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RNS

Half-year Report

Released 07:30 04-Sep-2018

RNS Number : 6812Z
Michelmersh Brick Holdings PLC
04 September 2018
 

 

4 September 2018

Michelmersh Brick Holdings Plc

("MBH", the "Company", or the "Group")

Half Year Results for the six months ended 30 June 2018

 

Michelmersh Brick Holdings Plc (AIM:MBH), the specialist brick manufacturer, is pleased to report its half year results for the six months ended 30 June 2018.

 

Financial Highlights



30 June 2018

30 June  2017

Change

 

Turnover


        £23.1m

         £16.2m

+ 43%

 

Gross margin

40.4%

35.6%

+ 4.8%

 

Underlying1 EBITDA*


          £5.6m

           £3.0m

+ 87%

 

Underlying1 EBIT

          £4.1m

           £2.4m

+ 70%


Underlying1 PBT


          £3.8m

           £2.4m

+ 57%

 

Underlying1 EPS


            4.2p

             2.6p

+ 60%

 

Interim Dividend

          1.06p

             0.70p

+ 51%

 

Cash from operations

          £2.7m

£1.1m

+ 135%

 

 

Operational Highlights:

·     

·     

·     

·     

·     

·     

 

Commenting on the results, Martin Warner, Chairman of Michelmersh Brick Holdings Plc, said:

"The strong growth achieved during the period reflects not only the successful acquisition and integration of Carlton but also improved sales and operational progress across our other divisions. With a robust order book for the rest of this year and into next year, and the market demand for bricks remaining strong, the outlook is positive and we are confident in meeting our full year targets."

 

* EBITDA as disclosed is Operating Profit with depreciation and amortisation added back.

1 References to 'underlying' excludes items classed as exceptional

Michelmersh Brick Holdings Plc

Frank Hanna, Joint CEO

Stephen Morgan, Finance Director

 

01825 430 412

Cenkos Securities plc (NOMAD)

Max Hartley

Harry Hargreaves

Julian Morse (Sales)

020 7397 8900

Yellow Jersey PR

Charles Goodwin

Abena Affum

07747 788 221

07555 159 808

 

 

About Michelmersh Brick Holdings PLC:

 

Michelmersh Brick Holdings PLC is a business with six market leading brands: Blockleys, Carlton, Charnwood, Freshfield Lane, Michelmersh and Hathern Terra Cotta. These divisions operate within a fully integrated business combining the manufacture of clay bricks, tiles and pavers. The Group also includes a landfill operator, New Acres Limited, and seeks to develop future landfill and development opportunities on ancillary land assets.

 

Established in 1997, the Company has grown through acquisition and organic growth into a profitable and asset rich business, producing over 100 million clay bricks, tiles and pavers per annum. Michelmersh currently owns most of the UK's premium manufacturing brick brands and is a leading specification brick and clay paving manufacturer.

 

Michelmersh strives to be a well invested, long term, sustainable, environmentally responsible business. Opportunity, training and security for all employees, whilst meeting the needs of stakeholders are at the forefront of everything we do. We aim to lead the way in producing some of Britain's premium clay products and enhancing our environment by adding value to the architectural landscape for generations to come.

 

We are Michelmersh Brick Holdings PLC: we are "Britain's Brick Specialist".

 

Please visit the Group's websites at: www.mbhplc.co.uk and www.bimbricks.com



 

 

Chairman's Statement

 

The first half of 2018 was another busy and successful period for the Group which resulted in positive growth in all of the underlying key performance indicators, despite the difficult winter weather in the early part of the year. Reported profit before taxation of £2.9 million was double that of the corresponding period (2017: 1.4 million) and excluding exceptional items in both periods was up 57%. Turnover was up 43% with growth achieved in each of the Group's divisions excluding the Michelmersh plant, which was successfully restructured in the period. The plant has delivered an improved performance since the restructuring in February 2018 and we anticipate this being maintained in the second half of the year. We have a strong, well-balanced forward order book of just over 67 million units as of 30 June this year, which was 10.5% ahead of the same period last year, indicating continued robust deliveries for the Group for H2 and the early part of 2019.

 

Underlying EBITDA* is perhaps a better measure of performance as it expresses operational performance and excludes non-cash charges for amortisation and depreciation; the Group's H1 2018 underling EBITDA at £5.6 million was 87% greater than that for the comparative period in 2017. Whilst Carlton is a significant part of that growth, the performance of all of the Group's plants has been pleasing. Each of our plants have different dynamics that shift with the market. In this year, Blockleys, in particular, has had a very strong first half and it is expected that this strong performance will continue. This reflects the investment put into the plant over the years but also the hard work and expertise of the production and sales teams in place.

 

Underlying Earnings per share (excluding amortisation of intangibles and exceptional items) increased by 60% to 4.2 pence (2017: 2.6 pence) for the six months and 7.5 pence for the last twelve months.

 

Carlton Integration

The Group's brickmaking activities are now fully integrated since the business of Carlton was transferred into the main operating company, Michelmersh Brick UK Limited, with effect from 31 December 2017. Operationally, culturally and legally, Carlton is now a division within the Group. The plant has been assessed for future investment and several projects have been identified that are expected to generate ongoing cost savings, reduce risk of interruption and ultimately provide increased capacity. The Group has entered into a contract for the first phase and both off-site and on-site work has now commenced.

References to 'underlying' excludes items classed as exceptional

*Earnings before interest taxation and depreciation and amortisation excluding exceptional items that are material and non-recurring

 

Michelmersh Plant

In February 2018, the Board made the difficult decision to cease hand-made brick and tile production at the Michelmersh plant in order to streamline operations and improve operational performance. The Group's hand-made brick production has now been fully migrated to our dedicated hand-made plant at Charnwood. The six months income statement shows the financial consequences which were the costs of redundancy of the majority of the workforce and the accelerated depreciation of specific plant and machinery no longer required. These costs have been displayed as exceptional on the face of the financial statements and are non-recurring. Since the change in operations at the plant, the concentration on machine-made bricks has seen better returns than anticipated with enhanced revenue from the sale of the hand-made and tile stocks. Operating on a lower output has reduced risk and increased contribution from the site as expected. 

Net Debt and Working Capital

Cash generated from operating activities was £2.7 million and represented a significant improvement over the comparative period and is expected to continue through the second half of the year, with net debt expected to be below one times EBITDA during 2019. The strong cash flow has allowed early repayment of the remaining £1.75 million of the deferred consideration for the acquisition of Carlton in August 2018 which will further reduce the Group's ongoing interest burden. Net debt at the end of June 2018 stood at £18.1 million (30 June 2017: £20.7 million) after paying £1.9 million in dividends during the period. Half year cash balances were adversely affected by delayed customer receipts as the month end fell on a weekend with a strong subsequent cash inflow the following week.

Dividend

 

The trading performance and continued cash generation of the Group provides the Board with the confidence to declare an increased interim dividend of 1.06 pence per ordinary share (2017: 0.7 pence) in line with the stated progressive dividend policy.  The interim dividend will be payable on 11 January 2019 to members on the share register on 14 December 2018.

Outlook

The Group has produced another positive trading performance whilst successfully completing both the integration of Carlton and the restructuring of the Michelmersh plant.  Industry statistics support the backdrop that demand for bricks remains strong, with imports filling shortfalls and industry brick stocks near historic lows. Housebuilders remain confident in the near to medium term. The uncertainty around Brexit does not seem to have entered the activity pattern of housebuilding or the Repair, Maintenance and Improvement market, but remains an unknown that could affect the industry going forward. Furthermore, two new key high value products were introduced in the first half of 2018 and these will begin to make a positive contribution in the latter part of 2018 and into 2019.

Looking ahead, production in the second half is traditionally lower than the first half due to planned maintenance shut downs.  The strong trading in the first six months also depleted plant stock levels due to high volumes outstripping output.  More widely, energy input prices that have risen over the recent months, are forecast to continue.  Despite this, with the benefits of the significant acquisition made last year, alongside the continued performance of our well invested works and future investment plans, the Board remains confident of delivering results for the full year in-line with market expectations. 

 

M R Warner

 

 

 

CHAIRMAN

Consolidated Income Statement

 








6 months

6 months

12 months



ended 30

ended 30

ended 31



June

 

2017

June

 

2017

December

2016



2018

2017

2017



£'000

£'000

£'000



 

Unaudited

 

Unaudited

 

Audited

Revenue


23,136

16,180

37,867

Cost of sales  


(13,775)

(10,420)

(24,449)






Gross profit


9,361

5,760

13,418

Administration expenses      - Underlying


(5,343)

(3,363)

(8,473)

- Exceptional


(930)1

-

(137)2

Other income


81

17

49






Operating profit


3,169

2,414

4,857

Exceptional item2


-

(1,044)

(1,195)

Finance (expense) / income


(312)

5

(323)






Profit before taxation


2,857

1,375

3,339

Taxation


(657)

(275)

(1,127)

 

Profit for the period


 

2,200

 

1,100

 

2,212

 

Basic earnings per share


 

2.55 p

 

1.35 p

 

2.64 p

Diluted earnings per share


2.50 p

1.34 p

2.60 p






 

 

Exceptional item1 relates to costs incurred in relation to the reconfiguration of activities at the Michelmersh plant in respect of redundancies and plant accelerated depreciation.

Exceptional item2 relates to costs incurred in connection with the acquisition of Carlton Main Brickworks Limited.


 

Consolidated Statement of Comprehensive Income

 

 

6 months

6 months

12 months


ended

30 June

2018

ended

30 June

2017

ended

31 December

2017


£'000

£'000

£'000


Unaudited

Unaudited

Audited





Profit for the financial period

2,200

1,100

2,212





Other comprehensive income

Items which will not subsequently be reclassified to profit or loss




Revaluation deficit of property, plant and equipment

-

-

(322)

Revaluation surplus of property, plant & equipment

-

-

2,069

Deferred tax on revaluation

-

-

(170)





Other comprehensive income for the period net of tax

-

-

1,577





Total comprehensive income for




the financial period

2,200

1,100

3,789





 

 

 

 

 



Consolidated Balance Sheet

 

 

As at

As at

As at

 


 30 June 2018

 30 June 2017

 31 December 2017



£'000

£'000

£'000



Unaudited

Unaudited

Audited

Assets





Non-current assets





Intangible assets


23,517

23,687

24,086

Property, plant and equipment


51,449

50,368

52,626








74,966

74,055

76,712






Current assets





Inventories


8,811

8,685

9,161

Trade and other receivables


11,054

10,140

6,934

Cash and cash equivalents


2,571

6,505

4,128






Total current assets


22,436

25,330

20,223






Total assets


97,402

99,385

96,935

Liabilities





Current liabilities





Trade and other payables


7,372

8,914

6,462

Interest bearing borrowings


2,666

6,946

1,791

Corporation tax payable


719

1,101

900

Total current liabilities


10,757

5,420

16,961

5,420

9,153






Non-current liabilities





Interest bearing borrowings


18,049

20,281

19,809

Deferred tax liabilities


8,493

5,545

8,590



26,542

25,826

28,399






Total liabilities


37,299

42,787

37,552






Net assets


60,103

56,598

59,383






Equity attributable to equity holders





Share capital

   

17,243

17,234

17,234

Share premium account


11,518

13,939

11,495

Other reserves


21,156

18,510

20,816

Retained earnings


10,186

6,915

9,838






Total equity


60,103

56,598

59,383








Consolidated Statement of Changes in Equity

 

 


Share

Share

Other

Retained

Total


Capital

Premium

Reserves

Earnings

Equity








£'000

£'000

£'000

£'000

£'000







As at 1 January 2017

16,294

11,495

18,410

7,444

53,643







Profit for the period

-

-

-

1,100

1,100

 

Total comprehensive income

-

-

-

1,100

1,100

Shares issued in the period

940

-

2,444*

-

3,384

Share based payment

-

-

100

-

100

Dividends paid

-

-

-

(1,629)

(1,629)

As at 30 June 2017

17,234

11,495

20,954

6,915

56,598







Profit for the period

-

-

-

1,112

1,112

Revaluation deficit

-

-

(322)

-

(322)

Revaluation surplus

-

-

2,069

-

2,069

Released on sale of land

-

-

(1,811)

1,811

-

Deferred tax on revaluation

-

-

(170)

-

(170)

Total comprehensive income

-

 

-

(234)

2,923

2,689

Share based payment

-

-

96

-

96

As at 31 December 2017

17,234

11,495

20,816

9,838

59,383






 

2,212

Profit for the period

-

-

-

2,200

2,200

Total comprehensive income

-

 

-

-

2,200

2,200

Shares issued in the period

9

23

-

-

32

Share based payment

-

-

340

-

340

Dividends paid

-

-

-

(1,852)

(1,852)







As at 30 June 2018

17,243

11,518

21,156

10,186

60,103







 

 

*Excess of issue price over nominal value for shares issued as part consideration for the acquisition of Carlton Main Brickworks Limited originally treated as share premium has been re-classified as merger reserve.



 

Consolidated Statement of Cash Flows

 


6 months

6 months

12 months

 


ended

30 June

2016

ended

30 June

2015

 ended

 31 December

2015

 


£'000

£'000

£'000

 


30 June

30 June

31 December

 


2018

2017

2017

 


Unaudited

Unaudited

Audited

 





 

Net cash generated by operations

2,670

1,138

6,869

 

Taxation paid

(935)

(376)

(1,760)

 





 

Net cash generated by operating activities

1,735

752

5,109

 





 

Cash flows from investing activities




 

Purchase of property, plant and equipment

(316)

(344)

(1,002)

 

Purchase of subsidiary undertaking net of cash acquired

-

(23,695)

(23,698)

 

Proceeds from sale of intangibles

-

-

155

 

Proceeds from sale of land

-

2,680

2,680

 

Proceeds on disposal of property, plant and equipment

42

12

11

 





 

Net cash used in investing activities

Net cash used in investing activities

(274)

(1,004)

(21,347)

(1,004)

(21,854)

(227)

 





 

Cash flows from financing activities




 

Bank loan drawdown

-

24,000

24,000

 

Interest (paid) /received

(312)

5

(323)

 

Repayment of interest bearing liabilities

(885)

-

(5,899)

 

Proceeds of share issue

32

4

4

 

Dividends paid

(1,853)

(1,629)

(1,629)

 





 

 Net cash (used in) / generated by financing activities

(3,018)

22,380

16,153

 





 





 

Net (decrease) / increase in cash and cash equivalents

(1,557)

1,785

(592)

 





 

Cash and cash equivalents at beginning of period

4,128

4,720

4,720

 





 

Cash and cash equivalents at end of period

2,571

6,505

4,128

 





 

Cash and cash equivalents comprise:




Cash at bank and in hand

2,571

6,505

4,128

Bank overdraft

-

-

-






2,571

6,505

4,128





 



NOTES TO THE GROUP INTERIM REPORT

 

1.     GENERAL INFORMATION

Michelmersh Brick Holdings Plc ("the Company") is a public limited company incorporated in the United Kingdom under the Companies Act 2006 (registration number 3462378). The Company is domiciled in the United Kingdom and its registered address is Freshfield Lane, Danehill, Haywards Heath, West Sussex, RH17 7HH.  The Company's Ordinary Shares are traded on the AIM Market of the London Stock Exchange plc. Copies of the Interim Report and Annual Report and Accounts may be obtained from the address above, or at www.mbhplc.co.uk.

 

2.     ACCOUNTING POLICIES

Basis of preparation

The interim financial information in this report has been prepared using accounting policies consistent with IFRS as adopted by the European Union. IFRS is subject to amendment and interpretation by the International Accounting Standards Board (IASB) and the IFRS Interpretations Committee and there is an ongoing process of review and endorsement by the European Commission. The financial information has been prepared on the basis of IFRS that the Directors expect to be adopted by the European Union and applicable as at 31 December 2018. "The group has chosen not to adopt IAS 34 "Interim Financial Statements" in preparing the interim financial information."

 

Statutory accounts

Financial information contained in this document does not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006 ("the Act"). The statutory accounts for the year ended 31 December 2017 have been filed with the Registrar of Companies. The report of the auditors on those statutory accounts was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under section 498(2) or (3) of the Act.

 

The financial information for the six months ended 30 June 2018 and 30 June 2017 is unaudited.

 

3.     EARNINGS PER SHARE

The calculation of earnings per share is based on a profit of £2,200,000 (six months ended 30 June 2017 -£1,100,000; 12 months ended 31 December 2017-£2,212,000) and 86,191,712 (at 30 June 2017 81,654,156 and 31 December 2017, 83,913,140) being the weighted average number of ordinary shares in issue.

 

                                                                                   Diluted

 

At 30 June 2017 there were 1,811,232 (30 June 2017: 151,796, and at 31 December 2017 1,138,070) dilutive shares under option leading to 88,002,944 (30 June 2017: 81,806,412, and at 31 December 2017 85,051,210) weighted average number of ordinary shares for the purposes of diluted earnings per share. A calculation is performed to determine the number of share options that are potentially dilutive based on the number of shares that could have been acquired at fair value, considering the monetary value of the subscription rights attached to outstanding share options.

 


This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
 
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Half-year Report - RNS