Shares in Michelmersh Brick (MBH) fell 8 per cent in early trading after the UK's leading independent brick maker indicated that activity in the second half of the year will slow down from a very busy first half. But returning to a more sustainable rate of growth has to be welcomed, and the group's prospects remain underpinned by the continuing imbalance between supply and demand in the housing market.
Michelmersh delivered strong first-half figures, demonstrating the high level of gearing in the operating model. So while turnover rose 13 per cent, operating profits nearly doubled to £2.7m. Strong demand for bricks enabled the group to enjoy a 9 per cent increase in prices. And with the cost of sales only marginally higher, gross margins increased by 5 percentage points to 38.6 per cent. Lower energy costs also helped, and the group has hedged these costs until 2017 to take advantage of current benign prices.
Crucially, cash flow grew strongly, enabling the early repayment of a £5m loan. And with a £1.5m deferred payment due in October from the sale of land to Bovis Homes, the group expects to be cash positive by the end of the year.
Analysts at Cenkos expect full-year pre-tax profits of £3.8m and EPS of 3.7p (from £2.9m and 3p in 2014).
| MICHELMERSH BRICK (MBH) | ||||
|---|---|---|---|---|
| ORD PRICE: | 86p | MARKET VALUE: | £70m | |
| TOUCH: | 85-87p | 12-MONTH HIGH: | 96p | LOW: 57p |
| DIVIDEND YIELD: | 0.6% | PE RATIO: | 22 | |
| NET ASSET VALUE: | 60p | NET DEBT: | 2% | |
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2014 | 13.6 | 1.3 | 1.2 | nil |
| 2015 | 15.3 | 2.5 | 2.5 | nil |
| % change | +13 | +96 | +99 | - |
Ex-div:na Payment:na | ||||
