TIDMMBH
RNS Number : 6226S
Michelmersh Brick Holdings PLC
21 March 2016
21 March 2016
Michelmersh Brick Holdings Plc
("MBH" or the "Group")
FINAL RESULTS
Debt Eradicated. Dividend Doubled. Well Positioned for the
Future
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 2015, representing a
strong performance and continued progress.
Financial Highlights
-- Operating profit of GBP4.7 million (2014: 2.8 million), an improvement of 68%;
-- EPS 4.44 pence (2014: 2.72 pence);
-- Turnover up 2% to GBP29.1 million (2014: GBP28.5 million);
-- Cash generated by operations of GBP6.6 million (2014: GBP2.6 million);
-- Net debt eradicated with a year-end cash balance of GBP2.9
million against a net debt of GBP2.1 million at the start of the
year; and
-- Dividend doubled to 1.0 pence per share payable for the period.
Operational Highlights
-- Completion of the expansion project at Freshfield Lane and
implementation of packaging robots at Telford;
-- Brick production up 3% to 69.5 million (2014: 67.5 million)
helping to rebuild stocks to workable levels;
-- Average selling prices increased 9% on prior year prices; and
-- Strong showing at the BDA awards including the prestigious Chairman's award;
Eric Gadsden, Chairman at Michelmersh Brick Holdings, commented:
"The Group has had a very good year both in terms of reported
results but also with the continued development of management and
systems, all of which means the Group is well placed to continue
its success in the future. The product offering remains targeted at
premium sectors and our service levels are wedded to our key
customers.
"MBH occupies a defined sector within the brick industry and the
Board is committed to invest in process and people to maximise the
returns of the business. Finally, I would like to thank all our
shareholders and look forward to a busy period ahead."
CHAIRMAN'S STATEMENT
The Final Results for the year ended 31 December 2015 included
in this Annual Report represent a continuation of the excellent
performance of the Group. All of the key indicators are positive
and represent an improved performance against the previous year.
The Group returned a profit before taxation of GBP4.6 million
(2014: GBP2.6 million). I am particularly pleased that the strong
performance of the business allows us to report that the Board is
recommending a dividend for the year of 1 pence per share, a 100%
increase over the previous payment.
The period under review saw the completion of our expansion
project at Freshfield Lane and installation of packaging robots at
Blockleys. These developments were achieved for relatively modest
outlays but lay capacity and efficiency foundations for future
periods, a position from which the Group will continue its stable
and proven progress.
The Group continues to closely manage its trading assets. As
working capital has fallen, positive cash balances have been
achieved, eradicating net debt.
Whilst trading conditions have been favourable, we have made the
most of the opportunities that the market has presented. A strong
cash balance will enable us to continue exploiting such
developments, being able to respond to contingencies as they
arise.
Financial Highlights:
2015 2014
Turnover GBP29.1 GBP28.5
m m
Operating profit GBP4.7 GBP2.8
m m
Basic EPS 4.44 2.72
p p
Dividend per share 1.0 p 0.5 p
Net assets GBP49.2 GBP46.7
m m
Net assets per share 60.6p 57.5
p
Net cash / (debt) GBP2.9 (GBP2.1)
m m
Net cash generated
by operating activities GBP6.6 GBP2.6
m m
Turnover was 2% higher than in 2014 on reduced despatch volumes
as price increases yielded improved margins and a recovery of brick
stocks. Operating profit consequently grew by 68% to GBP4.7 million
(2014: GBP2.8 million) as a result of much improved margins. Gross
margin rose from 30.6% to 38.2% with sales price increases and our
controlled management of production costs. We are pleased that
considered and successful management policies have resulted in
discernible improvements in efficiency, as evidenced in EPS
increasing to 4.44 pence, 63.2% higher than in 2014.
Production volumes increased in the year as a result of
increased capacity at Freshfield Lane, our largest brick plant,
with the completion of the GBP2.2 million investment at the site in
the second quarter of 2015.
Cash and Borrowings
During the year, strong cash flow allowed the Group to repay the
GBP5 million term loan ahead of schedule, and to cancel the
borrowing facilities with ABN AMRO. We ended the year with a net
cash balance of GBP2.9 million after starting the year with net
debt of GBP2.1 million. The final payment of GBP1.5 million under
the 2013 land sale was received from Bovis whilst non-operating
cash outflows included GBP1.7 million of capital expenditure and
GBP406,000 in dividends.
Following the repayment of the Barclays term loan, the Group has
entered into a GBP4 million Revolving Credit Facility ("RCF") with
Barclays to provide operating cash headroom, although no drawdowns
have been made against this facility to date.
The interest burden in 2015 comprised charges related to the
term loan before repayment in June 2015 and charges associated with
the early settlement of the ABN AMRO facility and accelerated
amortisation of prepaid arrangement fees. Finance charges going
forward will be limited to the RCF non-utilisation fee and any
facility utilisation.
Assets and Working Capital
Tangible fixed assets, including a substantial land element,
form a significant part of the Group's balance sheet at 83% of net
assets. Working capital has reduced by 5% over 2015, despite the
strategic increase in brick stocks, as debtors and creditors have
been carefully managed with a positive impact on cash balances. The
Group's net assets per share increased by more than 5%.
Dividend
The Board are intent upon maintaining a sustainable dividend
policy that reflects a balance between trading cash flows and
long-term reinvestment in capital assets. Accordingly, the Board
proposes a dividend of 1.0 pence (2014: 0.5 pence) per share in
respect of 2015.
The Board will seek to continue to make dividend payments out of
trading cash flow annually to maintain a prudent level of dividend
cover.
Land assets
As reported in the 2014 Annual Report, the Group has ceased
landfill activities in order to maximise the long-term economic
contribution of the Telford site. Contribution from landfill was
negligible in the period and will remain discontinued for some
years pending development on the site which releases the maximum
clay reserves. At this point landfill will recommence.
However, a draft license will shortly be issued for final
consultation at our Dunton site. We are making good progress with
bringing this forward as an income generator, and other land assets
in the Group are continually being assessed to maximise their
long-term value in conjunction with, but secondary to, the primary
objective to optimize brick manufacturing facilities.
Board realigned
From 1 January 2016, there has been a change in structure and
operational function of your Board. Frank Hanna and Peter Sharp
have been appointed as Joint Chief Executives and the Group can
look forward to the renewed energy and ingenuity that they will
bring. Martin Warner has relinquished his previous role as Chief
Executive and now serves as executive Deputy Chairman, absorbing
some of the responsibilities vacated by Alan Hardy. Alan resigned
as Non-executive director in October 2015 to pursue his other
interests and we all wish him well.
The new structure retains the experience and expertise required
to take the Group forward in the face of new challenges.
Our team
The continued success of the Group depends considerably upon the
commitment and diligence of our employees and, on behalf of the
Board, I would like to extend to them all my sincere thanks.
Outlook
The Group has had a very good year both in terms of reported
results, but also with the continued development of management and
systems, all of which means the Group is well placed to continue
its success in the future. The product offering remains targeted at
premium sectors and our service levels are wedded to our key
customers. The Board is committed to continued investment in
processes and our staff.
During 2015, Michelmersh was joined in the public markets by one
of its historic competitors and may be set to be joined by another.
We look forward to the challenge and the greater visibility this
brings to our sector.
We believe that demand will remain around current levels going
forwards so long as the residential development market remains
constrained by the current planning system and unhelpful changes to
taxation.
This will impact the industry, which has responded to the
product shortages seen in 2013 and 2014. The market will settle
down and the level of imports is reducing. Bricks will continue to
be supplied from across Europe, particularly in light of the
continuing weakness in the marketplace. However, product
suitability and currency fluctuations are a notable risk for this
sector of the market.
(MORE TO FOLLOW) Dow Jones Newswires
March 21, 2016 03:00 ET (07:00 GMT)
With our well invested and competitive works, key products
supplying the RMI sector and strong financial position the business
is set to prosper as these factors play out over the medium
term.
Eric Gadsden
Chairman
21 March 2016
CHIEF EXECUTIVES' REVIEW
Clay Products
Demand for our products at the start of 2015 followed the trend
from the end of 2014 and our first half showed continued sustained
increases in activity. Towards the end of the year, activity in the
construction sector settled, with demand levelling off as reported
in our October market statement. Over the year we despatched 66.4
million bricks, some 4 million less than in 2014. The average
selling price over the year of GBP429 per thousand (2014: GBP395)
maintains our 40% premium over industry averages.
In the second half of the year, we concentrated on rebuilding
our stocks and increasing margins. These decisions were enacted
against the background of a brick manufacturing industry in a state
of rapid growth, where plants were de-mothballed to meet a demand
that was being filled by European imports. This was aided by a
currency exchange advantage and fuelled by poor local demand.
Industry stocks have subsequently recovered, and a period of
relative stability has been achieved, although the Group starts
2016 with a strong and balanced order book.
The Group's production performance has been enhanced during 2015
with the completion of the project to increase capacity at
Freshfield Lane. Output rose by 3% to 69.5 million from 67.5
million bricks, with 2016 set to exceed this again. A GBP500,000
investment in a robotic packaging plant at Blockleys will increase
efficiency and allow further expansion of output in due course.
Cost of production per unit increased by a modest 3% in 2015 over
2014 as a result of wage increases and accelerated depreciation
ahead of further plant upgrades in 2016. Energy costs continue to
fall and have helped to limit cost inflation in 2015. Forward
hedging mechanisms suggest that energy will continue to have a
dampening effect on cost inflation over coming years.
The Group continued the important strategy of a 'well balanced'
market approach to distribution. Working hard in conjunction with
our retail partners we delivered an optimum product mix, thus
enabling a margin-focused result. Our key delivery sectors were new
housing, urban regeneration, commercial specification and the all
the important Repair, Maintenance and Improvement ("RMI") market.
We continued our strong support of merchants and distributors with
our robust distribution and partnership policy. We also experienced
a notable increase in projects utilising our bespoke Select Order
Process as a way of improving site planning and project
delivery.
Michelmersh had tremendous success at the 2015 brick awards,
winning categories such as the Best Public and Education Building,
the Best Housing Design Award and the Best Refurbishment Project.
Eight Artillery Row, London, won the prestigious BDA Chairman's
Award. The awards were testament to the Group's high quality
products, customer service and attention to detail. Other notable
projects during 2015 included the RIBA London Award winning
Brentford Lock West Development by Duggan Morris and the Watkin
Jones Student Accommodation, Glasgow as well as Octagon's Long Walk
Villas in Windsor.
We continue to be at the forefront of delivering much needed
high quality housing and community regeneration with companies such
as Crest, Croudace, Countryside properties, Cala Homes, Keepmoat
and the Berkeley Group.
Hathern Terra Cotta had a strong 2015, increasing turnover by
40% and quadrupling contribution. We supplied bespoke terra cotta
to a number of prestigious projects such as Brighton College, the
V&A Museum, Plaistow Hospital and the stunning Victoria Quarter
in Leeds.
A program of haulage fleet improvement and review saw our fleet
continue to grow, offering greater flexibility for the northern
region.
The Group successfully concluded the BIMBrick project in
readiness for the 2016 launch deadline. Acting rapidly on the
Government's Construction Strategy published in May 2011, MBH PLC
responded with its first range of clay products files. As the first
brick manufacturer to introduce Building Information Modelling
("BIM") files in the UK, we are now delighted to see a surge in
Industry support, acceptance and participation. The Group is
committed to upgrading files alongside the latest BIM software
developments and has therefore released 'V2' files earlier this
year. The files include bricks, pavers and roof tile products.
Management Systems
The Board is committed to improving energy efficiency and
performance through the planning and design of our operations. We
monitor and evaluate our energy consumption using a variety of
techniques including automatic half hourly data systems that link
to production output. The energy efficiency reports that are
generated enable us to develop strategies and best practice
techniques to continually improve. We are very pleased to report
that our commitment to energy management has delivered the
successful completion and independent verification of our ISO 50001
energy management system. The Group and its plants now operate to
this international standard that will drive our energy efficiency
performance for future periods as well as delivering full
compliance to the government Energy Savings Opportunity Scheme
known as ESOS.
During the period we also enhanced our sustainability
performance by achieving verification to BES 6001 the standard for
responsible sourcing of construction products. All of our brick,
paver, tile and terra cotta products now meet this standard with a
good performance rating.
Staff Development
Following the change in Board responsibilities, the management
structure below the Joint Chief Executives has been reorganised to
allow us to oversee the management of the operations whilst
adopting our new responsibilities. A sub-board of Associate
Directors made up of key production and sales managers has been
established to co-ordinate operational matters and provide an
environment for succession planning. These associate directors have
all been in the Group for some time and we expect them to develop
individually and as a team for the benefit of the Group.
We have strengthened our technical team at the beginning of the
year with the addition of a sustainability and improvement manager
to develop and maintain the performance of our management systems.
We also strengthened our engineering team and extended our
successful engineering apprenticeship programme to the Charnwood
factory. The group has a good demographic mix and sustainable
technical skills base in the important area of electrical and
mechanical engineering.
Landfill and Land Assets
As mentioned by the Chairman above, landfill activity was
minimal and restricted to the start of the year.
Recently our plans to develop the quarry at Charnwood have been
reviewed in light of the significantly improved operating
performance of this site over the past two years. We are now able
to economically extract additional mineral reserves in our quarry,
giving us 12 year's supply of manufacturing materials. This period
has potential to be extended significantly if mixed with other
minerals in the locality. It became clear that the brickmaking
operations should be optimised by the most cost effective clay
option, allowing development potential to be realised in the
future.
The Environment Agency will shortly issue a draft landfill
license for the former Dunton brickworks site at Chesham. Subject
to further local consultation, the site will soon be ready to be
brought forward as an income-generating asset in the coming months.
The landfill site will operate for six years and will then be
remediated as amenity land.
The extensive planning process at Michelmersh has been completed
and an option agreement secured for the extraction of mineral
adjacent to the brickworks. The site now has reserves to support
operations to secure the business and employment for over 20
years.
Outlook
Industry activity continues at a level higher than in recent
history fuelled by government incentives to housebuilders and
stronger economic conditions. With the frenzy removed from the
market, and with some difficult weather conditions over the winter
period, the indications are that the construction sector will
continue to grow at a healthy level for the medium term.
Whilst the high end housing and London apartment market are
suffering from slowing demand we have adapted our market sector
strategy and product mix for the RMI, commercial, self-build and
mid-range housing market where the Group continues to enjoy strong
demand and value added.
The Group occupies a defined sector within the brick industry
and the Board is committed to invest in process and people to
maximise the returns of the business.
Frank Hanna, Peter Sharp
Joint Chief Executives
21 March 2016
Consolidated Income Statement
For the year ended 31 December 2015
2015 2014
GBP'000 GBP'000
Revenue 29,071 28,476
Cost of sales (17,961) (19,750)
-------------------------------- ---------- ----------
Gross profit 11,110 8,726
Administrative expenses (6,468) (6,086)
Other income 68 161
-------------------------------- ---------- ----------
Operating profit 4,710 2,801
Finance costs (153) (199)
-------------------------------- ---------- ----------
Profit before taxation 4,557 2,602
Taxation (951) (401)
Profit for the financial year 3,606 2,201
-------------------------------- ---------- ----------
Basic earnings per share 4.44 p 2.72 p
(MORE TO FOLLOW) Dow Jones Newswires
March 21, 2016 03:00 ET (07:00 GMT)
Diluted earnings per share 4.42 p 2.72 p
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2015
2015 2014
GBP'000 GBP'000
Profit for the financial year 3,606 2,201
Other comprehensive income
Items which will not subsequently
be classified to profit and
loss
Revaluation surplus of property, 1,163 -
plant and equipment
Revaluation deficit of property,
plant and equipment (2,771) (1,000)
Deferred tax on movement 804 (128)
------------------------------------ -------- --------
(804) (1,128)
----------------------------------- -------- --------
Total comprehensive income
for the year 2,802 1,073
------------------------------------ -------- --------
Consolidated Balance Sheet
As at 31 December 2015
2015 2014
GBP'000 GBP'000
Assets
Non-current assets
Intangible assets 2,476 2,476
Property, plant and equipment 40,810 41,899
-------------------------------- --------- ---------
43,286 44,375
Current assets
Inventories 7,195 6,084
Trade and other receivables 4,308 7,346
Investments 30 30
Cash and cash equivalents 2,935 2,809
-------------------------------- --------- ---------
Total current assets 14,468 16,269
-------------------------------- --------- ---------
Total assets 57,754 60,644
Liabilities
Current liabilities
Trade and other payables 4,165 3,940
Provisions - 112
Corporation tax payable 456 370
Interest bearing liabilities - 19
-------------------------------- --------- ---------
Total current liabilities 4,621 4,441
-------------------------------- --------- ---------
Non-current liabilities
Deferred tax liabilities 3,914 4,593
Interest bearing liabilities - 4,916
-------------------------------- --------- ---------
3,914 9,509
------------------------------- --------- ---------
Total liabilities 8,535 13,950
Net assets 49,219 46,694
-------------------------------- --------- ---------
Equity attributable to equity
holders
Share capital 16,247 16,247
Share premium account 11,495 11,495
Reserves 16,850 17,530
Retained earnings 4,627 1,422
-------------------------------- --------- ---------
Total equity 49,219 46,694
-------------------------------- --------- ---------
Consolidated Statement of changes in equity
For the year ended 31 December 2015
Share Share Merger Share Revaluation Retained Total
Capital option reserve premium reserve earnings
reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
As at 1 January
2014 16,162 246 979 11,495 19,705 (3,084) 45,503
Profit for the
year - - - - - 2,201 2,201
Revaluation deficit - - - - (1,000) - (1,000)
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) 2,032 -
---------------------- --------- --------- --------- --------- ------------ ---------- --------
At 31 December
2014 16,247 48 979 11,495 16,503 1,422 46,694
Profit for the
year - - - - - 3,606 3,606
Revaluation surplus - - - - 1,163 - 1,163
Revaluation deficit - - - - (2,771) - (2,771)
Deferred taxation
on revaluation - - - - 804 - 804
---------------------- --------- --------- --------- --------- ------------ ---------- --------
Total comprehensive
income - - - - (804) 3,606 2,802
Share based payment - 129 - - - - 129
Transfer to retained
earnings - - - - (5) 5 -
Dividend paid - - - - - (406) (406)
---------------------- --------- --------- --------- --------- ------------ ---------- --------
At 31 December
2015 16,247 177 979 11,495 15,694 4,627 49,219
---------------------- --------- --------- --------- --------- ------------ ---------- --------
Consolidated Statement of cash flows
For the year ended 31 December 2015
2015 2014
GBP'000 GBP'000
Cash flows from operating activities
Profit before taxation 4,557 2,602
Profit on sale of fixed assets (7) (2)
Profit on sale of investments - (15)
Finance costs 153 199
Depreciation 1,174 973
Amortisation 3 2
Market value adjustment on
intangible assets (3) (40)
Share based payment charge 129 33
--------------------------------------- -------- --------
Cash flow from operations before
changes in working capital 6,006 3,752
(Increase)/decrease in inventories (1,070) 250
Decrease/(increase) in receivables 1,489 (1,219)
Increase/(decrease) in payables 197 (177)
--------------------------------------- -------- --------
Net cash generated by operations 6,622 2,606
Taxation paid (740) -
Interest paid (104) (206)
--------------------------------------- -------- --------
Net cash generated by operating
activities 5,778 2,400
--------------------------------------- -------- --------
Cash flows from investing activities
Purchase of property, plant
and equipment (1,734) (2,069)
Proceeds of sale of investments - 31
Proceeds of sale of land 1,500 1,500
Proceeds of disposal of property,
plant and equipment 7 4
--------------------------------------- -------- --------
Net cash used in investing
activities (227) (534)
--------------------------------------- -------- --------
Cash flows from financing activities
Repayment of interest bearing
borrowings (5,000) (155)
Proceeds of share issue - 85
Dividend paid (406) -
Repayment of hire purchase
and finance obligations (5) (5)
--------------------------------------- -------- --------
Net cash used in financing
activities (5,411) (75)
--------------------------------------- -------- --------
Net increase in cash and cash
equivalents 140 1,791
Cash and cash equivalents at
the beginning of the year 2,795 1,004
--------------------------------------- -------- --------
Cash and cash equivalents at
the end of the year 2,935 2,795
--------------------------------------- -------- --------
Cash and cash equivalents comprise:
Cash at bank and in hand 2,935 2,809
Bank overdraft - (14)
--------------------------------------- -------- --------
2,935 2,795
-------------------------------------- -------- --------
NOTES TO THE FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES
(MORE TO FOLLOW) Dow Jones Newswires
March 21, 2016 03:00 ET (07:00 GMT)
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