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Michelmersh Brick - Half Year Results

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 2020

30 June 2019

Change

 

Turnover

 

        £22.5m

        £27.2m

- 17.3%

 

Underlying*gross margin

38.8%

41.9%

-3.1%

 

Underlying* EBITDA2

 

          £4.4m

          £7.0m

-36.3%

 

Underlying*1 operating profit

          £2.9m

           £5.4m

-45.9%

 

Underlying* PBT

 

          £2.6m

          £5.1m

-48.6%

 

Reported Basic EPS

 

1.74p

3.36p

-48.2%

 

Underlying1*EPS

 

2.36p

            4.55p

-48.1%

 

Cash from operations

          £2.9m

£6.1m

-52.5%

 

Net debt

£6.5m

£13.8m

-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."

 

1Underlying gross margin is calculated by adding back £770,000 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

Stephen Morgan, Finance Director

 

01825 430 412

Canaccord Genuity Limited (NOMAD and Broker)

Bobbie Hilliam

Georgina McCooke

020 7523 8150

 

Yellow Jersey PR

Charles Goodwin

Annabel Atkins

07747 788 221

07983 557 851

 

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 2020

30 June 2019

Change

 

Turnover

 

        £22.5m

        £27.2m

- 17.3%

 

Underlying1 gross margin

38.8%

41.9%

-3.1%

 

Underlying* EBITDA2

 

          £4.4m

          £7.0m

-36.4 %

 

Underlying* operating profit

          £2.9m 

           £5.4m

-45.9%

 

Underlying* PBT

 

          £2.6m

          £5.1m

- 48.6%

 

Reported Basic EPS

 

1.74p

3.36p

-48.2%

 

Underlying* EPS

 

2.36p

            4.55p

-48.1%

 

Cash from operations

          £2.9m

£6.1m

-52.5%

 

Net debt

£6.5m

£13.8m

-52.9%

 

 

1Underlying gross margin is calculated by adding back £770,000 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 ended

30 June 2020

 

Six months ended

30 June 2019

H1 2020/ H12019

12 months ended

31 December 2019

 

 

£000

£000

 

£000

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

10,324

Finance costs - reported

(309)

(296)

 

(698)

'Underlying' profit before taxation

2,613

5,107

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

13,637

 

 

 

 

 

Reported Basic EPS

1.74 p

3.36 p

-48.2%

9.41 p

Underlying Basic EPS b

2.36 p

4.55 p

-48.1%

8.87 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 £6.5 million (30 June 2019: £13.8 million; 31 December 2019; £6.3 million). Once the impact of Covid threatened, the Board took steps to maximise cash balances and at the half-year, cash balances stood at £17.4 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 £400,000 under the government furlough scheme and has deferred VAT payments of £1.5 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

 

 

£'000

£'000

£'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 item1 - the 'Bargain purchase' reflects the excess of fair value of the assets acquired at Floren over the consideration paid. Exceptional item2 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

30 June

2020

ended

30 June

2019

ended

31 December

2019

 

£'000

£'000

£'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 2020

 30 June 2019

 31 December 2019

 

 

£'000

£'000

£'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

 

 

 

 

 

 

 

£'000

£'000

£'000

£'000

£'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 

 

 

£'000

£'000

£'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, plant and equipment

-

29

-

 

 

 

 

 

 

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 £1,623,000 (six months ended 30 June 2019 -£3,038,000; 12 months ended 31 December 2019-£8,604,000) 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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