14th Dec 2005 07:00
Michelmersh Brick Holdings PLC14 December 2005 14 December 2005 Michelmersh Brick Holdings PLC 60 ACRES OF DEVELOPMENT LAND SOLD TO PERSIMMON -Trading update- Michelmersh ("Michelmersh" or "the Company")(AIM: MBH), the UK's largestproducer of handmade specification bricks and clay paviors, announces that ithas concluded an agreement with Persimmon Homes ("Persimmon") for theresidential development of 60 acres of land at the Company's Telford site. Persimmon has entered into an option to purchase the site upon grant of planningconsent on a phased basis. Persimmon will now progress detailed planning for thefirst seven acres of land. In addition, Persimmon will also develop a masterplan with the planning authority for a phased development of the remaining land,which will be released as clay is worked, and restoration completed. This willenable land to be released and co-ordinated with Michelmersh's brick making andrestoration operations. Michelmersh will incur costs in the preparation of landfor sale for residential development. These will be reflected in the Company'sresults for the 2006 and 2007 financial years. The initial phase of land has been proposed for development between 2006 and2011 in the recently published Local Development Framework Preferred OptionsReport. It is anticipated that Michelmersh will receive income of £10 millionthrough the sale of this land in the 2008 and 2009 financial years. Since the Company indicated in its interim statement that a planning agreementhad been concluded for the comprehensive development of this Telford site, theBoard has been considering how best to maximise shareholder value. The Boardconsiders this transaction marks a pivotal juncture in the Company'sdevelopment, as Michelmersh is now able to marry its position as an importantsupplier of building products with opportunities afforded it through landdevelopment and planning. As at 31 May 2005 the Company had Tangible Fixed Assets of £40.4 million andTotal Net Assets of £31.2 million. As the Board has indicated in earlierstatements, the value of this residential development asset will be reflected inthe Company's 2005 year end balance sheet. In light of this transaction and current market conditions, the Company hasreviewed its brick making operations and the impact of current and projectedenergy costs, particularly over the winter months. Apart from Blockleys, where sales are at a similar level to last year, theCompany has attained higher volumes at each of its other plants. Selling priceshave also increased at all works. However, energy prices are now around three times greater than at the time ofthe Company's flotation in May 2004 and twice what they were last year, with anobvious impact on margins. In line with the other businesses in the brickmanufacturing sector, the Company is adjusting production to prioritise cashmanagement against profit until prices increase in the industry to reflect thecost levels now being experienced. This will impact upon profitability for thisperiod and, if current market conditions and costs prevail, will similarlyaffect next year as well. The Company's capital investment programme is now complete and Michelmersh iswell placed to benefit from an improved performance from the business as marginsrecover, whilst continuing to ensure that shareholder value is maximised fromthe land assets held. Eric Gadsden, chairman, commented: "The deal signed with Persimmon will addsignificant strength to our balance sheet at a time when industry is examiningways to counter the effect of rapidly increasing energy costs. The efficienciesgained through our recently completed investment programme have significantlyreduced the impact of these cost rises. This, combined with the income gainedfrom the sales of our land assets, gives us a degree of financial security whichwe believe will allow Michelmersh to weather the storm and make the most of anyopportunities which arise as a result of it." For further information: Martin Warner Russell Cook/Mark Taylor Jeremy Carey/Richard SunderlandManaging Director Charles Stanley & Co Ltd Tavistock CommunicationsTel: 01442 870 227 Tel: 020 7739 8200 Tel: 020 7920 3150 [email protected] Notes to editors Michelmersh is a holding company with five subsidiary companies, Blockleys,Michelmersh Brick & Tile, Charnwood and Duntons, which manufacture clay bricksand paviors, and New Acres, which operates a landfill site. Michelmersh has grown through acquisition and organic growth into a profitable,cash generative and asset rich business. Since 1997, it has invested in excessof £15 million in the modernisation of its plant and production processes andnow has the capacity to produce over 85 million bricks per annum. Michelmersh floated on AIM on May 2004 and is currently capitalised at about £40million. Further information on the Company can be found at www.michelmersh.co.uk This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Michelmersh Brick Holdings