22nd Aug 2006 07:00
Michelmersh Brick Holdings PLC22 August 2006 22 August 2006 Michelmersh Brick Holdings plc ("Michelmersh", the "Company", or the "Group") Interim results for the six months to 30 June 2006 Michelmersh Brick Holdings plc (AIM: MBH), the UK's largest producer of handmadespecification bricks and clay paviors, today announces interim results for thesix months to 30 June 2006. Highlights of the results are as follows: • Group turnover increased by 10.3% to £10.1 million (2005: £9.2 million) • sales volume maintained at 33.2 million units (2005: 33.6 million) and average selling price increased 10% • operating profit of £161,000 (2005: £628,000) as a result of higher energy costs and temporary plant closures • net assets grew 38% to £43.5 million (2005: £31.5 million) after an option agreement was signed with Persimmon on 60 acres of land at the Telford site, NAV per share is now 114.4p (2005: 82.2p) • cash inflow from operating activities improved to £885,000 (2005 outflow: £(912,000)) • enhanced products introduced at the end of 2004 lead to 17% increase in sales at Michelmersh plant • export sales have contributed well, with 1.5 million facing bricks exported to Japan for the construction of a new university • options to expand the business are under review and a number of potential acquisition opportunities are being considered. Commenting on the results, Eric Gadsden, chairman, said: "The first half of theyear has been somewhat turbulent for the brick industry, which has seen acombination of further increases in energy costs and a reduction in demand.Therefore, we are extremely pleased to have increased the Group's turnoverduring the period with a relatively modest impact on operating margin. Toneutralise, as far as possible, the effects of rises in energy costs, we madethe decision to reduce output over the winter months, when prices peak. This hasflowed through to impact on the Group's profit for the period, but has allowedus to improve cash flow. "I do remain confident about the Group's long term outlook. I believeMichelmersh's efficient modern production and distribution operations, highlyregarded sales team and strong balance sheet put us in a good position to usethe current market conditions to our advantage. We are therefore considering anumber of potential investment opportunities." For further information: Martin Warner, Michelmersh Brick Holdings plc: 01442 870 227Richard Sunderland/Rachel Drysdale, Tavistock Communications: 020 7920 3150Russell Cook/Mark Taylor, Charles Stanley Securities: 020 7149 6000 Chairman's Statement I am pleased to report on the progress of the Group for the six months ending 30June 2006. During the period, the Company managed to increase revenues, despitechallenging trading conditions. The industry has seen a substantial reduction indemand and has faced the impact of rising energy costs, which increasedthreefold during the 2005/2006 winter months, when compared to the price at thetime of our IPO. Throughout the period we have enlarged our range of products,continued to expand our overseas markets and progressed the preparation of ourland at Telford for residential development. We have examined ways to neutralise, as far as possible, the pressures facingall brick manufacturers. As a result, the decision was made to reduce productionduring the peak-cost winter period. This has inevitably impacted onprofitability, but has allowed us to achieve our objective of managing cashduring the period. Financial Results Group turnover increased by 10.3% to £10.1 million (2005: £9.2 million). Thesignificant increase in cost of sales for the period relate to higher energycosts and the consequential impact of a high fixed cost plant operating onreduced output. Whilst this has resulted in a reduced operating profit of£161,000 (2005: £628,000), cash inflow from operating activities improved to£885,000 (2005 outflow: £(912,000)) and end of period debt increased onlymarginally to £16.4 million, from £16.2 million at the year end. The 38% growth in our net assets at £43.5 million (2005: £31.5 million) wasprimarily as a result of the uplift in the land value following the optionagreement signed with Persimmon on 60 acres of land at our Telford site at theend of the last financial year. Net assets per share increased to 114.4pcompared to 82.8p at 30 June 2005. I refer below to the further progress that weare making on the project at Telford. We have also taken the opportunity of securing a new £14 million long term bankfacility to replace £9 million of overdraft facility. This provides a more appropriate funding structure for the Company and on more attractive terms. In line with our established dividend policy, the Board is not recommending aninterim dividend, but again expects to recommend the payment of a final dividendat the year end, to underline our continued confidence in the Company's longterm prospects. Operational Review Against an industry-wide backdrop of a 10% reduction in brick sales in 2005 anda further 20% in the first six months of this year, the Company maintained itssales volume at 33.2 million units (2005: 33.6 million) and achieved an averageincrease in selling price of 10%. After the planned reduction in output at thestart of the year, 35.1 million units were produced (2005: 38.7 million). As a result of the previous investment at each of the works, we have been ableto develop new products at Blockleys, Charnwood and Michelmersh. Theseinitiatives, together with our focus on customer service, have enabled us tomaintain our sales despite market conditions. Of particular note is the performance of our Michelmersh plant, where salesincreased by some 17%, resulting from enhanced products introduced to the marketat the end of 2004. These include new textures and plain colours, as well as anadditional tile range. As new products from other works become established inthe market place we expect to be able to continue to maintain our marketposition and sell our output. We have continued to experience strong demand for our high value products,particularly in one-off housing and matching work. Export sales have contributedwell, in particular, 1.5 million facing bricks were exported to Japan for theconstruction of a new university at Kobe. Good progress is being made with the planning application for residentialdevelopment on our land at Telford and we will be able to give a detailed updatewhen we announce our annual results. The restoration of the initial phase ofland continues apace and we anticipate that this will result in significantincome in 2008 and 2009. Outlook In the light of market conditions the Board has reviewed strategy for thebusiness moving forward. Even last week we saw Baggeridge Brick plc, our onlyindependent quoted competitor, in receipt of an offer from the Austrian company,Wienerberger AG. The continuing restructuring of the UK construction supplyindustry, including this latest development, represents ever greateropportunities for Michelmersh. Our strengths continue to be our unique product offering, customer service andstrong asset base. It is key to the ongoing profitability of the business thatwe maximise output and reap the rewards of the investment efficiencies made overthe past five years. Whilst production cost pressures are expected to persist,especially over this coming winter, we anticipate that energy prices couldstabilise thereafter. Therefore, we are reviewing options to expand our business, particularly wherethe current market conditions might work in favour of a business with efficientmodern production and distribution operations, a nationwide sales team and astrong balance sheet. A number of potential opportunities have been identified,which are currently being evaluated. We expect the rest of this year to remain challenging and profitability for thefull year will be lower than that achieved in 2005, the precautionary steps thatI have outlined above will help us ensure that we continue to strengthen ourposition in our market and I remain positive about the longer term outlook forthe Company. In the meantime, until we see demand in the industry pick up and aflattening or reduction in energy costs, we will continue to prioritise cashmanagement. Eric GadsdenChairman21 August 2006 CONSOLIDATED PROFIT AND LOSS ACCOUNT Half Year Half Year 13 Months to to to 30.06.06 31.05.05 31.12.05 £'000 £'000 £'000 Unaudited Unaudited Audited (restated) TURNOVER 10,112 9,166 21,094 Cost of sales (7,714) (6,325) (15,042) --------------------------------------- GROSS PROFIT 2,398 2,841 6,052 Administrative expenses (2,263) (2,232) (5,032) Other operating income 26 19 491 --------------------------------------- OPERATING PROFIT 161 628 1,511 Interest payable and similar charges (507) (420) (993) --------------------------------------- (LOSS)/PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION (346) 208 518 Tax on profit on ordinary activities - - (135) --------------------------------------- (LOSS)/PROFIT ON ORDINARY ACTIVITIES AFTER TAXATION (346) 208 383 ======================================= EARNINGS PER SHARE Basic (0.9p) 0.5p 1.0p Diluted (0.9p) 0.5p 1.0p CONSOLIDATED BALANCE SHEET As at As at As at 30.06.06 31.05.05 31.12.05 £'000 £'000 £'000 Unaudited Unaudited Audited (restated) FIXED ASSETS Intangible assets - positive goodwill - 22 - Intangible assets - other 326 - 69 Tangible assets 53,881 40,441 53,985 -------------------------------------------- 54,207 40,463 54,054 CURRENT ASSETS Stock 7,475 6,288 7,269 Debtors 4,577 4,091 4,226 Cash at bank and in hand 811 16 42 -------------------------------------------- 12,863 10,395 11,537 CREDITORS: Amounts falling due within one year (6,224) (13,875) (13,155) -------------------------------------------- NET CURRENT ASSETS/(LIABILITIES) 6,639 (3,480) (1,618) -------------------------------------------- TOTAL ASSETS LESS CURRENT LIABILITIES 60,846 36,983 52,436 CREDITORS : Amounts falling due after more than one year (15,540) (3,800) (6,366) PROVISIONS FOR LIABILITIES AND CHARGES Deferred taxation (1,824) (1,689) (1,824) -------------------------------------------- NET ASSETS 43,482 31,494 44,246 ============================================ CAPITAL AND RESERVES Called-up share capital 7,604 7,604 7,604 Share premium account 3,432 3,432 3,432 Revaluation reserve 27,776 15,199 27,776 Profit and loss account 4,670 5,259 5,434 -------------------------------------------- EQUITY SHAREHOLDERS' FUNDS 43,482 31,494 44,246 ============================================ CONSOLIDATED CASH FLOW STATEMENT Half Year to Half Year to 13 Months to 30.06.06 31.05.05 31.12.05 £'000 £'000 £'000 Unaudited Unaudited Audited Net cash inflow/(outflow) from operating activities 885 (912) 591 Returns on investments and servicing of finance Interest paid (591) (420) (751) Hire purchase interest paid (1) - (138) -------------------------------------------- Net cash outflow from returns on investments and servicing of finance (592) (420) (889) Taxation Corporation tax received /(paid) - - - -------------------------------------------- Taxation paid - - - Capital expenditure Purchase of intangible fixed assets - (1,427) (70) Purchase of tangible fixed assets (515) - (3,096) Sale of tangible fixed assets - - 1 -------------------------------------------- Net cash outflow from capital expenditure (515) (1,427) (3,165) Equity dividends paid - (418) (418) Net cash outflow before financing (222) (3,177) (3,881) Financing Issue of new bridging loan - - 3,250 Capital element of hire purchase payments (24) (216) (686) Repayment of other loans 8,718 (195) (430) -------------------------------------------- Net cash inflow/(outflow)from financing 8,694 (411) 2,134 -------------------------------------------- Increase / (decrease) in cash in the period 8,472 (3,588) (1,747) ============================================ Notes: 1.The figures for the half year ended 30 June 2006 and 31 May 2005 are unaudited and do not constitute statutory accounts. 2.The figures for the thirteen months ended 31 December 2005 are abridged from audited accounts, which are filed at Companies House and on which the Company's auditors gave an unqualified opinion. 3.Earnings per share of (0.9p) have been calculated based on the profit after tax for the six months ended 30 June 2006 and 38,017,855 shares in issue for the six months ended 30 June 2006. 4.Taxation is based on the unaudited results at the expected rate applicable for the full year. 5.The directors are not proposing a dividend. 6.The adoption of FRS 21 "Events after the balance sheet date" has resulted in a change in accounting policy in respect of proposed equity dividends. If the company declares dividends to the holders of equity instruments after the balance sheet date, the company does not recognise those dividends as a liability at the balance sheet date. The aggregate amount of equity dividends proposed before approval of the financial statements, which have not been shown as liabilities at the balance sheet date, will be disclosed in the notes to the financial statements. Previously, proposed equity dividends were recorded as liabilities at the balance sheet date. The adoption of FRS 25 "Financial Instruments: Disclosure and Presentation" has resulted in a change in accounting policy in respect of the treatment of dividends paid. Distributions to holders of equity share capital are debited directly to reserves, and not shown on the face of the profit and loss account for the year. These changes in accounting policy have resulted in a prior year adjustment for the company. Shareholders' funds at 31 December 2005 have been increased by £418,000. The balance sheet at 31 December 2005 has been restated to reflect the de-recognition of a liability for proposed equity dividends of £418,000. 7.Copies of this statement are being sent to shareholders. Further copies are available on request from: The Company Secretary Michelmersh Brick Holdings plc 121 High Street Berkhamsted Hertfordshire HP4 2PJ This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Michelmersh Brick Holdings