News blog
Michelmersh Brick
- BY: Andrew Hore |
- POSTED: 15/04/2010 |
Brick sales slumped at Michelmersh Brick in 2009 but it still managed to generate a higher gross profit.
Lower gas costs helped but it was a change in mix of sales that really boosted gross margins. Higher margin products are the focus.
Brick sales fell from 79m in 2008 to 50m in 2009. Average selling prices increased from £305 per thousand bricks to £350 per thousand. Production at Telford is still being rationalised and focused on specialised wire cut and clay paviour production.
While revenues fell from £24.2m to £17.9m, gross profits rose from £3.92m to £4.62m. Higher gross profits, the lack of a large bad debt and other lower admin and interest costs meant that the overall loss was reduced from £2.87m to £996,000.
Delays in refurbishing the Savoy Hotel have been good news for Michelmersh. It set up Hathern Terracotta last year and recently won a contract for the Savoy.
Michelmersh also intends to develop its landfill assets.
Michelmersh recently completed the acquisition of fellow bricks manufacturer Freshfield Lane Brickworks for £10m in cash and shares.
Selling agricultural land and houses bought with Freshfield and the receipt of payment for 16 acres of land in Telford where Persimmon has permission to build 170 homes will help to cut debt. There are another 69 acres on this site.
Net debt was £18.1m at the end of 2009 and it will have risen around £4m as a result of the Freshfield acquisition.
Michelmersh has its eye on other acquisitions. The Hanson brick operations are likely to be sold by HeidelbergCement. This business has around 30% of the bricks market and will be difficult to sell in one piece. Michelmersh would be interested in the more specialist parts of the business.
At 35p a share, Michelmersh is valued at £20.3m. Pro forma net assets are £35.9m.
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