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Michelmersh remains upbeat

Full-year profit is expected to beat expectations, as lower volume growth in the first half is offset by a stronger second half, a flat cost base and higher selling prices.
October 19, 2015

Shares in Michelmersh Brick (MBH) fell 7 per cent as the brick manufacturer reported slower than expected delivery volumes. The reaction is hard to justify, given that the slowdown was flagged at the time of the half-year results announcement in July. In addition, lower energy costs and operational efficiencies mean that full-year profit is likely to exceed market expectations.

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Commenting on the slower than expected volume growth, chief executive Martin Warner pointed to the effects of slower construction in the run-up to the general election, but stressed that trading in the second half has been better than expected.

Continued demand from new housing construction, together with a steady increase in selling prices - higher than budgeted for - will continue to underpin revenue growth. And while price rises are expected to moderate, Mr Warner added that more modest price increases should ensure a much more sustainable trend.

Analysts at Cenkos have upgraded gross margin forecasts from 33.4 per cent to 36.5 per cent for the year to December, and increased their pre-tax profit forecast from £3.8m to £4.2m.