Michelmersh Brick Share Discussion Threads

[stuart little] 03/6/2014 11:35

To an extent although Spanish bricks are not that aesthetically pleasing! Most imports, nice looking handmades, come from Belgium or Holland but we are starting to see delivery issues with the amount of bricks coming over on the ferries....It's only a year ago Hanson had to rent a farmers field next to one of their factories as their stock yards were bursting at the seams....hindsight eh??!!

[envirovision] 03/6/2014 11:18

I'm sure imports will come to the rescue, there must be a vast swath of capacity in places like Spain

[stuart little] 03/6/2014 10:16

The brick industry is possibly in the worst state I have known for over 20 years. The recession created such a short fall in both physical stock and manufacturing capacity that this upturn has created a monster! Hanson have now closed their order book on all factories for 2014, Ibstock are generally quoting anything up to 52 weeks lead time on most products, Weinerberger are trying to work on an allocation system based on last years purchases. As you would expect this is creating an upturn in price. I have a developer customer who last year was paying 230/1000 for his bricks, he's just placed an order for an 18 house site (190,000 bricks) @ 380/1000. We are having to use imports as none of the British manufacturers wanted to take the order. From my perspective it is very annoying the way the 3 main suppliers are pandering to the house builders, who dropped them like,well a brick, in the recession, whilst neglecting the sectors that kept them afloat when house building dried up a couple of years ago (merchants, stockist etc)....these people have short memories but all the power and they know it!(for the time being)

Everyone is now running at full capacity, mothballed factories have been reopened....we need to build more and more new homes, good luck with that!

[alanrussell] 03/6/2014 09:49

From Guardian business live:

Just in -- growth in Britain's construction sector fell to its slowest level in seven months in May, as builders experience bottlenecks and supply shortages.

But at 60.0, the UK construction PMI still showed solid growth (50 is the cut-off point between expansion and contraction).

Markit, which compiled the data, said that house building remains the strongest performing area of the sector, while commercial work grew at its weakest rate for seven months.

Economist Tim Moore said:
"Residential building remains a key engine of growth, with survey respondents citing another surge in new house building starts during May."

The strong growth over the last year has left builders scrabbling to get their hands on materials such as bricks.

"The latest survey pointed to another steep increase in demand for construction materials, with input buying rising at the fastest pace for three months.

Moreover, supplier lead times lengthened markedly in May, with survey respondents widely noting shortages of stock and supply-chain bottlenecks."
____________________________________________________

Perhaps explains the recent hop in share price.

[alanrussell] 22/5/2014 21:39

From the results 26-3-14
"The Directors are not recommending the payment of a dividend for this financial year but maintain that the return to dividends is a key target as operating cashflows are unencumbered by debt repayment and profitability provides available retained earnings."

Reading the AGM statement these provisos are being more than met. Say £2.5M+ profit this year and a 2p or 3p dividend announced next March....?

[cwa1] 21/5/2014 07:53

Solid stuff:-

AGM STATEMENT

Exceeding Market Expectations & Positioned for Growth

Michelmersh Brick Holdings PLC (AIM:MBH.L), the specialist brick, land development and landfill company, announces that, at its Annual General Meeting (AGM), which is to be held at 10.30 am today, Mr. Eric Gadsden, Chairman, will make the following statement:

"I am pleased to report that the long awaited recovery to the construction industry and demand for Michelmersh's products continued into the first quarter of 2014. Volumes for the brick industry increased by 26% against the backdrop of severe weather conditions in 2013.

More importantly, the industry achieved a long overdue average price increase of 13% for the quarter, as building materials generally, and bricks in particular, remain in very short supply. Michelmersh maintained its market premium and matched that percentage increase for the first quarter. The Board expects these trends in demand to continue into the peak trading season.

Despite political turmoil, energy prices have been more benign than in recent periods and the Group is managing its production costs within budget. The GBP2.3 million investment project to increase capacity at Freshfield Lane by 6 million bricks per annum is well progressed and is on schedule to start contributing to volumes in early 2015.

With the peak sales months still to come, the Board is forecasting continued strong trading and high demand for its premium product. Due to these circumstances, the Board expects the Company to exceed current market expectations for the year to 31 December 2014.

The Board continues to progress long term opportunities through the planning system including alternative development at the Charnwood quarry and the former Dunton brickworks site and to secure the future of operations at Michelmersh through extending clay reserves. The Group is uniquely placed in an industry with high barriers to entry. We remain well-financed and positioned to benefit from higher demand for bricks in the UK. Our market position, asset base and enhanced shareholder register gives the Board optimism about our future prospects."

[alanrussell] 26/3/2014 22:32

I had been nervous that the present value of the company price barely supported the share price never mind any increase however having had a longer look at the results I am less concerned. I see it like this (all very rough numbers of course but there's no point trying to fine tune, 6 months later it all changes):

2013 operating profit £1.4m
Near £1m interest paid, so for 2014 that should drop to say £300,000
Together with improving margins say 2014 profit £2m to £2.5M, call it £2.2m
However £2.2m investment in Freshfields plus increased overheads to rebuild stock (I know these are balance sheet items but I'm a "cash in, cash out" guy) off-set by £1.5m from Bovis = say £1.3m "cash" profit (probably will show as about £3m profit).

So 2015 £3.7m profit

Thereafter (assuming no further extraordinary items of expenditure, ha!) look to the Telford site. There appear to about 100 acres developable.
2005 option agreement with PSM for 60 acres, planning application for 7 acres
2008 upped to 16 acres.
2010 planning consent granted for 170 houses (10.6pa)
3/2012 "slow progress" reported, expert determination process
1/2013 received "satisfactory final determination", discussions with PSM
2013 in negotiations for sale of non-optioned 15 acre site
5/2013 15 acres sold to BVS £4.6m (£1.6m, +£1.5m + £1.5m) = £307,000 pa
It looks likely that the PSM option will lapse (planning costs are usually, but not always, borne by the developer not the landowner)and presumably MBH will seek sale to BVS. Assume sale phased over 10 years from 2015, 85 acres @ £300,000pa = £2.6m pa. (For the sake of ease - yes I know, anything for the easy life - assume remedial costs = value uplift since early last year. Actually this may not be a million miles off the mark).

2016 onwards £4.8m pa profit (less tax) but let's not forget the 8.5% increase in capacity due to Freshfields expansion, increased landfill capacity at Dunton and probable residential development at Charnwood.

A 3p dividend per share = £2.4m (easily affordable) = 4.5% yield
4p dividend per share = £3.2m = 6% yield
Maybe the shares aren't overvalued after all.

My best shot. All very broad brush, feel free to criticise (like an invitation is needed!) and suggest alternative numbers.

[envirovision] 26/3/2014 11:44

Precisely its very bad news indeed for MBH, what 5 years or so down the drain not to mention all of the costs, the work involved in planning must have cost a small fortune to have granted they have not explained why psm pulled out either ! Perhaps the market knows something I am missing.

[ed 123] 26/3/2014 10:32

FELIX99 and envirovision.

Yes, it can only be great expectations of the land value which keeps the share price at this level. However, net land value can be very different from gross. Eg. look at note 4: £1.9 million cost of ceasing production at the Dunton site. To that should be added the land remediation cost, planning gain for the LA, infrastructure cost, legal fees. I don't know what the net figure will be and I am not encouraged by the tone of Note 4 (iv) which updates on the Persimmon Homes land situation.

Of course it's possible that I'm being unduly pessimistic here. As ever, time will tell.

[felix99] 26/3/2014 09:35

Ed
mkt valuing the land assets ( ultimately to be sold for housing ) and future income from landfill I think .

Its a hybrid property co as well as a bricks business really so really you need to strip out the value per share of the land/property from share price and then divide the earnings that is left into the remaining share price to get a realistic p/e - probably still high but not 370 odd!

[ed 123] 26/3/2014 08:48

samenic.

...nothing in the figures to worry...

Basic earnings per share 0.18p. Share price 67p. P/E ratio 370. Compare that to the FTSE all share P/E ratio, which is currrently about 14.

What does it take to worry you? ;-)

alanrussell.

Continuing 'jam tomorrow' mantra from the company.

Don't get me wrong, I think the management are doing a good job here. The last placing was excellent for the business. I just don't don't understand how the market continues to value the shares around the 67p mark. Will the required step up in turnover/margin ever come?

[alanrussell] 26/3/2014 08:42

True. The way MBH reports profits makes it hard to compare at a glance but looking at the basic munbers: turnover H1 £13.1M H2 £12.8M, bricks produced H1 36M H2 35M.

From the statement "Despite a challenging first half of the year, turnover for the 12 months increased by just under 13% to GBP26 million (2012: GBP23 million) as activity picked up sharply in the second half of the year. " Doesn't square with the numbers reported - turnover may be up year on year but it is down H2 compared with H1.

PSM deal appears to be dead. Presumably relationship with PSM has broken down and they will wait for the option to expire and then do a deal with Bovis.

Cash flow over the next few years should be good. Statement hints at a dividend which would be very welcome to underpin the price.

[samenic] 26/3/2014 08:06

Unless l missed something,nothing in the figures to worry,nothing to excite either.

[oilyrag] 04/2/2014 10:50

Loads of advfn's company figures are rubbish. Just look at TAIH financials page and ask yourself why a company's earnings per share are 10 fold their share price.
There are loads of others, for example I recieved a 10% dividend on UVEL recently, it dosn't show on advfn but it does on their competitors screens.

[ballachar] 03/2/2014 17:25

ADVFN quotes the market cap. as £6m and the number of shares at 8m. It should, of course, be 80m. Maybe some people are believing the lower figure and think the shares are good value which they would be at £6m

[arthur_lame_stocks] 20/1/2014 16:48

I fully agree puffintickler, I sold out after they lost £2m in the first half, why the shares are this price is beyond me.

[gutterhead] 20/1/2014 06:48

Hastings thanks for that info.
Valuation is very high measured on pe basis, I will wait for results and then decide what to do.
Good luck all holders

[hastings] 19/1/2014 21:36

Persimmon entered into some options regarding land purchases with Michelmersh Concerning Telford, back in 2005 I think, if it helps.

[envirovision] 19/1/2014 20:50

Unlikely imo

[puffintickler] 19/1/2014 19:25

I sold out way to early here, but I cannot justify buying back in at anything like the current price, there seems to be an enormous amount of optimism built in.

[sonycam] 19/1/2014 13:46

Very good looking chart

[gutterhead] 19/1/2014 13:45

Previous poster mentioned psn, presume persimmon buying mbh