TIDMMBH
RNS Number : 1088I
Michelmersh Brick Holdings PLC
23 March 2015
23 March 2015
Michelmersh Brick Holdings Plc
("MBH" or the "Group")
FINAL RESULTS
Improved trading, reduced borrowings,
and dividend reinstated
Michelmersh Brick Holdings (AIM:MBH) , the specialist brick
manufacturer and landfill company, is pleased to report its audited
final results for the year ended 31 December 2014, reflecting
another positive period for the Group as the industry continues to
progress.
Financial Highlights
-- Turnover up 10% to GBP28.5 million (2013: GBP25.9million);
-- Operating profit of GBP2.8 million (2013: 1.4 million), the
best result since the business floated in 2004;
-- Net debt further reduced from GBP4.2 million to GBP2.1 million;
-- Capital expenditure of just over GBP2 million for Freshfield
Lane expansion project and completion of Telford reorganisation;
and
-- Dividend reinstated - 0.5 pence per share payable for the period.
Operational Highlights
-- Strong progress in an improved market place;
-- 70 million bricks sold in the period and production of 67.5 million;
-- Average selling prices increased 13.5% on prior year prices;
-- January 2014 saw the commencement of the 20% expansion
project at Freshfield Lane which has now been completed, extending
capacity at the plant by 6 million bricks;
-- New products launched and awards won such as 'Best Public
building' for the East Ham Customer Service Centre & Library at
the BDA awards;
-- Application for 200 houses at the Charnwood site was submitted at the end of 2014; and
-- Planning consent confirmed for additional clay extraction at Michelmersh site.
Eric Gadsden, Chairman at Michelmersh Brick Holdings, commented:
"Michelmersh is the only UK owned brick manufacturer and places
itself in the top end of the market in terms of quality of products
and service to customers. With a strong financial footing, and in a
market that seems set for continued prosperity, we can be confident
of robust profitability and meaningful shareholder returns going
forward. We have had a strong start to 2015 and, with our
well-invested plants, feel well positioned for the year ahead."
Chairman's Statement
I am pleased to report a very good performance for the Group in
2014 having made continued strong progress, building on the
foundations laid in the previous period, and in a further improved
market place. In addition, I can report to shareholders that the
Group is well placed to make further advances in a very promising
market.
In the financial period, turnover increased by 10% to GBP28.5
million (2013: GBP25.9 million) as average brick selling prices
increased by 13.5%. These price increases translated into a
profitable outcome for the year and we can anticipate continued
progress with the recent completion of the investment at our
largest brickworks Freshfield Lane, as the long awaited improvement
in industry dynamics continues to play out favourably. I am
particularly pleased that our fortunes and prospects are positive
enough to be able to reinstate dividend payments.
Financial Highlights
2014 2013 +/-
---------------------- --------- --------- --------
GBP28.5 GBP25.9
Turnover m m +10%
---------------------- --------- --------- --------
GBP2.8 GBP1.4
Operating profit m m +100%
---------------------- --------- --------- --------
Basic EPS 2.72 0.18 +2.54
p p p
---------------------- --------- --------- --------
GBP46.7 GBP45.5
Net assets m m +3%
---------------------- --------- --------- --------
57.5 56.3
Net assets per share p p +2%
---------------------- --------- --------- --------
Net Debt GBP2.1 GBP4.2 -GBP2.1
m m m
---------------------- --------- --------- --------
The price recovery in the brick market positively impacted the
income statement in 2014 at all levels: as stated above, turnover
increased by 10% and improved gross profit by 30% as gross margin
increased by 5% to 31%. Operating profit from underlying business
amounted to GBP3.0 million, by far the best result since the
business floated in 2004. With low borrowings, the interest burden
for the Group is modest and the Profit before taxation of GBP2.6
million exceeded the equivalent figure in 2013 by 6.4 times.
These positive results were achieved despite a reduction in
contribution from the landfill operations, which halved to
GBP130,000 as a result of a combination of external economic
conditions and internal decisions to maximise the lifetime assets
and income at the Telford site.
The income statement has separated the costs of non-underlying
events so that the accounts demonstrate better the true performance
of the Group. These non-underlying items in 2014 included set-up
costs of the Freshfield Lane expansion project, which is expected
to yield benefits in 2015 and beyond.
Cash and Borrowings
The Group ended the year with net debt of GBP2.1 million (2013:
GBP4.2 million) representing gearing of under 5%. Cash generated by
operations of GBP2.6 million was supplemented by the second of
three tranches of the Bovis land sale proceeds of GBP1.5 million.
The Group undertook capital expenditure of just over GBP2 million
in respect of the Freshfield Lane expansion project and completion
of the Telford reorganisation.
The Group has used cash resources to repay all borrowings except
a Term Loan of GBP5 million with Barclays and a small residual hire
purchase contract and has ceased the ineffective interest rate cap
agreement. The Group generates a strong cash flow from operations
and along with the final GBP1.5 million deferred land sale
proceeds, is expected to be in a net positive cash position through
2015 which gives flexibility for capital projects and shareholder
distributions.
Assets and working Capital
The Group's balance sheet is strongly backed by substantial
fixed assets of GBP42 million. Opportunities afforded by surplus
land assets continue to be evaluated and their eventual realisation
is closer as time passes. No significant planning or operational
events have occurred in the year and prudent valuations have been
made by the Directors. Only one asset, the landfill void at
Telford, has been subject to a valuation adjustment as a result of
a change in the Board's intended timescale of landfill. As the
economic benefit has been deferred for some years, the net present
value has reduced and as a result, the carrying value has fallen by
GBP1 million. Net asset value at 31 December 2014 stands at 57.5
pence (2013: GBP56.3 pence) per share.
Working capital has increased marginally during 2014 as strong
late season sales kept debtors unusually high. Stock levels are now
at a level that cannot be reduced much further. Overdraft
facilities have been maintained and, alongside cash balances,
provide healthy headroom for security and allow investment in
capital projects.
Dividend
Improved trading, reduced borrowings, strong cash flow and the
realisation of revaluation gains have now put the Group in a
position where it can recommence dividend payments. The Board are
intent upon implementing a sustainable dividend policy that
reflects a balance between trading cashflow and long-term
reinvestment in capital assets. Accordingly, the Board is proposing
a dividend of 0.5 pence per share in respect of the financial year
ended 31 December 2014. Net debt is likely to be positive by the
end of 2015, and the Board will seek to make dividend payments out
of trading cash flow annually to establish and maintain a prudent
level of dividend cover.
Land Assets
We have received the second tranche of funds from the sale of
the former factory site at Telford with a further GBP1.5 million
due in October this year. We have undertaken a comprehensive review
of our clay reserves at this site and based on current production
levels believe these will extend in excess of 30 years. In the
light of the improved market for brick manufacture our priority is
to maximise this asset and we have therefore taken the decision to
cease landfill at this site for the foreseeable future.
We have now received detailed consent for an additional 20 years
of clay supplies at our Michelmersh site. Our scheme for 200 houses
has now been submitted at our quarry site at Charnwood and we
continue to progress our application for a landfill licence at our
Dunton site.
People
In the past year much work was done to strengthen the business
and I would like to thank all our employees for their hard work
over the period. We have successfully recruited for our increased
capacity at Freshfield Lane and it is satisfying to anticipate a
more stable outlook in the future.
Outlook
Two long anticipated events occurred during 2014: firstly brick
industry prices increased for the first time in six years and
secondly two of the major UK manufacturers have new overseas
owners.
A generational oversupply of bricks has come to an end and the
market is now reliant on increasing levels of imports. The last big
industry investments were in the 1980's and capital will need to be
directed to modernise existing works rather than increasing
capacity.
The current environment brings a new set of challenges with our
stocks, and industry stocks, at an all time low. Bricks are no
longer immediately available on demand but we have successfully
managed our customers' requirements and our hallmarks of quality
and service will continue to serve us well in the future.
Michelmersh Brick Holdings is the only UK owned brick
manufacturer and places itself in the top end of the market in
terms of quality of products and service to customers. With a
strong financial footing, and in a market that seems set for
continued prosperity, we can look forward to increasing profits and
meaningful shareholder returns. We have had a strong start to 2015
and, with our well -invested plants, feel well positioned for the
year ahead.
Eric Gadsden
Chairman
Chief Executive Review
Clay Products
Demand for our product was strong during 2014. The Group
achieved record forward intake figures throughout the year,
ensuring robust deliveries into 2015, with some current products
currently on over 24 weeks availability. We sold 70 million bricks
in the period (2014 71.5 million) against production of 67.5
million (2014 65.4 million) and sales were constrained by capacity
for the first time in many years. Average selling prices increased
by 13.5% to GBP395 per '000 (2014: GBP348) against an industry
average increase for the year of 16%. This is a pleasing increase
in light of the premium price enjoyed by our products.
We worked hard with our customers to ensure that product
delivery schedules during the year were well balanced and in line
with production and stock management. The Group achieved a good mix
of 'Repair Maintenance and Improvement' ("RMI") projects,
specification and new housing work.
There was success for recently launched new products such as
Charnwood's I-Line range. The East Ham Customer Service Centre
& Library won the coveted 'Best Public Building' at the BDA
awards and the completion of the RFU Centre for Athletic
Development at Penny Hill Park sparked much positive praise for the
new high end product. During 2014 the Group also saw the
commencement of other notable schemes such as the contemporary
Grosvenor Estates Arts Complex in Southampton and the new junior
school complex for St. Swithuns, the leading girls' school in
Winchester. Many urban regeneration projects continued with new
phases being ordered well into 2015 by developers such as Crest
Nicholson's Oak Grove and the Lendlease Elephant & Castle
regeneration project. Our close relationship with developers such
as Berkeley Group Holdings Plc, Croudace Homes Ltd and Octagon
Developments Limited continues, with all delivering much needed
high quality housing stock using MBH Group products. The award
winning Hill, Ceres CB1 redevelopment in Cambridge also made an
impact this year, again delivering unique quality homes.
We continued to support key merchants and distributors with our
robust distribution and partnership policy.
Overall 2014 was a quieter period for the Hathern Terra Cotta
division, however it finished the year with a strong order intake
having completed some intricate high value restoration work for the
Jimmy Choo store refurbishment in New Bond St. London, along with
Brighton College's stunning new entrance and clock tower.
Exports were positive for both our high value specification
bricks and pavers with over 600,000 units going as far a field as
Singapore and New York, USA.
The drive for efficiency continued within our Central Sales
Office as we reviewed our haulage operations, IT and BIM data.
Furthermore, we increased our truck fleet capacity with our rolling
programme of vehicle replacement.
As with previous years, 2014 saw the Group continue it's policy
of supporting education through supply of free product, resource
and seminars to various colleges in the UK and contributing to the
CITB Skill build programme.
In January 2014 we commenced our 20% expansion project at
Freshfield Lane. The GBP2.2 million investment extends capacity at
the plant by 6 million bricks. We are pleased that the project was
completed within budget and on schedule and the plant now has a
capability of producing 36 million bricks per annum. The investment
encompassed a new clay preparation area, an additional brick making
machine, extending drier capacity and the erection of a new 'clamp'
for firing the bricks. The product output expansion at Freshfield
Lane has meant that we are now able to build upon and increase our
strong regional RMI and SME developer relationships, providing much
needed extra capacity to new sites.
We scheduled a tunnel kiln shutdown at our Blockleys plant
during December to carry out a major maintenance programme. This
consisted of lining and ductwork improvements and long-term
preventative maintenance of the mechanical systems. The kiln that
had been continuously firing bricks for five years was restarted
ahead of schedule delivering an increase over our budgeted output
for 2015.
Also at Blockleys we have this year commenced a GBP500,000
capital project to upgrade our fired brick packaging facility. This
builds on our kiln unloading investment in 2013 and involves the
replacement of the originalequipment with a new robotic system and
the latest control software. The project will deliver operational
cost savings, increased capacity and reduced downtime risk.
Management Systems
Following our successful quality and environmental system review
in 2013 we achieved full accreditation to ISO 9001 and ISO 14001
during the period meaning that all of our manufacturing sites
operate to these standards. We are now focusing our efforts on
expanding our sustainability and energy management systems to
achieve BES 6001 and ISO 50,001.
Staff Development
During the year we restructured our operations functions
following retirement and succession planning. Our Group is now
fully integrated with a highly skilled and focused team that are
industry leading with succession and development in place to
address the future needs of the business.
Following on from our successful apprenticeship programmes at
Charnwood and Freshfield Lane we set up a technical engineering
programme that started in September 2014 with The Manufactures'
Organisation "EEF". The two apprentices spend their first year at
residential college followed by three years at Blockleys and
Michelmersh. We are currently recruiting two further apprentices to
start the programme in September 2015 for Charnwood and Freshfield
Lane.
In February this year we added a sustainability manager to our
operations team and expanded the existing team roles to include a
specific focus on training needs and staff development.
Landfill and Land Assets
Activity at our Telford operations was reduced with turnover of
GBP400,000 (2014: GBP632,000) on a tonnage of 63,000 (2014:
200,000) at significantly higher rates. However we have undertaken
a comprehensive review of our reserves and now have a robust plan
to maximise these. During this process it became apparent that it
would not be possible to continue landfilling at previous rates
during the life of the quarry. In these circumstances and in light
of improved brick trading it was decided to shut the landfill at
this site for the foreseeable future.
We are planning limited landfill at our Charnwood site to
restore the quarry to a land form suitable for development later
this year. Our application for 200 houses was submitted at the end
of 2014 and is now being considered by the Planning Authority.
We are close to finalising all documentation for a landfill
licence in discussion with the Environment Agency at our Dunton
site and will consider options to maximise this asset during the
course of the year.
Finally we have received detailed planning consent for
additional clay extraction at our Michelmersh site which secures
many years of reserves at the site and allows us to consider
investment in plant and processes to increase efficiency and reduce
risks of breakdown.
Outlook
With house building recovering from low levels and a continued
need for new housing the business is now set to make further
progress.
Over the course of the next few months we will start to see the
benefit of improved production, pricing structures and market
dynamics benefit our business.
Although we are well invested there will be opportunities to
further enhance and future proof our facilities and with our strong
cash position we are looking to continue to make marginal
improvements wherever possible.
We continue to strengthen our market position in a highly
capital intensive industry with huge barriers to entry. Increased
reliance on imports underlines brick as the material of choice for
owners, developers and lenders.
It is to be hoped that we are now in a period where the true
worth of this product for its appearance, longevity,
sustainability, flexibility in use and low maintenance requirement
will be properly valued.
Martin Warner
Chief Executive
Consolidated Income Statement
For the year ended 31 December 2014
Underlying Non-underlying Underlying Non-underlying
2014 2014 2014 2013 2013 2013
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue 28,476 - 28,476 25,929 - 25,929
Cost of sales (19,631) (119) (19,750) (19,205) - (19,205)
----------- --------------- ---------- ----------- --------------- ----------
Gross profit 8,845 (119) 8,726 6,724 - 6,724
Administration
expenses (5,946) (140) (6,086) (5,656) (443) (6,099)
Other income 161 - 161 65 694 759
----------- --------------- ---------- ----------- --------------- ----------
Operating profit/(loss) 3,060 (259) 2,801 1,133 251 1,384
Finance costs (199) - (199) (977) - (977)
----------- --------------- ---------- ----------- --------------- ----------
Profit/(loss)
before taxation 2,861 (259) 2,602 156 251 407
Taxation (457) 56 (401) (86) (216) (302)
----------- --------------- ---------- ----------- --------------- ----------
Profit/(loss)
for the financial
year from continuing
operations 2,404 (203) 2,201 70 35 105
Loss for the financial
year from discontinued
operations - - - (117) (1,536) (1,653)
----------- --------------- ---------- ----------- --------------- ----------
Profit/(loss)
for the financial
year 2,404 (203) 2,201 (47) (1,501) (1,548)
Basic earnings
per share from 2.72 0.18
continuing operations p p
Diluted earnings
per share from 2.72 0.17
continuing operations p p
2014 2013
GBP'000 GBP'000
Consolidated Statement of Comprehensive
Income
for the year ended 31 December
2014
Profit/(loss) for the financial
year 2,201 (1,548)
--------------------- -------------------------
Other comprehensive income:
Items which will not subsequently be reclassified
to profit or loss
Revaluation surplus of property,
plant and equipment - 3,500
Revaluation of property,
plant and equipment (1,000) (2,000)
Deferred tax on revaluation
movement (128) 415
(1,128) 1,915
--------------------- -------------------------
Total comprehensive profit
for the year 1,073 367
--------------------- -------------------------
2014 2013
Consolidated Balance
Sheet GBP'000 GBP'000
as at 31 December
2014
Assets
Non-current assets
Intangible assets 2,476 2,438
Property, plant
and equipment 41,899 41,831
-------------- -----------------
44,375 44,269
Amounts falling
due after one year
Derivatives - 91
Other receivables - 1,267
-------------- -----------------
Total non-current assets 44,375 45,627
Current assets
Inventories 6,084 6,307
Trade and other
receivables 7,346 6,361
Investments 30 46
Cash and cash equivalents 2,809 2,170
-------------- -----------------
Total current assets 16,269 14,884
Total assets 60,644 60,511
-------------- -----------------
Liabilities
Current liabilities
Trade and other
payables 3,940 3,900
Provisions 112 337
Corporation tax
payable 370 -
Interest bearing
borrowings 19 1,212
-------------- -----------------
Total current liabilities 4,441 5,449
Non-current liabilities
Deferred tax liabilities 4,593 4,434
Interest bearing
borrowings 4,916 5,125
-------------- -----------------
9,509 9,559
Total liabilities 13,950 15,008
Net assets 46,694 45,503
-------------- -----------------
Equity attributable to equity
holders
Share capital 16,247 16,162
Share premium account 11,495 11,495
Reserves 17,530 20,930
Retained earnings 1,422 (3,084)
Total equity 46,694 45,503
-------------- -----------------
Consolidated Share Share Merger Share Revaluation Retained Total
Statement of capital option reserve premium reserve earnings
Changes in Equity reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
As at January
2013 11,645 216 979 6,440 17,908 (1,654) 35,534
Loss for the
year - - - - - (1,548) (1,548)
Revaluation surplus - - - - 3,500 - 3,500
Revaluation deficit - - - - (2,000) - (2,000)
Deferred taxation
on revaluation - - - - 415 - 415
------------------------- --------------------------- --------------- --------------- ------------------ --------------- ---------------
Total comprehensive
income - - - - 1,915 (1,548) 367
Share based payment - 30 - - - - 30
Shares issued
during the year 4,517 - - 5,055 - - 9,572
Transfer to retained
earnings - - - - (134) 134 -
------------------------- --------------------------- --------------- --------------- ------------------ --------------- ---------------
As at 31 December
2013 16,162 246 979 11,495 19,705 (3,084) 45,503
Profit for the
year - - - - - 2,201 2,201
Revaluation deficit - - - - (1,000) - (2,000)
Deferred taxation
on revaluation - - - - (128) - (128)
Total comprehensive
income - - - - (1,128) 2,201 1,073
Share based payment - 33 - - - - 33
Shares issued
during the year 85 - - - - - 85
Transfer to retained
earnings - (231) - - (42) 273 -
Reclassification* - - - - (2,032) 2032 -
As at 31 December
2014 16,247 48 979 11,495 16,503 1,422 46,694
------------------------- --------------------------- --------------- --------------- ------------------ --------------- ---------------
* Reclassification relates to the revalued element of land sold
in October 2013 which is deemed to have completed in 2014 and is
now transferred to realised reserves.
Consolidated Statement of Cash
Flows 2014 2013
for the year ended 31 December
2013 GBP'000 GBP'000
Cash flows from operating activities
Profit before taxation 2,602 407
Loss from discontinued activities - (152)
Loss on disposal plant and machinery - -
Profit on sale of fixed assets (2) (724)
Profit on sale of
investments (15) -
Finance costs 199 977
Depreciation 973 916
Amortisation 2 2
Provision for impairment of investments - 28
Market value adjustment of Intangible
assets (40) 28
Share based payment charge 33 30
Cash flows from operations before
changes in working capital 3,752 1,512
Decrease in inventories 250 2,151
Increase in receivables (1,219) (232)
(Decrease)/increase in payables (177) 1,340
-------------- -----------------
Net cash generated by operations 2,606 4,771
Taxation paid - (35)
Interest paid (206) (986)
Net cash generated by operating
activities 2,400 3,750
-------------- -----------------
Cash flows from investing activities
Purchase of property, plant and
equipment (2,069) (927)
Proceeds of sale
of investments 31 -
Proceeds of sale
of land 1,500 1,600
Proceeds of disposal of property,
plant and equipment 4 145
Net cash (used in)/generated
by investing activities (534) 818
-------------- -----------------
Cash flows from financing activities
Repayment of interest bearing
borrowings (155) (10,348)
Proceeds of share
issue 85 9,572
Repayment of hire purchase and
finance lease obligations (5) (19)
Net cash used in financing activities (75) (795)
-------------- -----------------
Net increase in cash and cash
equivalents 1,791 3,773
Cash and cash equivalents at
the beginning of the year 1,004 (2,769)
Cash and cash equivalents at
the end of the year 2,795 1,004
-------------- -----------------
Cash and cash equivalents comprise:
Cash at bank and in hand 2,809 2,170
Bank overdraft (14) (1,166)
2,795 (1,004)
-------------- -----------------
NOTES TO THE FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES
The consolidated financial statements have been prepared in
accordance with International Financial Reporting Standards as
adopted by the European Union ("IFRSs as adopted by the EU"), IFRS
Interpretations Committee interpretations and with those parts of
the Companies Act 2006 applicable to companies reporting under
IFRS. There have been no changes to the accounting policies adopted
since the last consolidated financial statements were
published.
2. FINANCIAL INFORMATION
The financial information set out in this Preliminary
Announcement does not constitute the Group's statutory financial
statements for the years ended 31 December 2014 or 2013. The
financial information has been extracted from the Group's statutory
financial statements for the years ended 31 December 2014 and 2013.
The auditors have reported on those financial statements; their
report was unqualified, did not include references to any matters
to which the auditors drew attention by way of emphasis and did not
contain a statement under Section 498(2) or (3) of the Companies
Act 2006.
The statutory accounts for the year ended 31 December 2013 have
been delivered to the Registrar of Companies, whereas those for the
year ended 31 December 2014 will be delivered to the Registrar of
Companies following the Company's Annual General Meeting.
The financial information is presented in sterling and all
values are rounded to the nearest thousand pounds (GBP000) except
when otherwise indicated.
3. EARNINGS PER SHARE
Basic
The calculation of earnings per share from continuing operations
based upon the profit for the year of GBP2,201,000 (2013:
GBP105,000) and 80,861,273 (2013: 59,098,895) weighted average
number of ordinary shares.
Diluted
The calculation of diluted earnings per share from continuing
operations based upon the profit for the year of GBP2,201,000
(2013: GBP105,000) and 81,053,889 (2013: 59,4583,396) weighted
average number of ordinary shares.
4. REPORT & ACCOUNTS
Copies of this announcement are available and the Annual Report
will be available in due course on the Group's website
www.mbhplc.co.uk and from the Company's registered office at
Freshfield Lane, Danehill, Haywards Heath, West Sussex RH17
7HH.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR JMMPTMBMTBIA
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