TIDMMBH
RNS Number : 8737Z
Michelmersh Brick Holdings PLC
20 March 2017
20 March 2017
Michelmersh Brick Holdings Plc
("MBH" or the "Group")
FINAL RESULTS
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 2016.
Financial Highlights
-- Turnover up 3.4% to GBP30.1 million (2015: GBP29.1 million);
-- Profit before tax stable at GBP4.5 million (2015: GBP4.5 million);
-- Debt free with a year-end cash balance of GBP4.7 million (2015: GBP2.9 million);
-- Dividend doubled again to 2.0 pence per share payable for the period; and
-- Strong forward order commitments -well positioned for 2017
operational and financial performance.
Operational Highlights
-- Kiln replacement project completed at the Michelmersh plant, now yielding 99%;
-- Operational issues at the Michelmersh plant have been resolved;
-- Average selling prices maintained; and
-- Since year end, the Company has signed a conditional contract
for the GBP2.7 million sale of the former Dunton brickworks site at
Chesham.
Eric Gadsden, Chairman at Michelmersh Brick Holdings, commented:
"The Group sits in a well-defined segment of the UK brick sector;
our high quality products set technical standards and our service
levels are recognised by our customers. We continue to develop the
business around our product offering and commitment to our
customers."
Enquiries:Michelmersh Brick Holdings
Frank Hanna, Joint CEO
Stephen Morgan, Finance
Director 01825 430413
Cenkos Securities plc
Bobbie Hilliam (NOMAD)
Harry Pardoe 020 7397
Alex Aylen (Sales) 8900
Yellow Jersey PR
07768 537
Dominic Barretto 739
07747 788
Charles Goodwin 221
Chairman's Statement
I am very pleased to report that the Company delivered another
strong performance in 2016, which culminated in matching 2015's
levels of profit before tax. What is more pleasing is that this was
achieved despite some challenging operational issues, notably at
the Michelmersh plant as reported at the half year. The Company has
grown stronger through investment, cash balances have increased and
further progress has been made on land assets across the Group. The
Board is pleased to report that confidence is high and we seek to
continue steady growth in 2017. This confidence also allows us to
double the dividend again, ahead of expectations, to reward
shareholders.
Financial Highlights
Turnover grew by 3.4% to GBP30.1 million, with additional output
from Freshfield Lane satisfying the increased demand for Company
product. The Group generated profit before tax of GBP4.6 million
(2015: GBP4.6 million). We maintained our average selling prices
across the Group despite the dilution caused by increased sales of
lower priced products. As reported at the half-year, operational
issues at the Michelmersh plant had an impact on Group margins and
consequently profit before tax, and being a higher value product
further diluted the Group average selling price. The problem is now
behind us and operations have returned to normal.
Cash and Borrowings
Cash balances at the year-end amounted to GBP4.7 million (2015;
GBP2.9 million). Having cleared all borrowings in previous years,
the Group can now invest its resources in the business whilst
increasing cash headroom. Available debt facilities were not
utilised during the year and the proceeds of sale of the Dunton
landfill site will further enhance our cash profile. This creates
opportunity to invest in operational and land assets and supports
strong dividend returns going forward.
Assets and Working Capital
The Group continues to invest in plant and land assets, spending
GBP2.3 million during 2016. The most significant individual
investment was the replacement of a kiln at Michelmersh for GBP1
million which became operational later in the year and which is now
working at full capacity. The investment programme is set to
continue at a sustainable rate through 2017 as expenditure is
targeted at energy and labour inefficient processes.
Dividend
In 2015 the Group paid its first, albeit modest, dividend since
2008 which was doubled in 2016. The Board are pleased to announce
that they will propose a dividend of 2 pence per share in respect
of the year to 31 December 2016 (2015: 1 pence). Having restored
the Group's positive cash balance, this represents a commitment to
shareholders to provide a meaningful return on their investment. In
addition, the Board has decided to commence payment of an interim
as well as a final dividend in respect of 2017 in December and June
respectively. The dividend represents over 40% of earnings and,
whilst the Group is trading favourably, it is the Board's intention
that this level of distribution is maintained.
Land Assets
The Board announced in January that it had signed a conditional
contract for the sale of the former Dunton brickworks site at
Chesham. Since the brickmaking operations ceased in 2013, the site
has been subject to a long and technically involved process to
achieve the best economic outcome for the site, which is as a high
value landfill site. The sale will complete when the landfill
licence is transferred to the purchaser, which is expected to take
place in the summer of 2017. A deposit has been paid, and the
remainder of the GBP2.68 million sale price will be paid on
completion. The land is treated as a 'non-current asset held for
resale' in the balance sheet as at 31 December 2016 at sale value
less the costs of disposal. The land was subject to a GBP1 million
revaluation uplift in the accounts to 31 December 2016 and
contributed to the increase in net asset value.
Board and Employees
The appointment of Frank Hanna and Peter Sharp as joint CEO from
1 January 2016, has proved effective. To support the change, a
sub-board of Associate Directors was established to manage
operations at a regional and national level. The Board would like
to recognise the important contribution of the new structure and
would like to thank all employees for their contribution to the
Group's performance in 2016.
Outlook
The Group sits in a well-defined segment of the UK brick sector;
our high quality products set technical standards and our service
levels are recognised by our customers. We continue to develop the
business around our product offering and commitment to our
customers.
The UK construction sector is facing continued demands to
provide increased residential output to meet the housing shortage.
This will support demand for bricks alongside other products and
the short and medium term prospects for our industry encourage
investment. The Board will continue to evaluate industry
opportunities as they arise.
On a personal note, this will be my last Chairman's Report as I
will be retiring from the Board at the forthcoming AGM. It is
interesting to reflect that what started as little more than a
hobby for Martin and myself to save a small craft brickworks in the
Chilterns has grown into a sizeable Public Company. It has been a
thoroughly enjoyable 20 years during which time I have learnt an
enormous amount about manufacturing thanks to the help of some of
the nicest and most professional people you could wish to meet. I
am proud of the fact that together we have managed to establish
Michelmersh as the foremost provider of bricks for premium projects
many of which have won awards both nationally and locally. Martin
Warner will take over the Chairman's role and I look forward to the
business's continued prosperity with him at the helm.
Eric Gadsden
Chairman
20 March 2017
Chief Executives' Review
Clay Products
The UK's construction sector fundamentals remain positive as
most housebuilders are reporting increased activity in 2016 and
suggesting further growth in 2017. The UK brick industry had a
comparatively steady 2016 against a backdrop of a positive drive to
increase housing starts but with some economic uncertainty caused
by wider political events. Overall the UK produced 7% less bricks
and imports fell. Deliveries increased by a similar percentage but
the impetus was strongest later in the year. Average prices were
flat or falling as the market sought equilibrium of supply and
demand.
Michelmersh occupies a defined sector of the market but is
affected by the wider industry forces. The Group despatched 69.4
million bricks, up 4% from the previous year, and would perhaps
have despatched more had output not reduced by 1.3%. Bricks
produced fell across the Group from 69.5 million to 68.6 million as
yields from the Michelmersh factory were affected by the clay
geological issues in the existing quarry, while delays in working
through ecological and archaeological issues restricted expansion
into the new available reserves. This and the associated production
downtime was addressed by a combination of improved clay recipes
and additional engineering resource. Towards the end of the period
the new kiln was commissioned, further improving yields at the
factory.
The Group continues to invest in its plants, systems and skilled
staff to seek to protect the business and enhance yield and
quality. Besides expenditure of GBP1 million on the new kiln at
Michelmersh, the Group invested in selected parts of the
manufacturing process through 2016. This included replacing two old
brick dryers at Freshfield Lane with one new GBP250k investment
that increases capacity and energy efficiency. Investment during
2017 will largely be focused on yield and energy efficiency
projects with existing kilns and dryers. The Group also plans to
undertake an extensive engineering review of our key manufacturing
assets to identify further plant maximisation and risk reduction
projects. We continue to explore larger conceptual projects that
afford output increases and / or target cost or risk reduction. Two
such projects are technically well advanced and will be subject to
financial feasibility assessments as time progresses.
During 2016 the Group achieved success by having a balanced
market approach as was set out in our annual sales strategy. The
focus was centred around delivering strong customer service to our
regional and national distribution partners in both the merchant
and factor sectors. The Group's distribution centric approach
ensured robust deliveries throughout the year.
As in recent years, our products were delivered into the Group's
usual sector mix of Repairs, Maintenance & Improvements (RMI),
new homes, quality urban regeneration and specification projects.
RMI remained steady and strong for the Group throughout 2016.
The Group saw the delivery and completion of some iconic
projects during the year. Of particular architectural note were the
following: the beautiful Englemere, Ascot, by Millgate Homes; Urban
regeneration at Chobham Manor, Stratford; the new Police and Fire
HQ in Butterley, Derbyshire perfectly highlighting our contemporary
and innovative Synthesis S17 blend delivered through our Select
Order Process; the new Banham offices in Thornsett Road,
Wandsworth; and lastly the Whitty Theatre at Luckley House School
which won the coveted Architects Choice Award at the 2016 BDA Brick
Awards.
High quality housing and urban regeneration has always been key
for the Group. Our strong product offering was again at the
forefront of key projects with companies such as Keepmoat, Telford
Homes, Countryside Properties PLC, Berkeley Group and A2 Dominion
to highlight a few.
The Group's strategy to maintain a well balanced forward order
book will continue to prevail post 2016 and into the current year,
thus ensuring a continued optimum product mix.
Hathern Terrcotta had a positive year and produced a solid
result albeit slightly below the exceptional result for 2015. Stand
out projects included Victoria Quarter, Leeds and Hans Place,
London.
During 2016, the Group increased its delivery fleet as part of a
rolling improvement programme. This investment will afford
additional flexibility, efficiency and customer service. The
Group's Freight Transport Association regulated haulage function
also currently holds Bronze FORS accreditation with a continuous
improvement programme aiming for Silver accreditation.
The Group's online BIMBricks.com brand continues to attract
significant web traffic from designers, architects and students.
2016 saw the Group receive the largest single order via BIM
totalling over half a million bricks. Our drive to continuously
improve and enhance the available data for free distribution
continues in the Group's effort to contribute to the creation of an
innovative and digitised construction sector.
As well as BIM, the Group was delighted to see a rise in social
media activity during the year, inspiring architects through our
online renders and images and in turn generating new enquiries.
Throughout 2016 the Group continued its support of education by
means of free products, funding and Continuing Professional
Development. This was in line with our ethos of future proofing the
UK construction sector by assisting local colleges in training much
needed bricklayers.
Management Systems
During the year we commenced a consolidation and integration
exercise of our quality and environmental management systems. When
complete, this will combine our four manufacturing sites into a
Group-wide system that will deliver consistent best practice across
the Group along with associated operational synergies. We also
delivered compliance with our EU-ETS carbon emissions and ESOS
energy saving obligations.
2016 saw the Group change its health and safety auditors with a
view to further improving our safety performance above and beyond
compliance. We joined and engaged RoSPA (The Royal Society for the
Prevention of Accidents) to carry out a Quality Safety Audit (QSA)
encompassing workplace and management audits across the group and
we are pleased to have achieved a Health and Safety Performance
Rating of 75%. ROSPA indicated that this was a credible result for
a first audit and we have targeted improvement for 2017.
Staff development
During 2016 we strengthened and developed our engineering team
across the group. In addition to our successful engineering
apprenticeship programme we now have a mix of technical and
management skills as well as succession planning which is being
enhanced with experience, training and development. Succession and
development has also been addressed in both the manufacturing and
commercial departments of the business with several new graduates
taking on key roles. Our key managers are engaged on our tailored
Institute of Leadership and Management programme as well as health
and safety training from The Institute of Occupational Safety and
Health.
Plans are under way to enhance the Group's HR function in 2017
by reallocating resources and redefining its role. This development
reflects the Group's commitment to its staff and recognises the
importance of a structured format to improve their skills and
support their personal development and wellbeing.
Landfill and land Assets
At the end of the period we successfully delivered two
technically challenging land projects at our Dunton and Michelmersh
sites. As detailed in the Chairman's Statement we have exchanged
contracts for the sale of the Dunton site for GBP2.68 million. At
Michelmersh we completed extensive ecology and archaeological field
work to enable us to extend our quarrying operations to our School
House Field. The archaeological work alone involved a team of
several archaeologists for five months stripping and excavating
subsoil. The field was found to contain a significant find of
Neolithic flint tools and fragments of international importance.
Clay extraction will commence towards the summer of 2017.
During 2016, we also updated the mineral valuation of the clay
resource within the Group's land holdings after taking advice from
mineral valuer, Wardell Armstrong LLP. The value of mineral
reserves was increased by GBP325,000 to GBP1.24 million.
The Board
Eric Gadsden has decided to relinquish his position as Chairman
of the Board at this year's AGM. It is fair to say that he has been
incredibly supportive to the Company as a whole and to us
individually. Michelmersh would not have achieved the success it
has without his energy and insight. We would like to thank him for
his contribution over many years. The Board intend to recruit a
non-executive director in due course to re-balance the Board.
Outlook
The positive indicators and market fundamentals look set to
continue. There is a widely accepted need and publicised government
drive for delivering new housing. We believe this backdrop presents
significant opportunities for the Group in not only new builds, but
also in RMI where we are particularly strong. During 2017 the Group
will improve efficiency and promote new innovative and contemporary
products to the market. Through the course of the year the market
may see brick demand rise to meet current mid-term UK output
capacity, however, the significant uncertainties surrounding the
impact of Brexit continue to prevail.
Frank Hanna, Peter Sharp
Joint Chief Executives
20 March 2017
Consolidated Income Statement
for the year ended 31 December 2016
2016 2015
notes GBP'000 GBP'000
---------------------------------------- ----- -------- --------
Revenue 2 30,057 29,071
Cost of sales (19,709) (17,961)
---------------------------------------- ----- -------- --------
Gross profit 10,348 11,110
Administrative expenses (5,833) (6,468)
Other income 3 36 68
---------------------------------------- ----- -------- --------
Operating profit 4,551 4,710
Finance income/(expense) 4 18 (153)
---------------------------------------- ----- -------- --------
Profit before taxation 5 4,569 4,557
Taxation 9 (1,010) (951)
---------------------------------------- ----- -------- --------
Profit for the financial year 3,559 3,606
---------------------------------------- ----- -------- --------
Basic earnings per share attributable
to the equity holders of the company 24 4.38p 4.44p
Diluted earnings per share attributable
to the equity holders of the company 24 4.36p 4.42p
The profit for the financial year is wholly attributable to the
equity holders of the Parent Company.
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2016
2016 2015
notes GBP'000 GBP'000
------------------------------------- ----- -------- --------
Profit for the financial year 3,559 3,606
------------------------------------- ----- -------- --------
Other comprehensive income/(expense)
Items which will not subsequently
be reclassified to profit or loss
Revaluation surplus of property,
plant and equipment 11 1,369 1,163
Revaluation deficit of property,
plant and equipment 11 - (2,771)
Deferred tax on revaluation movement 19 49 804
------------------------------------- ----- -------- --------
1,418 (804)
------------------------------------- ----- -------- --------
Total comprehensive income for
the year 4,977 2,802
------------------------------------- ----- -------- --------
The total comprehensive income for the year is wholly
attributable to the equity holders of the Parent Company.
Consolidated Balance Sheet
as at 31 December 2016
2016 2015
notes GBP'000 GBP'000
------------------------------ ----- -------- --------
Assets
Non-current assets
Intangible assets 10 2,469 2,476
Property, plant and equipment 11 40,794 40,810
------------------------------ ----- -------- --------
43,263 43,286
Non-current assets held for
resale 11 2,542 -
Current assets
Inventories 13 7,193 7,195
Trade and other receivables 14 5,052 4,308
Investments - 30
Cash and cash equivalents 4,720 2,935
------------------------------ ----- -------- --------
Total current assets 16,965 14,468
------------------------------ ----- -------- --------
Total assets 62,770 57,754
------------------------------ ----- -------- --------
Liabilities
Current liabilities
Trade and other payables 15 4,702 4,165
Corporation tax payable 373 456
------------------------------ ----- -------- --------
Total current liabilities 5,075 4,621
------------------------------ ----- -------- --------
Non-current liabilities
Deferred tax liabilities 19 4,052 3,914
------------------------------ ----- -------- --------
Total liabilities 9,127 8,535
------------------------------ ----- -------- --------
Net assets 53,643 49,219
------------------------------ ----- -------- --------
Equity attributable to equity
holders
Share capital 21 16,294 16,247
Share premium account 11,495 11,495
Reserves 18,410 16,850
Retained earnings 7,444 4,627
------------------------------ ----- -------- --------
Total equity 23 53,643 49,219
------------------------------ ----- -------- --------
Consolidated Statement of Changes in Equity
Share
Share option Merger Share Revaluation Retained
capital reserve reserve Premium reserve earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
As at 1 January
2015 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)
-------------------- -------- -------- -------- -------- ----------- --------- -------
As at 31 December
2015 16,247 177 979 11,495 15,694 4,627 49,219
Profit for
the year - - - - - 3,559 3,559
Revaluation
surplus - - - - 1,369 - 1,369
Deferred taxation
on revaluation - - - - 49 - 49
-------------------- -------- -------- -------- -------- ----------- --------- -------
Total comprehensive
income - - - - 1,418 3,559 4,977
Share based
payment - 212 - - - - 212
Shares issued
during the
year 47 - - - - - 47
Transfer to
retained earnings - (70) - - - 70 -
Dividend paid - - - - - (812) (812)
-------------------- -------- -------- -------- -------- ----------- --------- -------
As at 31 December
2016 16,294 319 979 11,495 17,112 7,444 53,643
-------------------- -------- -------- -------- -------- ----------- --------- -------
Consolidated Statement of Cash Flows
for the year ended 31 December 2016
2016 2015
GBP'000 GBP'000
------------------------------------------- -------- --------
Cash flows from operating activities
Profit before taxation 4,569 4,557
Profit on sale of fixed assets (8) (7)
Finance (income)/expense (18) 153
Depreciation 1,063 1,174
Amortisation 3 3
Market value adjustment of Intangible
assets 4 (3)
Share based payment charge 212 129
------------------------------------------- -------- --------
Cash flows from operations before
changes in working capital 5,825 6,006
Decrease/(increase) in inventories 35 (1,070)
(Increase)/decrease in receivables (744) 1,489
Increase in payables 537 197
------------------------------------------- -------- --------
Net cash generated by operations 5,653 6,622
Taxation paid (905) (740)
Interest received/(paid) 18 (104)
------------------------------------------- -------- --------
Net cash generated by operating activities 4,766 5,778
------------------------------------------- -------- --------
Cash flows from investing activities
Purchase of property, plant and equipment (2,254) (1,734)
Proceeds of sale of investments 30 -
Proceeds of sale of land - 1,500
Proceeds of disposal of property,
plant and equipment 8 7
------------------------------------------- -------- --------
Net cash used in investing activities (2,216) (227)
------------------------------------------- -------- --------
Cash flows from financing activities
Repayment of interest bearing borrowings - (5,000)
Proceeds of share issue 47 -
Dividend paid (812) (406)
Repayment of hire purchase and finance
lease obligations - (5)
------------------------------------------- -------- --------
Net cash used in financing activities (765) (5,411)
------------------------------------------- -------- --------
Net increase in cash and cash equivalents 1,785 140
Cash and cash equivalents at the beginning
of the year 2,935 2,795
------------------------------------------- -------- --------
Cash and cash equivalents at the end
of the year 4,720 2,935
------------------------------------------- -------- --------
Cash and cash equivalents comprise:
Cash at bank and in hand 4,720 2,935
Bank overdraft - -
------------------------------------------- -------- --------
4,720 2,935
------------------------------------------- -------- --------
General Information and Accounting Policies
General Information
Introduction
Michelmersh Brick Holdings Plc ("the Company") is a public
limited company limited by shares incorporated in
the United Kingdom under the Companies Act 2006.
The principal activity of the Company during the year was the
management and administration of its subsidiary companies. The main
activity of the main trading subsidiary company was the manufacture
of bricks. All other subsidiary companies were non trading.
These financial statements cover the financial year from 1
January to 31 December 2016, with comparative figures for the year
1 January to 31 December 2015.
The companies within the Group during the financial year ended
31 December 2016 are disclosed in note 12.
Accounting Policies
Basis of Preparation
The consolidated financial statements have been prepared in
accordance with International Financial Reporting Standards
("IFRSs") and IFRS Interpretations Committee interpretations and
with those parts of the Companies Act 2006 applicable to companies
reporting under accounting standards as adopted for use in the EU.
The consolidated financial statements for the financial years ended
31 December 2016 and 31 December 2015 have been prepared under the
historical cost convention, as modified by the revaluation of
certain items as stated in the accounting policies.
The consolidated financial statements are presented in sterling
and all values are rounded to the nearest thousand ("GBP000")
except where otherwise indicated.
The financial statements of the parent company are prepared
under FRS 102 and its subsidiary undertakings are prepared under
FRS101, all to the same reporting date. Adjustments are made to
remove any differences that may exist between UK GAAP and IFRS for
consolidation purposes.
The preparation of the financial statements, in conformity with
IFRS requires the use of estimates and assumptions that affect the
reported amounts of assets and liabilities at the date of the
financial statements and the reported amount of revenue and
expenses during the reporting period. Although these results are
based on management's best knowledge of the amounts, events or
actions, actual results ultimately may differ from those
estimates.
New Standards and interpretations
IFRS 9, Financial Instruments, IFRS 15, Revenue from Contracts
with Customers and IFRS 16, Leases are in issue but are not yet
effective so the Group has not adopted these standards in these
Accounts. The directors have not yet made an assessment of the
likely impact of these.
Accounting standards and interpretations adopted during the
year
No other Amendments and Improvements have been issued that are
not yet effective that would have an impact
on the Group's Accounts.
Basis of consolidation
The financial statements comprise a consolidation of the
financial statements of Michelmersh Brick Holdings Plc and all its
subsidiaries. Subsidiaries include all entities over which the
Group has the power to govern the financial and operating policies.
Subsidiaries are fully consolidated from the date on which the
Group has the power to control. When control of a subsidiary is
lost, a disposal occurs and the subsidiary is no longer
consolidated from that date.
On consolidation, inter-company transactions, balances and
unrealised gains on transactions between Group companies are
eliminated. Unrealised losses are also eliminated unless the
transaction provides evidence of an impairment of the asset
transferred.
Going Concern
The Group's business activities, together with the factors
likely to affect its future development, performance
and position are set out the Chairman's Statement and the Chief
Executives' Review.
The Group meets its day-to-day working capital requirements
principally through cash balances. Additional facilities are in
place including a revolving credit facility and an overdraft
facility provided by Barclays Bank Plc.
The Group's forecasts and projections, taking account of
reasonably possible changes in trading performance, show that the
Group should be able to operate within its facilities.
The Directors have a reasonable expectation that the Group has
adequate resources to continue in operational existence for the
foreseeable future. Thus they continue to adopt the going concern
basis of accounting in preparing these financial statements.
Revenue
Revenue is measured at the fair value of the consideration
received or receivable for the sale of goods and provision of
services in the ordinary course of the Group's activities. Revenue
is shown net of value added tax, returns, rebates and discounts and
after eliminating sales within the Group.
The Group recognises revenue when the amount of revenue can be
reliably measured, when it is probable that future economic
benefits will flow to the entity and when specific criteria have
been met for each of the Group's activities.
The following specific recognition criteria must also be met
before revenue is recognised:
Building materials product revenue
Revenue is recognised when the significant rights and rewards of
ownership of the goods have passed to the buyer, normally on
despatch of the goods. Discounts are negotiated with customers at
the beginning of each financial year.
Landfill revenue
Revenue is recognised following delivery of service in line with
quantities of inert landfill waste tipped by
customers.
Goodwill
Purchased goodwill, representing the difference between the fair
values of the consideration and the underlying assets and
liabilities acquired, is initially recognised as an asset at cost
and is subsequently measured at cost less any accumulated
impairment losses. See note 10 for further details.
Licences
The costs of preparing and submitting applications for licences
have been capitalised as an intangible fixed asset. Amortisation is
calculated so as to write off the cost of the licence on a straight
line basis, through cost of sales, over the operational life of the
landfill site to which it relates.
Property, plant and equipment
Plant and equipment are stated at cost or deemed cost less
accumulated depreciation and impairment losses. Land and buildings
are carried at appropriate valuation for the land and buildings
concerned. Further details are disclosed in note 11 to the
financial statements.
Freehold buildings are revalued annually
Depreciation is calculated so as to write off the cost or
valuation of an asset, less its estimated residual value
based on current prices at the balance sheet date, over the
useful economic life of the asset as follows:
Freehold buildings life of brickworks site
-
Plant and machinery
- 3% - 25%
Motor vehicles
- 25%
Fixtures and fittings
- 20% - 25%
Equipment - 3% - 25%
Freehold land used in landfill activities is amortised over the
life of the site on a usage basis. Mineral reserves are included
within freehold land and buildings and are amortised on a usage
basis. All other freehold land is not depreciated.
Site development costs are capitalised. These costs are written
off over the operational life of the site as and when the void
space created as a result of this expenditure is consumed.
Provision for site restoration costs is made and capitalised once
the Group creates a legal or constructive obligation in respect of
restoration work on landfill sites. This is deemed to be a cost of
disposal and is recognised in the income statement within profit or
loss on disposal when disposal occurs. Provision is made, where
material, for the net present value of the Group's estimated
unavoidable costs in relation to the restoration and aftercare of
landfill sites operated by the Group. Provision is not made where
no significant cost is expected, or where costs are not deemed
reliably measurable.
An amount equal to the excess of the annual depreciation charge
on certain revalued assets over the notional historical cost
depreciation charge on those assets is transferred from the
revaluation reserve to retained earnings.
Impairment of assets
At each balance sheet date the Group reviews the carrying amount
of its assets other than inventories to determine whether there is
any indication that those assets have suffered an impairment loss.
If any such indication exists, the recoverable amount of the asset
is estimated in order to determine the extent of the impairment
loss, if any. The review period is based on the expected life of
the brickworks and this is linked with available clay reserves.
If the recoverable amount of an asset is estimated to be less
than its carrying amount, the carrying amount is reduced to its
recoverable amount. An impairment loss is recognised as an expense
in the income statement, except to the extent that it represents
the reversal of a previous valuation, where it is recognised
directly in other comprehensive income.
The recoverable amount of assets is the greater of their fair
value less costs to sell and value in use. In assessing value in
use, the estimated future cash flows are discounted to their
present value using a pre-tax discount rate that reflects current
market assessments of the time value of money and risks specific to
the asset.
Inventories
Inventories are valued at the lower of cost and net realisable
value, after making due allowance for obsolete and slow moving
items. Cost is calculated using the average cost formula on the
basis of direct cost plus attributable overheads based on a normal
level of activity and includes as part of the deemed cost an
element of clay in respect of mineral reserves, which have been
extracted at valuation and transferred from the freehold land. No
element of profit is included in work in progress and no
revaluations of inventories are made after recognition.
Financial Instruments
Financial Instruments are recognised when the Group becomes a
party to the contractual provisions of the
instrument. The principal financial assets and liabilities of
the Group are as follows:
Interest-bearing borrowings
Interest-bearing borrowings are recognised initially at fair
values less attributable transaction costs. Subsequent to initial
recognition, interest-bearing borrowings are stated at amortised
cost with any difference between cost and redemption value being
recognised in the income statement over the period of the
borrowings on an effective interest basis, matching the expense to
the value of borrowings in issue.
Trade and other receivables
Trade receivables are recognised initially at fair value and
subsequently at amortised cost less any provision for impairment. A
provision for impairment is established when it becomes probable
that the Group will not be able to collect all amounts due
according to the original terms of the receivables. The amount of
the provision is the difference between the asset's carrying amount
and the present value of estimated future cash flows, discounted at
the original effective interest rate. The reduction in carrying
amount of the asset is recognised in the income statement within
administrative expenses. When a trade receivable is uncollectible,
it is written off. Subsequent recoveries of amounts previously
written off are credited against administrative expenses in the
income statement.
Trade and other payables
Trade payables are recognised initially at fair value and
subsequently measured at amortised cost using the
effective interest method.
Cash and cash equivalents
For the purposes of the cash flow statement, cash and cash
equivalents comprise cash at bank and in hand, including bank
deposits with original maturities of three months or less. Bank
overdrafts are also included as they are an integral part of the
Group's cash management.
Share based payment transactions
An expense for equity instruments granted under employee share
schemes and the Save-As-You-Earn Schemes is recognised in the
financial statements based on the fair value at the date of the
grant. This expense is recognised over the vesting period of the
scheme. The cumulative expense recognised at each reporting date,
until the vesting date, reflects the extent to which the vesting
period has expired and the Directors' best estimate of the number
of equity instruments that will ultimately vest. The Group has
adopted the principles of the Black Scholes Model for the purposes
of computing fair value.
Operating Lease Agreements
Rentals applicable to operating leases where substantially all
of the benefits and risk of ownership remain with
the lessor are charged against profits on a straight line basis
over the life of the lease.
Taxation
Income tax on the profit for the year comprises current and
deferred tax. Income tax is recognised in the income statement
except to the extent that deferred tax relates to items recognised
directly in equity, in which case, this element of the deferred tax
charge is recognised in equity.
Current tax is the expected tax payable on the taxable profit
for the year, using tax rates enacted or substantively enacted at
the balance sheet date, and any adjustment to tax payable in
respect of previous years. Taxable profit differs from net profit
as reported in the Income Statement because it excludes items of
income or expense that are taxable or deductible in other years and
it further excludes items that are neither taxable or
deductible.
Deferred tax is provided using the balance sheet liability
method and is the tax expected to be payable or recoverable on
differences between the carrying amounts of assets and liabilities
in the financial statements and the corresponding tax bases used in
the computation of taxable profit. Deferred tax liabilities are
generally recognised for all taxable temporary differences and
deferred tax assets are recognised to the extent that it is
probable that taxable profits will be available against which
deductible temporary differences can be utilised.
The carrying amount of deferred tax assets is reviewed at each
balance sheet date and reduced to the extent that it is no longer
probable that sufficient taxable profits will be available to allow
all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to
apply in the period when the liability is settled or the asset is
realised based on tax rates enacted or substantively enacted at the
balance sheet date.
Deferred tax assets and liabilities are offset when there is a
legally enforceable right to set off current tax assets against
current tax liabilities and when they relate to income taxes levied
by the same taxation authority and the Group intends to settle its
current assets and liabilities on a net basis.
Pension costs
The Group operates defined contribution pension schemes for
employees. The assets of the schemes are held separately from those
of the companies. Contributions are charged to the income statement
in the year in which they are incurred.
Carbon emissions allowances policy
Unused and acquired carbon emission quotas held at the Balance
Sheet date are recognised as intangible
assets and are valued at open market value. Any gain or loss
arising is recognised in the Income Statement.
Dividends
Dividend distributions to the Company's shareholders are
recognised as a liability in the Group's financial
statements in the period in which the dividends are approved by
the Company's shareholder.
Notes to Financial Statements
Year ended 31 December 2016
1. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
The critical accounting judgements and key sources of estimation
uncertainty employed in the preparation of these financial
statements are as follows:
-- Future taxation payments and receipts, which have been
estimated on the basis of the best information available (see note
9).
-- Freehold land and buildings are valued by the Directors,
after taking into account external professional advice, and
incorporate certain assumptions in relation to the future use of
the properties and the estimated useful economic life relating to
clay extraction and landfill facilities.
-- Estimated useful life of property, plant and equipment is
estimated and reviewed at each financial year end. The Group also
tests for impairment whenever a trigger event occurs. Impairment
test assumptions include cash flows based on trading forecasts
generated from current performance of each of the cash generating
units. Cash generating units are deemed to be each integrated
trading site, due to the integrated business model adopted by the
Group. Discounting is applied based on weighted average cost of
capital.
-- The fair value of share based payments is calculated using
the appropriate fair value model with the estimated level of
vesting being reviewed annually by management. The key assumptions
of this model are set out in note 22.
2. SEGMENTAL REPORTING
Segment information is presented in respect of the Group's
business segments, which are based on the Group's management and
internal reporting structure as at 31 December 2016. Segment
information has been prepared in accordance with the accounting
policies of the Group as set out on pages 21 to 25.
The chief operating decision-maker has been identified as the
Board of Directors (the "Board"). The Board reviews the Group's
internal reporting in order to assess performance and allocate
resources. Management have determined the operating segments based
on these reports and on the internal report's structure.
The Board assesses the performance of the operating segments
based on measures of revenue and profit before tax. Segment results
include items directly attributable to a segment as well as those
that can be allocated on a reasonable basis, such as centrally
managed costs relating to individual segments and costs relating to
land used in more than one individual segment.
The Group comprises the following segments:
Building materials:
Manufacture of bricks, tiles and building products being
principally facing bricks and clay paviors:
-- Blockleys - based in Telford, Shropshire
-- Charnwood - based in Shepshed, Leicestershire
-- Freshfield Lane - based in Danehill, West Sussex
-- Michelmersh - based in Romsey, Hampshire
Landfill:
Engagement in landfill operations:
-- New Acres Limited - based in Telford, Shropshire
Segment performance is evaluated by the Board based on revenue
and profit before tax. Given that income taxes and certain
corporate costs are managed on a centralised basis, these items are
not allocated between segments for the purposes of the information
presented to the Board and are accordingly omitted from the
analysis below.
2016 2015
---------------------------------------- ------------- ------- ------- -------
Segmental PBT Segmental PBT
Revenue Revenue
Continuing Activities GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------------- ------------- ------- ------- -------
Building materials
Blockleys 7,121 2,162 7,464 2,113
Charnwood 3,507 948 3,491 991
Michelmersh 5,802 188 6,057 1,377
Freshfield Lane 14,104 5,614 12,475 5,215
Less rebates (477) (477) (461) (461)
---------------------------------------- ------------- ------- ------- -------
30,057 8,435 29,026 9,235
Landfill
New Acres - (8) 50 4
---------------------------------------- ------------- ------- ------- -------
30,057 8,427 29,076 9,239
Inter-segmental revenue and unallocated
costs* - (3,858) (5) (4,682)
---------------------------------------- ------------- ------- ------- -------
30,057 4,569 29,071 4,557
---------------------------------------- ------------- ------- ------- -------
*All inter-segmental revenues transactions are at arms length
prices
Other segmental disclosure
2016 2015
---------------- ---------------------------------------- ----------------------------------------
Property, Intangible Property, Intangible
plant and fixed plant and fixed
equipment assets equipment assets
Additions Depreciation Amortisation Additions Depreciation Amortisation
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------- ------------- ------------- ---------- ------------- -------------
Building
materials
Blockleys 238 280 - 560 258 -
Charnwood 118 67 - 265 55 -
Michelmersh 1,362 433 - 185 380 -
Freshfield
Lane 285 283 - 655 396 -
2,003 1,063 - 1,665 1,089 -
Landfill
New Acres - - - - - 3
Dunton 251 - - 68 - -
2,254 1,063 - 1,733 1,089 3
---------------- ---------- ------------- ------------- ---------- ------------- -------------
Revenue by geographical
destination
2016 2015
GBP'000 GBP'000
---------------- ---------- ------------- ------------- ---------- ------------- -------------
United Kingdom 29,990 29,017
Europe 36 37
Rest of
the World 31 17
---------------- ---------- ------------- ------------- ---------- ------------- -------------
30,057 29,071
---------------- ---------- ------------- ------------- ---------- ------------- -------------
Total assets including property, plant and equipment and
intangible assets are all held in the UK. Sales of GBP4,559,000
(2015: GBP4,296,000) were made to a single customer of the
Group.
Total Group revenue made to the top five customers amounted to
GBP13,602,000 (2015: GBP11,284,000). No other customers were
individually material in revenue value.
3. OTHER INCOME
2016 2015
GBP'000 GBP'000
Rents receivable 15 19
Profit on sale of fixed assets 8 7
Market value adjustment to intangible
asset - 3
Other 13 39
--------------------------------------- -------- --------
36 68
4. FINANCE COSTS
2016 2015
GBP'000 GBP'000
----------------------------------------- -------- --------
Interest expense - 82
Charges in respect of early termination
and new facilities - 188
Charges in respect of hire purchase
agreements - 1
less
Release of interest adjustment
on deferred proceeds of land sale - (118)
Interest earned (18) -
(18) 153
5. PROFIT BEFORE TAXATION
2016 2015
GBP'000 GBP'000
-------------------------------------------------------------------- -------- --------
Profit before taxation is stated
after charging:
Amortisation - other 3 3
Depreciation - owned assets 1,063 1,171
- assets held under hire purchase
agreements - 3
Operating lease costs - plant and
machinery 91 281
- motor vehicles 435 449
-------------------------------------------------------------------- -------- --------
6. DIVID
On 30 June 2016, a dividend was paid of 1.0 pence per share,
amounting in total to GBP812,000.
The Board has proposed a dividend of 2.0 pence per share payable
on 30 June 2017 to shareholders on the register on 2 June 2017. The
dividend will amount to a total payment of GBP1,629,000.
Services provided to the Group by the auditors are reviewed by
the Board of Directors to ensure that the independence of the
auditors is not compromised.
7. AUDITORS REUMERATION
2016 2015
GBP'000s GBP'000s
--------------------------------------------- --------- ---------
Fees payable to the Group's auditor
for the audit of the Group's annual
financial statements 20 20
Fees payable to the Group's auditor
and its associates for other services
- the audit of the Group's subsidiaries,
pursuant to legislation 23 25
- tax compliance services 26 26
- corporate finance services 7 7
--------------------------------------------- --------- ---------
Services provided to the Group by the auditors are reviewed by
the Board of Directors to ensure that the independence of the
auditors is not compromised.
8. PARTICULARS OF EMPLOYEES
The average number of staff employed
by the Group during the year amounted
to:
2016 2015
------------------------------------------- ------- -------
Manufacture and supply of bricks 266 257
Administration 33 32
----------------------------------------------- ------- -------
299 289
----------------------------------------------- ------- -------
2016 2015
GBP'000 GBP'000
------------------------------------------- ------- -------
Wages and salaries 8,909 8,597
Social security costs 864 844
Other pension costs 338 330
----------------------------------------------- ------- -------
10,111 9,771
----------------------------------------------- ------- -------
Details of Directors' emoluments are shown
in the Remuneration Report on page 11.
9. TAXATION
a) Recognised in the income statement
2016 2015
GBP'000 GBP'000
------------------------------------------- ------- -------
Current tax expense
Current year 843 876
Prior year (21) (50)
----------------------------------------------- ------- -------
822 826
Deferred tax
Origination and reversal of temporary
differences 188 125
----------------------------------------------- ------- -------
Total income tax charge in the income
statement 1,010 951
----------------------------------------------- ------- -------
b) Factors affecting the tax charge for
the year
The tax assessed for the year is higher (2015 higher) than the
standard rate of corporation tax in the UK of 20% (2015: 20.25%).
The differences are explained below.
2016 2015
GBP'000 GBP'000
---------------------------------- -------- --------
Reconciliation of effective tax
rate
Profit before taxation 4,569 4,557
---------------------------------- -------- --------
Income tax using the domestic
corporation tax rate 914 923
Effects of :
Expenses disallowed 19 53
Share option expense not taxable 28 -
Depreciation in excess of capital
allowances 65 44
Change to prior year estimate 32 (4)
Profit on sale (2) (25)
Rate changes (38) (55)
Other timing differences (8) 15
---------------------------------- -------- --------
1,010 951
---------------------------------- -------- --------
c) Factors affecting future tax charges
The Chancellor has announced that the main UK corporation tax
rate will be reduced from the current rate of 20%, which has
applied from 1 April 2015 to 17%. The reduction in the corporation
tax rate to 19% from 1 April 2017 and 17% from 1 April 2020 was
enacted on 15 September 2016. As this rate was enacted at the
balance sheet date, and reduces the tax rate expected to apply when
temporary differences reverse, it has the effect of reducing the UK
deferred tax balance.
As at 31 December 2016, the Group had tax losses carried forward
of approximately GBP1,169,000 (2015: GBP1,181,000).
A deferred tax asset has not been recognised in respect of
GBP503,000 (2015: GBP503,000) of these tax
losses, as the Directors do not consider their recovery to be
sufficiently certain in the near future.
10. INTANGIBLE ASSETS
PPC Carbon
license emissions
Goodwill quota Total
GBP'000 GBP'000 GBP'000 GBP'000
----------------------- -------- ----------- --------------- -------
Cost or valuation
As at 1 January 2015 2,280 75 143 2,498
Revaluation adjustment - - 3 3
----------------------- -------- ----------- --------------- -------
As at 31 December
2015 2,280 75 146 2,501
Revaluation adjustment - - (4) (4)
----------------------- -------- ----------- --------------- -------
As at 31 December
2016 2,280 75 142 2,497
----------------------- -------- ----------- --------------- -------
Amortisation
As at 1 January 2015 - 22 - 22
Charge for the year - 3 - 3
----------------------- -------- ----------- --------------- -------
As at 31 December
2015 - 25 - 25
Charge for the year - 3 - 3
----------------------- -------- ----------- --------------- -------
As at 31 December
2016 - 28 - 28
----------------------- -------- ----------- --------------- -------
Net book value
As at 31 December
2016 2,280 47 142 2,469
----------------------- -------- ----------- --------------- -------
As at 31 December
2015 2,280 50 146 2,476
----------------------- -------- ----------- --------------- -------
GOODWILL
The goodwill relates exclusively to the acquisition of
Freshfield Lane Brickworks Limited in 2010. In accordance with
accounting standards, the Group annually tests the carrying value
of goodwill for impairment. At 31 December 2016, the review was
undertaken on a value in use basis, assessing whether the carrying
value of goodwill was supported by the net present value of future
cash flows derived from those assets, using cash flow projections
of the brickworks discounted at the Group's weighted average cost
of capital.
The key assumptions used in the value in use calculations are
those regarding discount rates of 10% (2015: 10%) and revenue and
cost growth rates of 3% (2015: 3%). The Group prepares cash flow
forecasts as part of the budget process, and these are extrapolated
forward for the expected life of the business.
There were no impairment losses recognised on goodwill during
the year (2015: GBPnil).
11. PROPERTY, PLANT Freehold
AND EQUIPMENT land Site Motor Plant
and develop- and
buildings ment vehicles machinery Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------- ---------- --------- --------------------- --------
Cost or valuation
As at 1 January 2015 33,671 202 27 25,477 59,377
Additions 1,338 - - 396 1,734
Transfer between categories (41) - - - (41)
Transfers to inventories - - - (72) (72)
Revaluation surplus 1,163 - - - 1,163
Revaluation deficit (2,771) - - - (2,771)
------------------------------------- ---------- --------- ----- -------------- --------
As at 31 December 2015 33,360 202 27 25,801 59,390
Additions 640 - 11 1,602 2,254
Transfers to inventories (33) - - - (33)
Transfer to current
assets (2,639) - - - (2,639)
Disposals - - - (38) (38)
Revaluation surplus 1,369 - - - 1,369
------------------------------------- ---------- --------- ----- -------------- --------
As at 31 December 2016 32,697 202 38 27,365 60,302
------------------------------------- ---------- --------- ----- -------------- --------
Depreciation
As at 1 January 2015 1,666 46 27 15,739 17,478
Charge for the year 132 - - 1,042 1,174
Disposals - - - (72) (72)
------------------------------------- ---------- --------- ----- -------------- --------
As at 31 December 2015 1,798 46 27 16,709 18,580
Charge for the year 317 - 1 745 1,063
Transfer to current
assets (97) - - - (97)
Disposals - - - (38) (38)
------------------------------------- ---------- --------- ----- -------------- --------
As at 31 December 2016 2,018 46 28 17,416 19,508
------------------------------------- ---------- --------- ----- -------------- --------
Net book value
As at 31 December 2016 30,679 156 10 9,949 40,794
------------------------------------- ---------- --------- ----- -------------- --------
As at 31 December 2015 31,562 156 - 9,092 40,810
------------------------------------- ---------- --------- ----- -------------- --------
The Group's freehold land and buildings were valued by the
Directors at GBP30,679,000 at 31 December 2016 (2015:
GBP31,562,000), resulting in a net increase in the revaluation
reserve of GBP1,369,000 (2015: decrease GBP1,608,000). Deferred tax
liabilities were decreased by GBP49,000 (2015: GBP804,000) and have
been credited to the revaluation reserve.
The revaluation surplus in the year ended 31 December 2016
relates to an increase in value of a landfill asset and the Group's
mineral reserves. Conditional contracts have been exchanged in
January 2017 for the sale of the Dunton landfill site for GBP2.68
m. The asset was revalued to the sale value less costs to sell and
re-categorised as 'non-current assets, held for resale' as at 31
December 2016. The Group's mineral assets were revalued during the
year by Wardell Armstrong LLP and the value was increased
accordingly.
In respect of the freehold property stated at a valuation, the
comparable historical cost and depreciation values are as
follows:
2016 2015
GBP'000 GBP'000
---------------------------------------- -------- --------
Historical cost
At 1 January 16,705 15,408
Additions 640 1,338
Transfer to inventories (33) (41)
---------------------------------------- -------- --------
At 31 December 17,312 16,705
---------------------------------------- -------- --------
All other property, plant and equipment
are stated at historical cost.
IFRS13
Under IFRS13 companies must disclose greater detail about the
assets held at fair value and the valuation methodology.
Michelmersh 'fair values' its land and buildings on a range of
bases described below depending on the nature of the asset. Fair
value is defined as the price that would be received on sale of the
asset in an orderly transaction between market participants at the
measurement date.
The assets have been valued individually consistent with the
principles of IFRS13. Valuations have been made on the basis of
highest and best use which involves consideration of a potential
alternative use given current market conditions. Current and best
use is considered by the directors to represent highest and best
use.
Methodology
IFRS13 requires the fair values to be categorised in a three
level 'fair value hierarchy' based on the inputs
used in the valuation.
Level 1 - Quoted prices in active markets for identical assets
or liabilities that the entity can access at measurement date.
Level 2 - Use of a model with inputs (other than quoted prices
as in Level 1) that are directly or indirectly observable market
data.
Level 3 - Use of a model with inputs that are not based on
observable market data.
The fair value of Land and Buildings above of GBP30,679,000 are
all derived using Level 3 inputs and there have been no transfers
between Levels during the period.
Valuation techniques
Brickwork properties have been fair valued using a cost
approach, by assessing the rebuild cost provided by external
professional valuers in 2011, ascribing a construction industry
price inflation factor and applying a remaining life period over
the total life of each asset of between 20 and 50 years. These
values were confirmed by a third party valuation in 2015 of
Freshfield Lane and Telford properties. Mineral reserves were
assessed during 2016 and the volumes of 4.7 million tonnes and
market rate less extraction costs have been reveiwed and subjected
to net present value assessments to arrive at current fair value.
Similarly, the fair value of landfill assets have been assessed by
updating external third party valuations from 2011 based on
available landfill voids of 1.9 million tonnes.
Other property comprises land assets that may be treated as
Investment properties at some point in the future. The Directors
have reviewed the third party professional valuations conducted in
2011 updated them where they consider conditions have changed in
the interim period.
2016 2015
GBP'000 GBP'000
------------------------------------------- -------- --------
Fair value of Land and Buildings
at 1 January 31,562 32,005
Transferred to inventories (33) (41)
Charged to the Income Statement
in cost of sales (317) (132)
Expenditure on assets 640 1,338
Transferred to current assets (2,542) -
Net loss recognised in Other Comprehensive
Income - (2,771)
Net gains recognised in Other
Comprehensive Income 1,369 1,163
------------------------------------------- -------- --------
Fair value of Land and Buildings
at 31 December 30,679 31,562
------------------------------------------- -------- --------
Sensitivity
The fair value of brickworks land and buildings will be
sensitive to changes in construction costs and expected life of the
buildings. The net present value of the landfill and mineral
deposits uses inputs relating to the market value of landfill and
clay and usage levels available that would determine market
participants evaluation.
The open market value of the other properties is sensitive to
general economic conditions but changes in value will be most
highly affected by change in planning status and the period of time
estimated to ultimately developed alternative use.
12. SUBSIDIARIES
The following subsidiaries have been included within the
consolidated financial statements
Class %
Country of of Shares age
Company Incorporation held of holding Nature of business
---------------------------- ------------- ------------ --------------------
Michelmersh Brick England Ordinary 100 Manufacture Bricks
UK Limited
Dunton Brothers England Ordinary 100 Non trading property
Limited holding
Charnwood Forest England Ordinary 100 Non trading property
Brick Limited holding
Michelmersh Brick
and Tile
Company Limited England Ordinary 100 Non trading property
holding
Freshfield Lane England Ordinary 100 Non trading property
Brickworks Limited holding
New Acres Limited England Ordinary 100 Non trading landfill
operations
No entities have been excluded from the consolidated financial
statements.
13. INVENTORIES
2016 2015
GBP'000 GBP'000
----------------- ------- -------
Raw materials 2,555 2,532
Work in progress 1,235 1,112
Finished goods 3,403 3,551
----------------- ------- -------
7,193 7,195
----------------- ------- -------
The cost of inventories expensed during the year is
GBP17,909,000 (2015: GBP17,929,000). The inventory cost disclosed
above is used for security of previous borrowings as disclosed in
note 16.
14. TRADE AND OTHER RECEIVABLES
2016 2015
Amounts falling due within one year GBP'000 GBP'000
-------------------------------------- ------- -------
Trade receivables 4,440 4,039
Prepayments and accrued income 612 269
------------------------------------------- ------- -------
5,052 4,308
------------------------------------------- ------- -------
The fair values of the trade and other receivables are
approximate to their carrying value. The trade receivables
disclosed above are used for security of the overdraft as disclosed
in note 17.
Included within trade receivables is GBP10,000 (2015: GBP82,000)
of receivables past due but not impaired. The Directors do not feel
there is any deterioration of credit quality of these receivables.
The age analysis of receivables past due but not impaired is as
follows.
2016 2015
GBP'000 GBP'000
30 days overdue 4 82
30 - 60 days overdue - -
60 - 90 days overdue 6 -
10 82
The carrying amount of the Group's trade and other receivables
are denominated in sterling. The total cash and receivables
category comprises trade and other receivables above together with
cash of GBP4,720,000 as shown in the balance sheet, totalling
GBP9,160,000.
During the year no provisions were made against any debtors
(2015: nil).
15. TRADE AND OTHER PAYABLES
Amounts falling due within one 2016 2015
year GBP'000 GBP'000
-------------------------------------------- -------- --------
Trade payables 2,137 1,155
Other taxation and social security 709 698
Other payables 149 3
Accruals 1,658 2,256
Pension 49 53
-------------------------------------------- -------- --------
4,702 4,165
-------------------------------------------- -------- --------
The fair values of trade and other payables are approximate to
their carrying value. The total financial liabilities at amortised
cost category comprises the above payables excluding other taxation
and social security totalling GBP3,993,000.
Trade payables are not interest bearing and are generally
settled within terms. Other payables are non-interest bearing.
16. BORROWINGS
Interest rate risk of financial assets and liabilities
The Group has no borrowings at 31 December 2016 (2015: GBPnil)
and has no hire purchase liabilities (2015: GBPnil). The Group's
financial assets at 31 December 2016 and 31 December 2015 include
cash at bank and in hand for which minimal interest is earned.
Borrowing facilities
The Group has undrawn committed borrowing facilities at 31
December 2016 of GBP4,500,000 (2015: GBP4,500,000). The facilities
are committed until 2018.
The Group currently operates with positive cash reserves. The
Group has a GBP4 million committed Revolving Credit Facility and a
GBP500,000 overdraft facility with Barclays. If utilised, interest
is payable on the borrowing facilities at a margin above LIBOR per
annum and the Group is subject to a non-utilisation fee. The
facilities are secured by a floating charge over all property and
assets of the Group both present and future, and a fixed charge on
one property, dated 23 March 2006 in favour of Barclays Bank
Plc.
17. FINANCIAL INSTRUMENTS AND RELATED DISCLOSURES
Financial instruments
As the Group predominantly operates within the United Kingdom,
and the majority of overseas sales are
conducted in sterling, the directors consider there is minimal
exposure to currency risk.
Financial risk factors
The Group's activities expose it to a variety of financial
risks: market risk (including cash flow interest rate risk and
price risk), credit risk and liquidity risk. The Group's overall
risk management programme focuses on the unpredictability of
financial markets and seeks to minimise potential adverse effects
on the Group's financial performance.
Risk management is carried out by the Operations Board under
policies approved by the Board of Directors. The Operations Board
identifies, evaluates and takes measures to adequately mitigate
financial risks in close co-operation with the Group's operating
units. The Board provides written principles for overall risk
management, as well as written policies covering specific areas,
such as foreign exchange risk, interest rate risk, credit risk, use
of derivative financial instruments and non-derivative financial
instruments, and investment of excess liquidity.
Market risk
Cash flow and fair value interest rate risk
Given that the Group has no current borrowings, and expects that
potential utilisation of facilities will be
limited in amount and time periods, the Group's interest rate
risk is restricted.
Liquidity risk
Prudent liquidity risk management implies maintaining sufficient
cash and availability of funding through an adequate amount of
committed credit facilities. Due to the dynamic nature of the
underlying businesses, Group treasury aims to maintain flexibility
in funding by keeping committed credit lines available.
Capital management
The Group's objectives when managing capital are to safeguard
the Group's ability to continue as a going concern in order to
provide returns for shareholders and benefit other stakeholders and
to maintain an optimal capital structure to reduce the cost of
capital.
In order to maintain or adjust the capital structure, the Group
may adjust the amount of dividends paid to shareholders, return
capital to shareholders, issue new shares or sell assets to reduce
debt.
Fair value estimation
The carrying value less impairment provision of trade
receivables and payables are assumed to approximate to their fair
values due to their short-term nature. The fair value of financial
liabilities for disclosure purposes is estimated by discounting the
future contractual cash flows at the current market interest rate
that is available to the Group for similar instruments.
18. PENSIONS
Defined contribution Scheme
The Group operates a defined contribution scheme for its
employees. The assets of the scheme are held separately from those
of the Group in trustee administered funds. The pension charge for
contributions made by the Group to the defined contribution scheme
amounted to GBP340,000 (2015: GBP328,000). Amounts unpaid at the
year end in respect of contributions amounted to GBP31,000 (2015:
GBP33,000).
19. DEFERRED TAXATION
Deferred tax at 31 December 2016 relates to the following:
Property
plant Other
Losses and equipment items Total
GBP'000 GBP'000 GBP'000 GBP'000
Cost
As at 1 January 2015 (139) 4,684 48 4,593
Recognised in income 17 131 (23) 125
Recognised in other comprehensive
income - (804) - (804)
---------------------------------- ------- -------------- ------- -------
As at 31 December 2015 (122) 4,011 25 3,914
Recognised in income 9 183 (5) 187
Recognised in other comprehensive
income - (49) - (49)
---------------------------------- ------- -------------- ------- -------
As at 31 December 2016 (113) 4,145 20 4,052
---------------------------------- ------- -------------- ------- -------
Deferred tax assets included above are deemed recoverable
against future taxable profits in certain Group companies.
In addition to the above, the Group has un-provided deferred tax
assets of GBP85,000 (2015: GBP90,000) in respect of unrelieved tax
losses.
20. COMMITMENTS UNDER OPERATING LEASES
Total future minimum lease payments under non-cancellable
operating leases in respect of vehicles, plant
and machinery are set out below:
2016 2015
GBP'000 GBP'000
---------------------------- -------- --------
Within one year 601 590
Between two and five years 1,114 517
1,715 1,107
Under the terms of the lease agreements, no contingent rents are
payable.
21. SHARE CAPITAL
2016 2016 2015 2015
Authorised share Number GBP'000 Number GBP'000
capital
Ordinary shares
of 20p each 110,000,000 22,000 110,000,000 22,000
--------------------- ------------ -------- ------------ --------
2016 2016 2015 2015
Allotted, called Number GBP'000 Number GBP'000
up and fully paid:
Ordinary shares
of 20p each 81,471,178 16,294 81,234,656 16,247
--------------------- ------------ -------- ------------ --------
There were no unusual rights or restrictions attaching to the
Ordinary shares of the company.
22. SHARE BASED PAYMENTS
Share option reserve GBP'000
------------------------ --------
As at 1 January 2016 177
Released on maturity (70)
Charge for the year 212
As at 31 December 2016 319
------------------------ --------
a) Michelmersh Brick Holdings Plc Group share option schemes
No. of No. of
options Options options
Exercise as at forfeited/ as at
Year price lapsed
of per Period of 31 December Options in 31 December
Grant share exercise 2015 granted the year 2016
------- --------- ----------------- ------------ -------- ----------- ------------
February
2011 - February
2008 96p 2018 12,500 - - 12,500
July 2017
-
2014 72.75p July 2024 164,000 - - 164,000
May 2020
-
2015 nil June 2025 1,000,000 - - 1,000,000
December
2018 - December
2015 nil 2025 36,524 - - 36,524
Vesting conditions under the schemes include a three or five
year vesting period. Employees may exercise options after they
leave employment if exercised within six months of ceasing to be an
employee. The exercise period is seven or five years from the
vesting date.
The options granted in the year were made under the "Long Term
Incentive Plan" and are subject to performance conditions. The
conditions relate to EPS targets in repect of the first grant (see
Directors Remuneration Report on page 11) and the second grant to
senior management relate to profitability of the brick
business.
b) Michelmersh Brick Holdings Plc SAYE scheme
No. of No. of
options Options options
Exercise as at forfeited/ as at
Year price lapsed
of per Period of 31 December Options in 31 December
Grant share exercise 2015 granted the year 2016
------- --------- ----------
November 2011 -
2011 19p December 2016 238,416 (238,416) - -
August 2015 -
2015 66.2p August 2018 382,609 - (27,190) 355,419
August 2015 -
2015 66.2p August 2020 39,877 - - 39,877
Vesting conditions under the scheme include a three or five year
vesting period but do not include any performance criteria.
Options were valued using the principles of the Black Scholes
Model. This valuation is amortised to the income statement over the
vesting period. The charge for the year amounted to GBP212,000
(2015: GBP129,000).
The following key inputs have been used in the valuation of the
share options using the Black Scholes Model, as deemed applicable
at the grant date.
Weighted average share price GBP0.821
Expected volatility 30%
Expected dividend yield 1.8%
Risk free rate 5%
Expected volatility is derived from historic share price of the
Group.
The weighted average exercise prices for both schemes combined
were as set out below:
2016 2015
Weighted Weighted
average average
exercise exercise
No price No price
Outstanding as at 1 January 1,873,926 24.3p 440,179 57.0p
Exercised (238,416) 19p - -
Lapsed and forfeited (27,190) 66.2p (34,506) 31.6p
Granted - - 1,468,253 19.5p
Outstanding as at 31 December 1,608,320 24.4p 1,873,926 24.3p
--------- ---------
The weighted average contractual life for the share options
outstanding at 31 December 2016 is 7 years (2015: 7 years).
23. EQUITY ATTRIBUTABLE TO EQUITY HOLDERS
Share option reserve
The share option reserve relates to the Group Share Option and
SAYE Share Option Schemes. Additional
details are disclosed in note 22 to the financial
statements.
Share premium account
The share premium account relates to the excess of issue price
over nominal value of shares issued.
Merger reserve
The merger reserve relates to the premium of fair value of
ordinary shares issued on acquisition of a
subsidiary over the par value of the shares.
Revaluation reserve
The revaluation reserve relates to revaluation of property as
disclosed in note 11.
24. EARNINGS PER SHARE
2016 2015
Earnings GBP'000 GBP'000
Earnings for the purposes of basic and diluted earnings per share being net profit
attributable
to equity shareholders from continuing operations 3,559 3,606
Number of shares
Weighted average number of ordinary shares for the purposes of basic earnings per share 81,259,280 81,234,656
Number of dilutive shares under option 379,105 389,741
Weighted average number of ordinary shares for the purposes of dilutive earnings per share 81,638,385 81,624,397
The calculation of diluted earnings per share assumes conversion
of all potentially dilutive ordinary shares, all of which arise
from share options. 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 company news service from the London Stock Exchange
END
FR JRMPTMBTBBIR
(END) Dow Jones Newswires
March 20, 2017 03:00 ET (07:00 GMT)
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