Michelmersh Brick sold all the bricks it made last year, even though the market remains weak, and it managed to achieve these sales at higher margins.
Average selling prices have increased each year since 2007 and were £345/1000 bricks compared to an industry average of £218/1000 which has hardly changed over the period. Revenues improved from £23.3m to £24.3m, while a loss of £311,000 was turned into a profit of £530,000. Gross margins moved ahead from 26% to 30%. There was a full year contribution from Freshfield Lane, which was bought in spring 2010.
Michelmersh has negotiated a new five year loan with Barclays. Net debt was £19.8m at the end of the year and there were spare facilities of £2.4m.
There is development land in the books that could potentially be sold at some point and that would wipe out the debt.
The market will remain tough and higher gas prices will hamper progress. House broker Westhouse forecasts a profit of £700,000 this year.
At 24p a share, Michelmersh is valued at £14m. The shares are trading on 22 times prospective 2012 earnings. The share price remains well below the net asset value of 60p a share.
Michelmersh is keen to make acquisitions. Opportunities could come from the restructuring of larger rivals.
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