Coronavirus Update

Michelmersh Brick Holdings Plc - Final Results

Financial Highlights

  • Revenue up 22% to £46.3 million (2017: £37.9 million)
  • Improved gross margin by 3.5% to 38.9% (2017: 35.4%)
  • Underlying1 Operating profit increased by 45% to £8.0 million (2017: £5.4 million)
  • Basic EPS at 5.8pence up 118% over 2017
  • Underlying1 EBITDA increased 38% to £10.9 million (2017: £7.9 million)
  • Cash generated by operations of £11.7 million (2017: £6.9 million), representing 165% of Operating profit
  • Total dividend increased by 49% to 3.20 pence per share for the year


Operational Highlights

  • Full operational integration of the Carlton plant
  • Successful restructure of operations at the Michelmersh plant
  • Strong, balanced forward order book into Q1 2019 - 10.5% ahead of H1 2018
  • Contract signed for Carlton project targeting enhanced efficiency & output
  • New, key, high-value products introduced to the market
  • Post-2018 period, completed acquisition of Floren giving access to European markets



Martin Warner, Chairman at Michelmersh Brick Holdings, commented: 


"The acquisitions of Carlton and Floren demonstrate that the Group has ambition to expand its geographic footprint and product range. However, this growth is set within strict parameters to preserve the character and position of Michelmersh in its sector. The Board is equally committed to nurturing its existing business and investing to improve efficiency, as well as acting as a good corporate citizen for the benefit of all its stakeholders."



1Underlying results reflect the statutory results excluding one-off items that arose in connection with the restructure of operations at the Michelmersh plant (2017 costs associated with the acquisition of Carlton.) 








I am delighted to report on another significant year of growth and achievement for the Group. The exceptional financial performance outlined below exceeds that of previous years, with the growth in earnings maintaining the Group's progressive dividend policy. Since acquiring and integrating Carlton in 2017, the Group is now developing with a broader base of activity and benefitting from its greater scale and capacity. At the same time, the Group has remained focused on the requirements of its customers and developing the products they need.


Post year-end, the Group has successfully completed the acquisition of Floren, a Belgium-based clay brick manufacturing business, which enhances the Group's scale, expands its customer offering and deepens its market presence. The well-established and invested production facility, which is based near Antwerp, complements the Group's premium centric market strategy with a quality range of wirecut brick products which caters for the Belgian and UK markets.


Financial Highlights


The strong growth in turnover and profitability reflects both the contribution of Carlton for a full twelve-month period, for the first time, and the excellent performance from the established members of the Group.






Turnover (£m)




Gross Margin




Operating profit (pre exceptional costs1) (£m)




Profit before tax (pre exceptional costs1(£m)




Basic Earnings per share (pence)








Net cash generated by operations





1Exceptional costs in 2018 relate to the costs associated with the restructuring of operations at the Michelmersh plant being redundancy costs (£390,000) and write down of associated plant (£540,000). In 2017, exceptional costs of £617,000 included an adjustment to cost of sales to reflect fair value and reorganisation following the acquisition of Carlton

2EBITDA is displayed as Operating profit pre - exceptional costs and depreciation of £1,842,000 (2017: £1,455,000) and amortisation of £1,138,000 (2017: £1,038,000) 


Cash and Net Debt


Having acquired Carlton in 2017 principally out of cash and through new debt facilities, the Group has made strong progress in generating cash to reduce its net debt level in 2018. Net debt fell from £17.5 million at 31 December 2017 to under £12 million at 31 December 2018 and strong cash flows post year end means that reaching the target of below one-times EBITDA is now within touching distance. The Group has also improved its interest margin as a result of the profit and cash performance under the terms of its facilities. The term loan stood at just over £17 million at the year end, with a healthy cash balance to meet dividend payments and working capital requirements.


During the year, the Group's strong operating cash flow led to the repayment of £1 million that had been drawn in 2017 under our revolving credit facility and the repayment of the remaining deferred consideration from the Carlton acquisition.


Taking full advantage of the strength of cash flow and with the support of its bank, HSBC, the Group completed the acquisition of Floren in February 2019, in an accelerated timeframe using existing facilities with a completion payment of €9.4 million in cash. Subsequent to the acquisition, the Group issued 5.5 million new shares following a share placing which raised gross proceeds of £5 million to reduce the level of increased debt. 


Assets and working capital


Through 2018, the Group's net assets grew by £4.4 million with net assets per share improving by 7%. Net working capital reduced marginally with demand for product outstripping production output and inventory levels fell by £0.9 million.


Investment in plant amounted to £2 million which included the project to automate the unloading of the kiln at Carlton. This project will generate cost savings and reduce downtime and may, after further investment in other processes, increase the capacity of the plant. 


The Directors have reviewed the Group's land assets and c. £600,000 uplift in value has resulted, principally in respect of the land at Telford encompassing the quarry and ancillary land around the Blockleys site. This followed a review by Carter Jonas on the potential future alternative use of the site, as the mineral is extracted, a new road accessway completed and the land remediated on a phased basis. This is a long-term cycle that is expected to yield cash proceeds in tranches, albeit the present value of the cash flow is reflected in the current values.


The Company continues to nurture the prospect of future alternative value at all of the sites, which in total amount to nearly 500 acres, whilst maximising the opportunities of brick making.




On 30 June 2018, the Group paid a final dividend in respect of 2017 of 1.45 pence per ordinary share bringing the total dividend for 2017 to 2.15 pence. In January 2019, the Group paid an interim dividend of 1.06 pence per ordinary share. The Board proposes a final dividend of 2.14 pence bringing the total dividend in respect of 2018 to 3.2 pence per share, a 49% increase over the previous period reflecting the improved performance of the Group, satisfactory debt levels and confidence in future prospects.


The Board has this year added a resolution to the AGM to introduce the option for shareholders to elect to take the dividend in shares rather than cash. A detailed circular accompanies this Annual Report that provides full details of this additional flexibility.


Board and Employees


In the early part of 2018 the Board took the step to restructure the Michelmersh plant, which was deemed necessary in order to secure its future and adapt accordingly to where product demand was coming from. As a consequence of this decision I can report that the Michelmersh plant performance has improved. I am also particularly pleased to note that all employees made redundant during the restructuring process have moved on to further employment outside the Group.


We welcome the employees of Floren to the Group and look forward to working with them and anticipate that the Group will benefit from the shared expertise that the Floren team brings.


The success of 2018 and recent years reflects on the individual and collective performance of the Group's employees and I must thank them all on behalf of the shareholders and all stakeholders.


The exercise surrounding the adoption of the QCA Corporate Governance Code has been undertaken with enthusiasm and rigour. We found that the process confirmed our belief that the Group has a robust structure and an open attitude to all of our stakeholders.




As in previous years, the outlook for the coming year is positive in that demand for our products remains strong and the operational environment conducive to a robust brick industry. The UK still manufactures less bricks than being used and capacity cannot change significantly over the short term.


Whilst Brexit has raised many concerns across the UK business landscape, a specific review of markets, customers and suppliers has not revealed significant threats to our business other than a wider economic downturn, whilst the political landscape around the construction industry gives an expectation that it will be less affected than elsewhere.


The Group has established scale and strength from the acquisitions in 2017 and 2019 and should be better placed to progress and prosper as a result. The Board are intent on nurturing the business through investment in assets and people and will continue to work down debt and reward investors through a progressive dividend policy.


Martin Warner


25 March 2019