A targets, we look for businesses with a strong reputation where the team has strong technical skills, a great vendor and customer portfolio, and a culture and ethos that are similar to ours. Our typical valuations are between five and six x EBIT. We spent over GBP 200 million on acquisitions since our IPO in 2016, and we've calculated that our average return measured as EBIT over enterprise value has been 20% on those deals. The next slide gives a list of our 2023 transactions. We completed all but one of these by the time of the interim, so I won't go over them again. The final one on the list, ProdyTel, completed in December. ProdyTel is a very well-respected audio distributor specializing in particular brands and based in Nuremberg in Germany.
So I thought we'd give an example of a recent acquisition and how we've helped the business subsequently. NMK is our business in the Middle East. We acquired it on the 1st of January 2021. As part of our acquisition planning, we look at a development program for the business, and this included a few elements that we were going to really help the business to grow. So we delivered on these, and these included investment in a new experience center at a cost of over GBP 1 million. We financed the establishment of a business in Saudi Arabia with an initial investment in excess of GBP 4 million. We seconded one of our senior finance people out to NMK until they'd identified a suitable, full-time finance director of their own. We supported them with the recruitment of 63 people for their team.
We've helped them to win and launch 15 brands, which delivered GBP 4.5 million across profit in 2023. In return, in addition to delivering very strong profit and cash flow, the business has helped us to cement relationships with a number of vendors and introduce some exciting new brands into the group. Now I'd like to talk about what I think makes Midwich a good investment proposition. Firstly, we have a market-leading position in a large global market with a significant growth opportunity. Our strategy is clear and has been consistent since the IPO. We have a strong team, and our customer and vendor relationships provide effective barriers to entry. We have a proven track record of delivering strong revenue and profit growth driven by our portfolio management skills, strong cash generation, and successful M&A track record.
Finally, we have an experienced management team, high team engagement, and longstanding support for sustainability. Although, as I've mentioned earlier, current trading has its challenges, we believe there are key drivers for long-term growth in the business. This growth will be delivered organically through expected market growth, a trend of the increased use of distributors, and mostly through market share gains, particularly in the US market. We'll supplement organic growth with M&A in a fragmented market using our proven acquisition integration model and demonstrable ability to add value to acquired businesses. We'll look to continue growing our gross margin through a further increase in technical product sales supported by our value-add approach with the potential to further develop our business in software, services, and rental activities.
Finally, we'll continue to manage our cost base, gaining operating leverage as the business grows, seeing enhanced productivity through the implementation of new systems, and hopefully seeing the benefit of lower interest rates in due course. If we cast our minds forward to 2030, if we combine revenue growth of mid to high single digits plus M&A with enhanced margins and small productivity improvements, then we think we could achieve double-digit Adjusted EPS growth. That's the end of our presentation. If anyone has any questions.
Yep. US, Stephen, if you remember back to the Starin deal, I think the logic there was that they would like to structure in the gross margins in that market as a whole. I think we saw that in the numbers. I mean, your reporting is 17.2, the second highest in the group. Clearly, SFM was a bit of that. So I think my question is, you've got structured lower margins, but you've just got a higher margin business. If you strip SFM out, has there been a progress, an increase in the underlying Starin margin that you can point to? And if so, what's driven that? Just more technical.
I think it's pretty stable, actually.
Starin is stable?
Yeah. It's just the sort of most of the mix affects SFM. So they've got the right product set, but it's not moving massively at this point in time.
Right. So that high margin, we can look at SFM and say it's.
It's much higher, yeah.
Okay. And then that margin itself, one would assume would stay at its higher level with the vendor.
You'll have an annualizing effect in 2024 as well through the margin.
Yeah.
Double-digit EPS growth medium term, how would you define that?
Oh, well, more than 9.9%.
No, no, nothing.
Sorry.
Nothing. Double-digit, the timeline, how simple is that?
Well, I think in here we're quoted 2030, whatever that is, that's 7, 8, 6 years away. So it's that sort of 5-year time, 5, 6-year time horizon. Feels like a reasonable assumption based on you put all the building blocks together, which individually feel reasonable, and you end up with a quite strong EPS growth of that period.
On cash conversion, you're saying 78% this year, back to 78%?
Yeah. I hope that's a bit conservative, but.
Okay. Still smashing it on the working capital management.
Well, we kind of had some return on that earlier. We sort of went through that whole product shortages, boats getting stuck in Suez Canal, malarkey, over the sort of COVID period, and things are pretty much back to normal now. So there's not really much supply chain disruption. So working capital returns to sales, I think, fell back from 12.5 to 12.23. That feels like a reasonable level, so it should track more growth, I think, for the next few years. But we'll keep focusing on that a bit more.
And the Microsoft installation.
PRP?
ERP, yeah. How's that going?
A bit slower than planned, but I think we're still in testing mode. But it's due to go live soon this year. I've stopped giving a date.
What about CapEx in that regard?
We spent a little bit more, actually. I think we spent GBP 15 rather than my guidance of GBP 12. I think it'll probably be more at GBP 12 this year, and then hopefully it starts to go away and so forth. Because that's probably two-thirds of our CapEx, maybe a bit more.
Okay. The last question is on the floor. Just one more question on Midwich Ignite.
Yes.
Can you talk to us a bit of background to that? What's the idea? How much are you going to contribute to it? What kind of returns might you hope for over time?
It's obvious we've just launched it. The idea is that it's our sort of corporate venture capital arm. So looking at investing in very early-stage businesses within the AV sector and as relevant to us as we can find them. The team of two. One is Alex Kemanes, who runs our NMK business. So this is something that's personal interest to him, and he's been very involved in early-stage investments. So we've sort of committed internally to a fairly modest amount of money initially. We'll see how it goes. It's a new thing for us. We've had a lot of interest in it, actually. The reason for doing it is partly to get ourselves into new technologies, new products, and services earlier so that we're in the right place when these come through into fruition.
Obviously, to look to achieve a return on our investments and also to indicate to the market that we are very much embedded in the AV market. We're committed to it. We want to invest and support the development of businesses in our sector. In returns, it's very difficult to say. Early-stage businesses, some of them won't succeed. Some of them hopefully will do very well. So we were certainly not hoping that we'll achieve a return that's less than the group does. But it's going to be over quite a long period of time, isn't it? So interesting, really interesting new activity. Got a lot of raised eyebrows and interested.
You've been surprised by the level of incoming?
Yes. I'm really pleased. Yes. I wasn't sure. You never know with these sorts of things till you get going. So we've had a lot of interest from people. We're absolutely immersed in the AV world, and we think for a business that's trying to launch or launch a new product, launch a new service, we've got so much to offer them in terms of either not just access to market, but in terms of market intelligence. We do this for our vendors nowadays. If they're looking at a go-to-market strategy, we can help them to develop it. Well, it's the same principle for new businesses. We should really be able to help them to identify what they should be doing and how they should be getting to market.
Being very lazy and going back to those 2030 markets ambitions, how are you seeing the growth rates of mainstream and technical in there? Because technical's had a great run from a lower base. Presumably, will now be a little bit slower, but still the driver of that momentum?
It has been the driver of our momentum for a long time, and I think that will continue. That will be more and more of our focus. Higher margin products, more technical products, they require more skill, more selling activity, and that makes us a more defensible and more valuable business that's adding value to the market. So I think that will be. I don't see mainstream product going. Almost every AV installation's got a display or two or a projector in it. And it's an important part of getting into projects is having access to those sorts of products and being able to supply them. So the trend has been for reducing mainstream product sales as a percentage of the overall business. I would think that will probably continue, but I don't think it will certainly won't disappear.
In terms of the pricing expectations of vendors, you've been able to keep a reasonably tight range of multiples paid. You've just done a deal in the West Coast. It sounds like you're still well placed as a group that people want to join. It's not just the exit multiple, but.
I think for us, that's the most important thing. If you look at the reasons why businesses are attractive to us, they're really about people in the business that will buy their skills, their relationships. So it's really important that they're bought into us. And yeah, okay, they need to get a fair price for their business, but we want them to continue and see the benefits of joining the group. And I think Midwich is the place you'd want your business to go in our industry if you're wanting to if you're thinking about how you want to develop it in the future or sometimes people looking to retire themselves, having put in place a management team. And I think we're a good home. I think we look after people, certainly try to do that.
Okay.
Very good.
The market number on page 11, it's still pending. We don't know what it is yet. Is your sense it's roughly you have 1% in the year?
For the AVIXA numbers, yeah. They publish numbers in sort of the middle of the year. So they publish their 2023 estimates in the middle of 2023. And we think that they've revised them once already. We think there'll be another revision coming through for how 2023 actually looked. We'll have a good look. I'd be very surprised if our growth was less than the market or a decline or whatever it was. If the market grew more than us, and particularly if we look at those parts of the market where we operate, I think there's probably been some stronger growth in the Chinese, Indian markets, particularly China. Probably seen some stronger growth in the rest of the world. But we'll wait and see. There are a number of different research organisations.
AVIXA tends to cover the whole market, but other ones like Futuresource and Context tend to focus on specific product sets, which are easier to measure. Displays and projection is the sort of mainstream product areas. In the appendices, you'll see the results for those for 2023, and they show significant drops in those product areas, much higher than we've seen in ours. But AVs cover so many different segments, and it's really hard to get much information on the overall market.
That segment you're talking about, do you think do they measure in the same way that you're sort of roughly reporting that sort of technical other? Would they measure analogous product sets, do you think?
They have probably about a dozen different product areas, which you can pretty well map to. You bundle up different product sets to make what I've called very loosely technical products and mainstreams in there. I mean, we've tended to have a bigger share of our businesses in being in the displays and projection in the overall market historically. I think that's slowly changing as you've seen in here. But there are many different aspects of our market and many different niches and very difficult to collect all the data together. Okay. Any more questions?
Many thanks, Stephen. If anyone online has a question, please can you raise your virtual hand, and I can let go into the room? We have no questions online, gents. So over to you for any closing comments.
Yes. Thank you. So a great year last year for the group in the face of a very challenging market. The market continues in many areas to be challenging this year, but I'm very confident that we'll outperform what's happening. We have a fantastic team, and the business is getting stronger and stronger over the years. So I'm looking forward to the rest of the year. Thank you.