News Column

Michelmersh Brick To Beat Market Expectations As It Swings To Profit

July 21, 2014

Hana Stewart-Smith

LONDON (Alliance News) - Michelmersh Brick Holdings PLC said Monday that it will exceed current market expectations for pretax profit in 2014 if maintains its performance, after it swung to profit in the half year to end-June.

The brick, land development and landfill company posted a pretax profit of GBP1.3 million, swinging from a loss of GBP340,000, as revenue rose to GBP4.5 million from GBP3.1 million. In the previous year the company also posted restructuring costs of GBP262,000, which didn't reoccur.

Michelmersh manufactured 33.7 million bricks during the half year, up from 33.4 million, and despatched 34.0 million bricks, down from 35.2 million. Average selling prices were up 13%, it said.

The company said that the brick industry was benefiting from recovering demand in UK construction and is seeing the first signs of increasing prices for bricks since 2008.

Michelmersh's landfill strategy has developed through 2014, it said, as income from the segment started the year strongly but overall fell marginally behind the first half of 2013. It said volumes declined after rates were increased to almost double what it achieve in the segment in the first half of 2013. As a result, contribution from the division of GBP109,000 was 22% greater than that in the first half of 2013.

The company said it has opted not to pay an interim dividend. It said it would be in a position to recommence dividends within the foreseeable future provided that its cash reserves are not used for profit-generating investments instead.

The company said that its project to increase capacity at its Freshfield lane site by 20% is well underway, and the installation programme is half complete. Increased production will come on stream in late 2014, it said, which will deliver additional capacity of six million units for sale in 2015.

Michelmersh completed the restructuring of its Telford site, and the plant is now operating from a more compact facility, it said. It is continuing to evaluate the site in light of improved brick market conditions, and said there was a "number of options" open to it.

The company said it has received consent for a low-level restoration scheme at its Charnwood Quarry site, and has now started a consultation process to bring forward a scheme for around 200 houses.

Michelmersh said that the national construction output landscape has improved. In the first half of the year, focus was on London and the South East, and the company said that whilst this remained an important long-term market, it has seen a spread of new work and sector improvements at a national level. It has continued to get new orders in Scotland and is continuing to grow its market position there.

"The group is well positioned to prosper from improved industry dynamics, particularly as our additional production comes on stream and we progress our various asset opportunities," said Chairman Eric Gadsden in a statement.

Shares in Michelmersh were trading up 0.9% at 73.40 pence Monday morning.

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Source: Alliance News

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