Michelmersh Brick Holdings Plc – Half-year Report

Financial Highlights

Operational Highlights:

·      Full operational integration of the Carlton plant

·      Successful restructuring of operations at the Michelmersh plant

·      Strong, balanced order book into Q1 2019 – 10.5% ahead of June 2017

·      Contract signed for Carlton investment project targeting enhanced efficiency and output

·      New key high value products introduced to the market

·      Increased interim dividend

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.

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