26th Mar 2014 13:48
LONDON (Alliance News) - Michelmersh Brick Holdings PLC Wednesday said it will look to acquire rival businesses this year despite reporting a drop in profit for the full-year after a slow start to 2013.
Last November the company raised GBP9.6 million in a share placing, leaving the firm in a "good position" to respond to activity in the market.
"I think there are going to be some big changes to industry in the next year or two," Chief Executive Martin Warner told Alliance News.
"There is uncertainty with some of the other players - CRH is reviewing their portfolio who knows whether they will hang on to that or not. I don't think Hanson Building Products is part of HeidelbergCement's ambitions long-term and they are looking to sell that business. So I think we are sitting in a good position - if the opportunities comes up then we are able to respond quickly," he said.
The brick manufacturer, which is also engaged in land development and landfill operations, posted pretax profit of GBP407,000 for 2013, down from GBP423,000 in 2012, even though revenue rose to GBP25.9 million from GBP23.0 million a year earlier.
"The first-half of the year was very difficult, we were probably sitting around in snow this time last year. Everything picked up around May when bricks stocks effectively dropped to a low level then Help to Buy kicked in and everything started to move around," Warner said.
The Help to Buy scheme, which commenced in April, caused a surge in demand for bricks from housebuilders as they aimed to meet buyer demand for newly built homes. The first part of the scheme makes buyers of newly built homes eligible for a 20% equity loan from the UK government on top of their 5% deposit. The second phase, which started in the Autumn, guarantees a portion of a buyer's mortgage of new and existing homes.
Michelmersh said revenue rose 13% during the period despite a "sluggish" construction sector in the first half of the year. This increase was achieved through the despatch of nearly seven million additional bricks, the firm said, which enabled it to overcome margin pressure caused by increasing energy costs, generating higher levels of cash from operations.
The company said that, excluding its Dunton brickworks which was closed in May, it despatched 71.5 million units compared with 63.9 million at an average selling price of GBP348 per thousand up from GBP343 per thousand.
Despite this, Warner said the company had been affected by flat industry prices which had eroded margins.
"The cost of a brick for a house is not a lot of money; for a typical thousand square foot house it is about GBP3,000. What we are seeing now is different; just 12 months ago people would be able to ring up and get a brick tomorrow, but now we are on 20 weeks availability. So over time we need to get that margin back," he said.
"People are more worried about getting the bricks than the pricing. If you can't get your bricks you've got people standing around on site and that's no good - you're losing money," Warner added.
"In the last two months of 2013 we started to benefit from better selling prices as new work at revised prices were despatched and price increases implemented at the beginning of this year have held," the company said in a statement.
The company also was boosted by its landfill operator, New Acres, with revenue rising to GBP632,000 from GBP626,000 on a tonnage of 177,000 compared to 200,000 a year earlier.
During the period, the company sold its former land at Telford to Bovis Homes Group PLC. The initial consideration of GBP1.6 million has been received with the remaining GBP3 million due on the first and second anniversaries.
After a "difficult five years" for the brick industry, the company said it is pleased with its start to 2014.
"The road to recovery will take time but is now firmly moving in the right direction from very low levels," Chief Warner said in a statement
"With pricing and demand improving, increased production at our most efficient plant, and the other initiatives which we are working on, we believe that we will be able to more than hold our own in the future and the fruits of many years of hard work will start to become apparent," he added.
The company did not recommend payment of a dividend but hopes to introduce a policy soon.
The stock was trading at 68.00 pence Wednesday, up 0.37%.
By Anthony Tshibangu; [email protected]; @AnthonyAllNews
Copyright © 2014 Alliance News Limited. All Rights Reserved.
Related Shares:
Bovis HomesCRHTelford Homes