TIDMMBH
RNS Number : 2781Y
Michelmersh Brick Holdings PLC
08 September 2020
8 September 2020
Michelmersh Brick Holdings Plc
("MBH", the "Company", or the "Group")
Half Year Results for the six months ended 30 June 2020
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 2020.
Financial Highlights:
30 June
30 June 2020 2019 Change
Turnover GBP22.5m GBP27.2m - 17.3%
Underlying(*) gross margin 38.8% 41.9% -3.1%
Underlying(*)
EBITDA(2) GBP4.4m GBP7.0m -36.3%
Underlying*(1) operating
profit GBP2.9m GBP5.4m -45.9%
Underlying(*)
PBT GBP2.6m GBP5.1m -48.6%
Reported Basic
EPS 1.74p 3.36p -48.2%
Underlying(1)
*EPS 2.36p 4.55p -48.1%
Cash from operations GBP2.9m GBP6.1m -52.5%
Net debt GBP6.5m GBP13.8m -52.9%
Operational Highlights:
-- Swift and effective return to work after Covid instigated suspension of operations
-- Returned profitable 6-month period despite operational and
financial disruption caused by Covid
-- Cash preservation actions and trading cash generation leave
Group with both significant cash balances and reduction in net
debt
-- Robust H2 forward order book in line with same period last year
Commenting on the results, Martin Warner, Chairman of
Michelmersh Brick Holdings Plc, said:
"The Group's performance in the first half of 2020 demonstrates
resilience and management actions to protect our stakeholders.
Trading has returned to a stable state, with no impact on capacity
under our new operating conditions. While the broader economic
outlook remains uncertain over the coming months, based on the
continued strong brick market fundamentals and our performance
since operations have resumed, the Directors are positive on the
outlook for the Company. "
(1) Underlying gross margin is calculated by adding back
GBP770,000 to the reported gross profit to eradicate the 'fair
value' element of brick stock acquired at Floren.
(2) EBITDA is defined as earnings before interest, tax,
depreciation and amortisation(.)
(*) Items deemed underlying are reconciled with the reported
figures in the table Alternative Performance Measures below.
Michelmersh Brick Holdings Plc
Frank Hanna, Joint CEO 01825 430
Stephen Morgan, Finance Director 412
Canaccord Genuity Limited (NOMAD
and Broker)
Bobbie Hilliam 020 7523
Georgina McCooke 8150
07747 788
Yellow Jersey PR 221
07983 557
Charles Goodwin 851
Annabel Atkins
The information contained within this announcement is deemed to
constitute inside information as stipulated under the Market Abuse
Regulations (EU) No. 596/2014. Upon the publication of this
announcement, this inside information is now considered to be in
the public domain.
About Michelmersh Brick Holdings PLC:
Michelmersh Brick Holdings PLC is a business with seven market
leading brands: Blockleys, Carlton, Charnwood, Freshfield Lane,
Michelmersh, Floren and Hathern Terra Cotta. These divisions
operate within a fully integrated business combining the
manufacture of clay bricks 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 120 million clay bricks and pavers per annum.
Michelmersh currently owns most of the UK's premium manufacturing
brick 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 results for the six months to 30 June 2020 have been
adversely affected by the impact of Covid. The Group responsibly
ceased operations for four weeks from late March while new, safe
operating procedures were designed and implemented. On return to a
Covid-safe workplace, our employees were reassured that the new
conditions were in place to keep them safe while manufacturing
recommenced and customer demand was satisfied. Output was lost from
commencement of orderly closedown of operations in the last week of
March and for most of April while sites were closed. The phased
recommencement of processes took time to reach normal levels, which
was achieved in late May. The Group has been able to consistently
sell all the product it makes, therefore the closure of operations
lost the Company product and revenue that cannot be recouped.
However, the Group has now regained its pre-closure levels of
production and is back operating at normal levels.
I have to give special thanks to the teams who have reacted to
the conditions and developed new safe operating procedures and
delivered a Covid-safe workplace. I must also pay tribute to our
workforce who have overcome natural concerns and helped the
business get back on its feet so quickly.
Financial Highlights
30 June 30 June
2020 2019 Change
Turnover GBP22.5m GBP27.2m - 17.3%
Underlying(1) gross margin 38.8% 41.9% -3.1%
-36.4
Underlying* EBITDA(2) GBP4.4m GBP7.0m %
Underlying* operating profit GBP2.9m GBP5.4m -45.9%
Underlying* PBT GBP2.6m GBP5.1m - 48.6%
Reported Basic
EPS 1.74p 3.36p -48.2%
Underlying* EPS 2.36p 4.55p -48.1%
Cash from operations GBP2.9m GBP6.1m -52.5%
Net debt GBP6.5m GBP13.8m -52.9%
(1) Underlying gross margin is calculated by adding back
GBP770,000 to the reported gross profit to eradicate the 'fair
value' element of brick stock acquired at Floren.
(2) EBITDA is defined as earnings before interest, tax,
depreciation and amortisation(.)
(*) Items deemed underlying are reconciled with the reported
figures in the table Alternative Performance Measures below.
Trade in the first quarter of 2020 was positive for the Group
until the point when operations ceased towards the end of March.
Once restarted, recovery of manufacturing output was necessarily
gradual but by the end of May turnover was only 26% behind the
equivalent period in 2019. June 2020 turnover was ahead of June
2019 meaning that for the half year, the like-for-like fall in
turnover was below 18%.
The lost turnover from the period when the business was closed
had a more telling impact as employees were fully remunerated and
there was a significant element of fixed costs. With the intention
to return to full production as soon as possible, the opportunity
for cost savings during the suspension of operations were limited
and therefore net profit was impacted. Underlying operating profit
and EBITDA were 45.9% and 36.4% below the equivalent period
respectively as a result. By resuming operations quickly, however,
the Company was able to quickly replenish stock levels which will
assist the Group's financial performance in the second half of
2020.
Whilst the table above shows lower performance in the first half
of 2020 against that in 2019, it is worth noting that 2019 was an
exceptional trading year showing significant improvement over 2018.
Moreover, even in this difficult period, the Group has generated
cash, maintained a modest debt profile and returned a profit. The
Directors believe this is testament to the strategy of the Group
and the strength of the management within the Company.
Alternative Performance measures reconciliation:
Six months Six months H1 2020/ 12 months
ended ended H12019 ended
30 June 30 June 31 December
2020 2019 2019
GBP000 GBP000 GBP000
----------- ----------- --------- -------------
Reported Operating profit 2,338 4,325 -45.9% 11,065
----------- ----------- --------- -------------
Add back exceptional items relating
to the acquisition of Floren
(a) - 509 (1,907)
----------- ----------- --------- -------------
Amortisation of intangibles 584 569 1,166
----------- ----------- --------- -------------
'Underlying' operating profit 2,922 5,403 -45.9% 10,324
----------- ----------- --------- -------------
Finance costs - reported (309) (296) (698)
----------- ----------- --------- -------------
'Underlying' profit before taxation 2,613 5,107 -48.8% 9,626
----------- ----------- --------- -------------
'Underlying' operating profit
as above 2,922 5,403 -45.9% 10,324
----------- ----------- --------- -------------
Depreciation 1,507 1,557 3,313
----------- ----------- --------- -------------
Underlying EBITDA 4,429 6,960 -36.4% 13,637
----------- ----------- --------- -------------
9.41
Reported Basic EPS 1.74 p 3.36 p -48.2% p
----------- ----------- --------- -------------
8.87
Underlying Basic EPS (b) 2.36 p 4.55 p -48.1% p
----------- ----------- --------- -------------
(a) Includes adjustments to cost of sales and exclusion of
acquisition related entries.
(b) Includes adjustments to exclude amortisation of
intangibles
Land and Assets
Capital expenditure in H1 2020 was limited to preserve cash
reserves. Expenditure was centred on health and safety projects and
continued preparation for commencement of the Telford road project.
Since the end of the half year, preparations have progressed and
the Board has committed to commencing structural works that will
lead to releasing remaining mineral reserves on the site,
supporting the long-term operations at the Blockleys plant.
Net Debt and Working Capital
Net debt at 30 June 2020 stood at GBP6.5 million (30 June 2019:
GBP13.8 million; 31 December 2019; GBP6.3 million). Once the impact
of Covid threatened, the Board took steps to maximise cash balances
and at the half-year, cash balances stood at GBP17.4 million. These
steps included postponement of the final dividend in respect of
2019, suspension of capital expenditure projects and drawing down
of RCF facilities.
In order to minimise the potential cashflow impact of Covid, the
Group has received GBP400,000 under the government furlough scheme
and has deferred VAT payments of GBP1.5 million.
Despite the strange circumstances, the Group has maintained a
strong financial position and is well positioned as the recovery of
the general economy and construction sector plays out in the coming
months.
Dividend
The interim dividend for 2019 was paid in January 2020. I am
again pleased to note that the scrip dividend offering was selected
by a reasonable number of large and smaller shareholders which
suggests continuing commitment to the Company's shares.
The Board suspended the final dividend in respect of 2019. This
action was taken to safeguard the business in uncertain economic
conditions when it was difficult to predict how events would turn
out. The Board is still intent on returning to a progressive
dividend stream to reward shareholders for their investment. Based
on the current trading of the Company, and the information
available to the directors today, the Group expects to resume the
payment of dividends alongside the full year results to December
2020. The Directors continue to monitor the economy and the wider
impact that Covid has on the end markets and outlook of the
Company. Further guidance on the Company's dividend payout will
therefore be provided in due course.
The Board
On 18 June 2020, the Board was strengthened by the appointment
of Paula Hay-Plumb as Non-Executive Director. Paula is a Chartered
Accountant (ACA) and is a Fellow of the Association of Corporate
Treasurers. She has extensive directorship experience and currently
sits on the Board of a number of prominent organisations. We look
forward to working with her and gaining from her energy and
expertise.
Outlook
The future is difficult to predict given threats from continuing
and potential localised issues from Covid, and the effectiveness of
the government's tactics to support the economy are yet to be seen.
However, it seems likely that the construction sector, where the
Group is positioned, will play a key role in restarting the
economy.
The Group's performance in the first half of 2020 demonstrated
resilience and management actions to protect our stakeholders.
Trading has returned to a stable state, with no impact on capacity
under our new operating conditions. Our customers have also reacted
positively to the situation and since the half year trading has
been robust. Additional cost of working has been matched by
positive energy pricing and the Board is concentrating on managing
the business through the near future whilst watchful of events.
As at 30 June 2020, the Group benefited from a strong balance
sheet and cash reserves and is resolved to meet the challenges that
may arise with confidence.
M R Warner
CHAIRMAN
Consolidated Income Statement
6 months 6 months 12 months
ended 30 ended 30 ended 31
June June December
2020 2019 2019
GBP'000 GBP'000 GBP'000
Unaudited Unaudited Audited
Revenue 22,459 27,165 53,523
Cost of sales (13,738) (16,544) (31,618)
Gross profit 8,721 10,621 21,905
Administration expenses - Underlying (5,837) (6,041) (11,754)
* Amortisation of intangibles (584) (569) (1,166)
------------ ------------ ----------
(6,421) (6,610) (12,920)
Other income 38 53 224
Exceptional items - 'Bargain purchase'
(1) - 828 2,422
* Acquisition costs (2) - (567) (566)
Operating profit 2,338 4,325 11,065
Finance expense (309) (296) (698)
------------ ------------ ----------
Profit before taxation 2,029 4,029 10,367
Taxation (406) (991) (1,763)
------------ ------------ ----------
Profit for the period 1,623 3,038 8,604
------------ ------------ ----------
Basic earnings per share 1.74 p 3.36 p 9.41 p
Diluted earnings per share 1.68 p 3.26 p 9.19 p
.
Exceptional item(1 -) the 'Bargain purchase' reflects the excess
of fair value of the assets acquired at Floren over the
consideration paid. Exceptional item(2) is the costs incurred in
acquiring Floren that has been expensed in the period.
Consolidated Statement of Comprehensive Income
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 December
2020 2019 2019
GBP'000 GBP'000 GBP'000
Unaudited Unaudited Audited
Profit for the financial period 1,623 3,038 8,604
---------- ---------- -------------
Other comprehensive income
Items which may subsequently be reclassified to profit or loss
Currency movements 743 22 67
Items which will not subsequently be reclassified to profit or loss
Revaluation deficit of property, plant and equipment - - (10)
Revaluation surplus of property, plant & equipment - - 801
Deferred tax on revaluation - - (134)
---------- ---------- -------------
Other comprehensive income for the period net of tax 743 22 724
---------- ---------- -------------
Total comprehensive income for the financial period 2,366 3,060 9,328
---------- ---------- -------------
Consolidated Balance Sheet
As at As at As at
30 June 30 June 2019 31 December
2020 2019
GBP'000 GBP'000 GBP'000
Unaudited Unaudited Audited
Assets
Non-current assets
Intangible assets 22,006 22,379 22,590
Property, plant and equipment 64,852 64,294 65,348
---------- -------------- -------------
86,858 86,673 87,938
Current assets
Inventories 10,815 9,135 9,761
Trade and other receivables 10,680 11,164 8,567
Cash and cash equivalents 17,390 8,881 15,140
---------- -------------- -------------
Total current assets 38,885 29, 180 33,468
---------- -------------- -------------
Total assets 125,743 115,853 121,406
---------- -------------- -------------
Liabilities
Current liabilities
Trade and other payables 10,468 9,464 9,889
Interest bearing borrowings 4,846 1,922 3,414
Lease liabilities 658 558 542
Corporation tax payable 475 1,079 883
---------- -------------- -------------
Total current liabilities 16,447 13,023 14,728
Non-current liabilities
Interest bearing borrowings 19,070 20,714 18,036
Lease liabilities 399 761 673
Deferred tax liabilities 11,866 11,930 11,866
---------- -------------- -------------
31,335 33,405 30,575
Total liabilities 47,782 46,428 45,303
---------- -------------- -------------
Net assets 77,961 69,425 76,103
========== ============== =============
Equity attributable to equity holders
Share capital 18,744 18,495 18,498
Share premium account 15,742 15,545 15,545
Other reserves 23,777 22,145 23,259
Retained earnings 19,698 13,240 18,801
---------- -------------- -------------
Total equity 77,961 69,425 76,103
========== ============== =============
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
2019 17,297 11,643 21,788 13,066 63,794
Profit for the
period - - - 3,038 2,200
Currency difference - - - 22 22
-------- -------- --------- --------- --------
Total comprehensive
income - - - 3,060 3,060
Shares issued
in the period 1,198 3,902 - - 5,100
Share based payment - - 358 - 358
Dividends paid - - - (2,887) (2,887)
As at 30 June
2019 18,495 15,545 22,146 13,239 69,425
Profit for the
period - - - 5,566 5,566
Currency difference - - - 45 45
Revaluation deficit - - (10) - (10)
Revaluation surplus - - 801 - 801
Deferred tax on
revaluation - - (134) - (134)
-------- -------- --------- --------- --------
Total comprehensive
income - - 657 5,611 6,268
Shares issued
in the period 3 - - - 3
Transfer to retained
earnings - - (18) 18 -
Share based payment - - 407 - 407
Reclassification
(1) - - 67 (67) -
As at 31 December
2019 18,498 15,545 23,259 18,801 76,103
Profit for the
period - - - 1,623 1,623
Currency difference - - 743 - 743
Total comprehensive
income - -- 743 1,623 2,366
Shares issued
in the period 46 197 - - 243
Share based payment - - 313 - 313
Release on exercise
of options 200 - (538) 338 -
Dividends paid - - - (1,064) (1,064)
As at 30 June
2020 18,744 15,742 23,777 19,698 77,961
======== ======== ========= ========= ========
Reclassification (1) reflects currency adjustments that are held
in a separate reserve but may in future periods be released to
revenue reserves.
Consolidated Statement of Cash Flows
6 months 6 months 12 months
ended ended ended
GBP'000 GBP'000 GBP'000
30 June 30 June 31 December
2020 2019 2019
Unaudited Unaudited Audited
Net cash generated by operations 2,946 6,144 16,622
Taxation paid (766) (760) (2,105)
Net cash generated by operating
activities 2,180 5,384 14,517
---------- ---------- ------------
Cash flows from investing activities
Purchase of property, plant
and equipment (632) (810) (2,412)
Purchase of subsidiary undertaking
net of cash acquired - (6,768) (6,202)
Proceeds on disposal of property, - 29 -
plant and equipment
---------- ---------- ------------
Net cash used in investing
activities (632) (7,549) (8,614)
---------- ---------- ------------
Cash flows from financing activities
Bank loan drawdown 3,000 5,264 5,100
Interest paid (311) (238) (698)
Repayment of interest bearing
liabilities (887) (970) (1,990)
Lease payments (282) (480) (646)
Proceeds of share issue 3 4,703 4,704
Dividends paid (821) (2,488) (2,488)
---------- ---------- ------------
Net cash generated by / (used
in) financing activities 702 5,791 3,982
---------- ---------- ------------
Net increase in cash and cash
equivalents 2,250 3,626 9,885
Cash and cash equivalents at
beginning of period 15,140 5,255 5,255
---------- ---------- ------------
Cash and cash equivalents at
end of period 17,390 8,881 15,140
========== ========== ============
Cash and cash equivalents comprise:
Cash at bank and in hand 17,390 8,881 15,140
========== ========== ==============
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 AIM, part 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 2020. 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 2019 have been filed with the Registrar of
Companies. The report of the auditors on those statutory accounts
was unqualified, and did not contain a statement under section
498(2) or (3) of the Act. The Report did draw attention to the
accounting policy in the financial statements concerning the
Group's ability to continue as a going concern connected with the
declaration of Covid-19 as a pandemic by the World Health
Organisation noting this as a material uncertainty.
The financial information for the six months ended 30 June 2020
and 30 June 2019 is unaudited.
3. EARNINGS PER SHARE
The calculation of earnings per share is based on a profit of
GBP1,623,000 (six months ended 30 June 2019 -GBP3,038,000; 12
months ended 31 December 2019-GBP8,604,000) and 93,550,650 (at 30
June 2019 90,427,069 and 31 December 2019, 91,463,549) being the
weighted average number of ordinary shares in issue.
Diluted
At 30 June 2019 there were 2,941,812 (June 2019: 2,815,170, and
at 31 December 2019 2,169,290) dilutive shares under option leading
to 96,492,461 shares (30 June 2019: 93,242,239, and at 31 December
2019 93,632,839) being the 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.
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