TIDMMBH
RNS Number : 6607P
Michelmersh Brick Holdings PLC
04 September 2017
4 September 2017
Michelmersh Brick Holdings Plc
("MBH", the "Company", or the "Group")
Half Year Results for the six months ended 30 June 2017
Michelmersh Brick Holdings Plc (AIM:MBH), the specialist brick
manufacturer, is pleased to report its half year results for the
six months ended 30 June 2017.
HIGHLIGHTS
Financial Highlights:
-- Turnover increased by 6% to GBP16.2 million (H1 2016: GBP15.3
million)
-- EBITDA* of GBP3.0 million (H1 2016: GBP3.0 million), with
stronger earnings performance expected during the second half of
the financial year
-- PBT (before exceptional item) GBP2.4 million (H1 2016: GBP2.6
million)
-- EPS (excluding exceptional item) 2.37 pence (H1 2016: 2.57
pence)
-- Net debt of GBP20.7 million after drawing GBP24 million in
loans to meet acquisition payments (30 June 2016: net cash GBP2.7
million)
-- Final Dividend of 2 pence per share paid in June 2017 with an
Interim Dividend declared of 0.7 pence per share payable in January
2018.
Operational Highlights:
-- Acquisition of Carlton Main Brickworks for net consideration
of GBP31 million with post-acquisition integration on track.
Minimal financial contribution from acquisition (7 days), but
expected to significantly increase the output of bricks and
financial performance of the Group during the second half of the
financial year
-- Completed sale of Dunton site for total consideration of
GBP2.68 million
-- Improved average selling price and forward order commitment
of over 55 million bricks at period end, ahead of initial
targets
-- Well positioned for a stronger operational and financial
performance in H2 2017
Commenting on the results, Martin Warner, Chairman of
Michelmersh Brick Holdings Plc, said:
"This has been another strong period for the Group, which
culminated in the acquisition of Carlton Main Brickworks. The
integration of Carlton is on track and forward order commitments
have increased, positioning the Group for further growth in the
second half. This is a transformational period for the business,
which will further benefit our customers and shareholders in the
future."
*EBITDA as disclosed is Operating Profit with depreciation and
amortisation added back.
Michelmersh Brick Holdings Plc
Frank Hanna, Joint CEO 01825 430
Stephen Morgan, Finance Director 412
Cenkos Securities plc
Bobbie Hilliam (NOMAD)
Harry Hargreaves 020 7397
Alex Aylen (Sales) 8900
07747 788
Yellow Jersey PR 221
07555 159
Charles Goodwin 808
Abena Affum
About Michelmersh Brick Holdings PLC:
Michelmersh Brick Holdings PLC is a business with six market
leading brands: Blockleys, Carlton, Charnwood, Freshfield Lane,
Michelmersh and Hathern Terra Cotta. These divisions operate within
a fully integrated business combining the manufacture of clay
bricks, tiles and pavers. The Group also includes a landfill
operator, New Acres Limited, and seeks to develop future landfill
and development opportunities on ancillary land assets.
Established in 1997, the Company has grown through acquisition
and organic growth into a profitable and asset rich business,
producing over 100 million clay bricks, tiles and pavers per annum.
Michelmersh currently owns most of the UK's premium manufacturing
brands and is a leading specification brick and clay paving
manufacturer.
Michelmersh strives to be a well invested, long term,
sustainable, environmentally responsible business. Opportunity,
training and security for all employees, whilst meeting the needs
of stakeholders are at the forefront of everything we do. We aim to
lead the way in producing some of Britain's premium clay products
and enhancing our environment by adding value to the architectural
landscape for generations to come.
We are Michelmersh Brick Holdings PLC: we are "Britain's Brick
Specialist".
Please visit the Group's websites at: www.mbhplc.co.uk and
www.bimbricks.com
Chairman's Statement
The six months to 30 June 2017 included two significant events
for the future development of the Group, although both had limited
impact on the trading performance reported. The acquisition of
Carlton Main Brickworks Limited ("Carlton") on 23 June 2017
promises to significantly increase the Group's production capacity,
EBITDA and market presence. The contribution to the Group profit
for the six months to 30 June 2017 was limited to the 7 days of
ownership.
In late June 2017, the sale of the former Dunton brickworks site
was also completed. The land asset had been revalued upwards in
2016 by GBP1.4 million as the terms of the conditional sale
contract were signed in January 2017. The asset was displayed in
the balance sheet at 31 December 2016 as a non-current asset held
for resale at its sale price (GBP2.68 million) less costs
associated with the sale. The proceeds were included in the cash
balance in the balance sheet at 30 June 2017 but with no impact on
the reported profit before taxation.
The Group reported an operating profit of GBP2.4 million (HI
2016: GBP2.6 million) after turnover increased by 6% over a very
strong first half in 2016. This includes a small contribution from
Carlton but was ahead of our forecast as we saw the seasonal
balance shift in 2017 to a stronger second half. Gross margin at
35% was slightly better than the margin for the full year 2016.
Administration expenses were 7% higher than in the first six months
of 2016 due to a combination of the inclusion of Carlton overheads,
currency and employment related cost inflation, and additional
overhead arising from investment in the sales team and engineering
department.
Not including Carlton, the Group produced 35 million bricks in
the first half of 2017 (2016: 35 million) and despatched 35 million
(2016: 35 million) bricks at a slightly improved average selling
price compared to 2016. The Group is well placed for the rest of
the year with a strong, well balanced forward order book of over 55
million bricks spread across RMI, housing and commercial
sectors.
Carlton
On 26 June 2017, the Group announced the acquisition of Carlton
for a net consideration of GBP31 million. The addition of this
business will have a significant impact on the structure and
performance of the Group. Output will increase to over 100 million
bricks and turnover and EBITDA will significantly increase with
immediate effect. Over time, identified operational synergies will
be implemented to improve Carlton's contribution further.
Carlton's product range is aligned with Michelmersh in that it
is of high technical quality, well respected in the market and with
a strong Repair Maintenance and Improvement (RMI) presence. As
such, the products sit well alongside Michelmersh and will be
marketed through our established channels.
Carlton produces a range of over 50 wirecut bricks at the South
Yorkshire plant with a capacity of 35 million bricks per annum and
employs 65 staff on a 93-acre site. Carlton's products have a
strong gross margin but have a lower average selling price than
Michelmersh which will dilute our premium over the market. However
we expect to maintain around 35% premium over the industry.
The historic cost base assets of Carlton at completion were
valued at GBP14 million although the true value is materially
higher. Valuation exercises are underway that will recognise the
true worth of the fixed assets and intangibles, including goodwill.
Depreciation and amortisation will arise as a result of the
revaluations, albeit not affecting the strong EBITDA addition to
Group results.
The Board wishes to thank the staff at Carlton for the support
and warm welcome given since they joined the Group. We are pleased
to report that the post-acquisition integration is on track with
the management team meeting key milestones in the process.
Net Debt and Working Capital
At 30 June 2017, the Group's net debt stood at GBP20.7 million
(2016: net cash of GBP2.8 million). Whilst this is a significant
change in the gearing position, the Board is comfortable with the
level of debt and the debt covenants in place. Hedging arrangements
are in place to protect the Group from significant changes in LIBOR
rates over the six-year term of the main term loan and cash
positive trading is expected to see the net debt position fall
steadily.
New facilities totalling GBP27 million were provided by HSBC in
anticipation of the Carlton acquisition. The Board is grateful for
the support and guidance provided by our new banking partners. Of
the GBP24 million drawn to meet completion payments, GBP3 million
has already been repaid in July, principally from the proceeds of
the Dunton land sale that took place within days of the acquisition
completing.
Levels of working capital at 30 June 2017 have increased from
those seen at 30 June 2016 as a result of the inclusion of
Carlton's trading assets, but also in respect of VAT on the land
sale late in June as well as accrual for costs relating to the
acquisition. It is expected that working capital levels will reduce
going forward.
Dividend
The Group has enjoyed a positive cash position over recent years
and has returned to the payment of dividends to reward
shareholders. Whilst the Group is now in a net debt position
following the acquisition of Carlton, the Board recognise that
increased earnings in the enlarged Group allow us to continue to
maintain a progressive dividend policy and propose an interim
dividend of 0.7 pence per ordinary share. The dividend will be
payable on 12 January 2018 to shareholders on the register on 15
December 2017.
Outlook
This has been another strong period for the Group, which
culminated in the acquisition of Carlton Main Brickworks. The
integration of Carlton is on track and forward order commitments
have increased, positioning the Group for further growth in the
second half. This is a transformational period for the business,
which will further benefit our customers and shareholders in the
future. We look forward to a busy second half of 2017 with a strong
contribution from Carlton.
To an extent, the Company's trading results reflect the fortunes
of the wider brick industry which is now highly consolidated.
Despite the increased demand enjoyed in the first half and
inflationary pressures from energy and currency denominated costs,
average selling prices have not as of yet reflected these factors.
Michelmersh remains strongly cash generative with a long-term asset
base and it continues to exceed market averages and seeks to
maintain that position whilst continuing to invest in plant, people
and process.
M Warner
Chairman
Consolidated Income Statement
6 months 6 months 12 months
ended 30 ended 30 ended 31
June June December
2016
2016 2016
2017
2017 2016 2016
GBP'000 GBP'000 GBP'000
Unaudited Unaudited Audited
Revenue 16,180 15,292 30,057
Cost of sales (10,420) (9,581) (19,709)
Gross profit 5,760 5,711 10,348
Administration expenses (3,363) (3,126) (5,833)
Other income 17 13 36
Operating profit 2,414 2,598 4,551
Exceptional item * (1,044) - -
Finance income 5 8 18
------------ ------------ ----------
Profit before taxation 1,375 2,606 4,569
Taxation (275) (521) (1,010)
------------ ------------ ----------
Profit for the period 1,100 2,085 3,559
------------ ------------ ----------
Basic earnings per share 1.35 p 2.57 p 4.38 p
Diluted earnings per share 1.34 p 2.55 p 4.36 p
Exceptional item * relates to costs incurred in connection with
the acquisition of Carlton Main Brickworks Limited.
Consolidated Statement of Comprehensive Income
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 December
2017 2016 2016
GBP'000 GBP'000 GBP'000
Unaudited Unaudited Audited
Profit for the financial period 1,100 2,085 3,559
---------- ---------- -------------
Other comprehensive income
Items which will not subsequently be reclassified to profit or loss
Revaluation surplus of property, plant & equipment - - 1,369
Deferred tax on revaluation - - 49
---------- ---------- -------------
Other comprehensive income for the period net of tax - - 1,418
---------- ---------- -------------
Total comprehensive income for
the financial period 1,100 2,085 4,977
---------- ---------- -------------
Consolidated Balance Sheet
As at As at As at
30 June 30 June 2016 31 December
2017 2016
GBP'000 GBP'000 GBP'000
Unaudited Unaudited Audited
Assets
Non-current assets
Intangible assets 23,687 2,475 2,469
Property, plant and equipment 50,368 41,354 40,794
---------- -------------- -------------
74,055 43,829 43,263
Non-current assets held for resale - - 2,542
Current assets
Inventories 8,685 7,278 7,193
Trade and other receivables 10,140 6,045 5,052
Investments - 30 -
Cash and cash equivalents 6,505 2,747 4,720
---------- -------------- -------------
Total current assets 25,330 16,100 16,965
---------- -------------- -------------
Total assets 99,385 59,929 62,770
---------- -------------- -------------
Liabilities
Current liabilities
Trade and other payables 8,914 4,899 4,702
Interest bearing borrowings 6,946 - -
Corporation tax payable 1,101 521 373
---------- -------------- -------------
Total current liabilities 16,961 5,420 5,075
5,420
Non-current liabilities
Interest bearing borrowings 20,281 - -
Deferred tax liabilities 5,545 3,914 4,052
---------- -------------- -------------
25,826 3,914 4,052
Total liabilities 42,787 9,334 9,127
---------- -------------- -------------
Net assets 56,598 50,595 53,643
========== ============== =============
Equity attributable to equity holders
Share capital 17,234 16,247 16,294
Share premium account 13,939 11,495 11,495
Reserves 18,510 16,953 18,410
Retained earnings 6,915 5,900 7,444
---------- -------------- -------------
Total equity 56,598 50,595 53,643
========== ============== =============
Consolidated Statement of Changes in Equity
Share Share Other Retained Total
Capital Premium Reserves Earnings Equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
As at 1 January
2016 16,247 11,495 16,850 4,627 49,219
Profit for the
period - - - 2,085 2,085
-------- -------- --------- --------- --------
Total comprehensive
income - - - 2,085 2,085
Share based payment - - 103 - 103
Dividends paid - - - (812) (812)
As at 30 June
2016 16,247 11,495 16,953 5,900 50,595
Profit for the
period - - - 1,474 1,474
Revaluation surplus - - 1,369 - 1,369
Deferred tax on
revaluation - - 49 - 49
-------- -------- --------- --------- --------
Total comprehensive
income - - 1,418 1,474 2,892
Share based payment - - 109 - 109
Shares issued
in the period 47 - - - 47
Transfer to retained
earnings - - (70) 70 -
-------- -------- --------- --------- --------
As at 31 December
2016 16,294 11,495 18,410 7,444 53,643
Profit for the
period - - - 1,100 1,100
Total comprehensive
income - - - 1,100 1,100
Shares issued
in the period 940 2,444 - - 3,384
Share based payment - - 100 - 100
Dividends paid - - - (1,629) (1,629)
As at 30 June
2017 17,234 13,939 18,510 6,915 56,598
======== ======== ========= ========= ========
Consolidated Statement of Cash Flows
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 December
2016 2015 2015
GBP'000 GBP'000 GBP'000
30 June 30 June 31 December
2017 2016 2016
Unaudited Unaudited Audited
Net cash generated by operating
activities 757 1,628 4,766
---------- ---------- --------------
Cash flows from investing activities
Purchase of property, plant
and equipment (344) (1,004) (2,254)
Purchase of subsidiary undertaking (23,289) - -
net of cash acquired
Acquisition costs (406) - -
Proceeds from sale of investment - - 30
Proceeds from sale of land 2,680 - -
Proceeds on disposal of property,
plant and equipment 12 - 8
---------- ---------- --------------
Net cash used in investing
activities (21,347) (1,004) (2,216)
Net cash used in investing
activities (1,004) (1,004) (227)
---------- ---------- --------------
Cash flows from financing activities
Bank loan drawdown 24,000 - -
Proceeds of share issue 4 - 47
Dividends paid (1,629) (812) (812)
---------- ---------- --------------
Net cash generated by / (used
in) financing activities 22,375 (812) (765)
---------- ---------- --------------
Net increase / (decrease) in
cash and cash equivalents 1,785 (188) 1,785
Cash and cash equivalents at
beginning of period 4,720 2,935 2,935
---------- ---------- --------------
Cash and cash equivalents at
end of period 6,505 2,747 4,720
========== ========== ==============
Cash and cash equivalents comprise:
Cash at bank and in hand 6,505 2,747 4,720
Bank overdraft - - -
---------- ---------- ------------------
6,505 2,747 4,720
========== ========== ==================
NOTES TO THE GROUP INTERIM REPORT
1. GENERAL INFORMATION
Michelmersh Brick Holdings Plc ("the Company") is a public
limited company incorporated in the United Kingdom under the
Companies Act 2006 (registration number 3462378). The Company is
domiciled in the United Kingdom and its registered address is
Freshfield Lane, Danehill, Haywards Heath, West Sussex, RH17 7HH.
The Company's Ordinary Shares are traded on the AIM Market of the
London Stock Exchange plc. Copies of the Interim Report and Annual
Report and Accounts may be obtained from the address above, or at
www.mbhplc.co.uk.
2. ACCOUNTING POLICIES
Basis of preparation
The interim financial information in this report has been
prepared using accounting policies consistent with IFRS as adopted
by the European Union. IFRS is subject to amendment and
interpretation by the International Accounting Standards Board
(IASB) and the IFRS Interpretations Committee and there is an
ongoing process of review and endorsement by the European
Commission. The financial information has been prepared on the
basis of IFRS that the Directors expect to be adopted by the
European Union and applicable as at 31 December 2017. "The group
has chosen not to adopt IAS 34 "Interim Financial Statements" in
preparing the interim financial information."
Statutory accounts
Financial information contained in this document does not
constitute statutory accounts within the meaning of section 434 of
the Companies Act 2006 ("the Act"). The statutory accounts for the
year ended 31 December 2016 have been filed with the Registrar of
Companies. The report of the auditors on those statutory accounts
was unqualified, did not draw attention to any matters by way of
emphasis and did not contain a statement under section 498(2) or
(3) of the Act.
The financial information for the six months ended 30 June 2017
and 30 June 2016 is unaudited.
3. EARNINGS PER SHARE
The calculation of earnings per share is based on a profit of
GBP1,100,000 (six months ended 30 June 2016 -GBP2,085,000; 12
months ended 31 December 2016-GBP3,559,000) and 81,654,156 (at 30
June 2016 and 31 December 2016 81,234,656) being the weighted
average number of ordinary shares in issue.
Diluted
At 30 June 2017 there were 151,796 dilutive shares under option
leading to 81,806,412 weighted average number of ordinary shares
for the purposes of diluted earnings per share. 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.
4. ACQUISITION OF CARLTON MAIN BRICKWORKS LIMITED ("Carlton")
On 23 June 2017, the Company completed the acquisition of 100%
of the share capital of Carlton Main Brickworks Limited for a
maximum gross consideration of GBP38.4 million payable in cash
(GBP31.5 million), deferred cash (GBP3.5 million) and by the issue
of 4,694,444 new Michelmersh Brick Holdings Plc ordinary shares
valued at 72 pence (GBP3.4 million). The book value of the net
assets of Carlton at acquisition was GBP19 million after applying a
valuation of the land and buildings that was conducted by
independent valuers. The excess of consideration over book assets
is recorded as 'intangible' in the consolidated balance sheet as at
30 June 2017.
However, the initial accounting for the acquisition is
incomplete and the amounts recognised in the financial statements
are provisional. An exercise to establish fair value of other
tangible and intangible assets and consequent deferred tax balances
is under way and will be applied in the audited balance sheet as at
31 December 2017.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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