Michelmersh Brick Share Discussion Threads

[alanrussell] 23/7/2013 15:15

Thanks for the insight.

[stuart little] 23/7/2013 15:01

The volume side of the brick industry is currently in turmoil! 90% of Hanson bricks are now on at least 12 weeks availability. Probably 50% are not available till 2014. This obviously has a knock on effect with Ibstock and Wienerberger factories now following onto extended lead times. This has been caused by a sudden upturn in housebuilder activity coupled with historic low volumes of bricks on stock and low manufacturing capacity. Hanson have reacted by reopening their Claughton factory (mothballed 5 years ago) and ramping up production at other factories but this won't have an impact till next year. Hanson and Wienerberger have recently implemented 2.5% increases but more telling is the lack of any 'deals' available. You could always twist someones arm for an extra discount but not now....

I think there was a degree of panic buying when stocks got low which caused a snowballing effect, this seems to be levelling out now. The whole industry was caught with its pants down.

I'm obviously talking about the bottom end of the market, bricks on deals at circa £200/1000 so not directly MBH related....but a noticable increase in activity from housebuilders can only be goods for anyone looking at land deals.

stuart.

[alanrussell] 23/7/2013 14:04

The implication of the RNS of 29-5-13 is that whatever £ MBH got from Bovis, much the same is to be expected from the PSM deal. So if the PSM deal is not announced by the time of the results (and given its rate of progress that seems highly unlikely) we should get a good indication then. With an improved balance sheet and increased sales volume hopefully leading to increases in prices (Stuart, you're a man with your ear to the ground, any sign of brick price movement?) perhaps the worst is behind us. 61p still seems a long way away though.

[hastings] 23/7/2013 09:58

hxxp://www.privatepunter.co.uk/News/22-july-2013news-from-michelmersh

[ed 123] 30/5/2013 00:06

I may be wrong, but to me it's likely that the remediation costs would be borne by the buyer of the land. This because the buyer is able to claim Land Remediation Tax Relief, and the buyer can decide the detail/specification of the remediation to meet its own requirements, and it avoids any risk being carried by the seller (MBH). Additionally, as we know, MBH is already heavily borrowed and so would likely seek to avoid any upfront cost in connection with the land sale.

I don't know the cost of remediation in this case, nor do I have details of the Section 106 obligations - which would also impact on the amount that the buyer (BVS) would have been willing to pay. Additionally, there are the infrastructure costs (roads, sewers, street lighting, electricity, gas and water supplies).

Anyway, a bit of guesswork, fwiw ....

185 houses in 15 acres is about 12 per acre. Perhaps smallish detached houses? Next to a brick works in Telford, guessing sale price £170,000 each. Build cost, say £100,000 per house. Per house cost of remediation, infrastructure and Section 106, say £30,000. Land cost = £4.6 million / 185 houses = £25,000. Therefore, Bovis profit per house = £170,000 - £100,000 - £30,000 - £25,000 = £15,000.

Moving on to the core business, at around 4% operating margin there must be scope for a big increase in profit if the market becomes firmer and price increases can be achieved. At some point, debt free and 5 pence per share earnings? Times 12, gives target share price of 60p.

Today's broker recommendation - Westhouse Securities, 'buy', target 61p.

[alanrussell] 29/5/2013 15:43

If I recollect correctly the PRM (oops, PSM) deal provided for MBH to carry out remedial works but I haven't hunted back through the RNSs to check that.

[shanklin] 29/5/2013 15:31

Alan

I do wonder what the remediation costs for the factory site are and which party is having to bear them. If its BVS, the situation might be somewhat different from what it seems on the surface.

[alanrussell] 29/5/2013 14:20

Today's sale equates to £300,000 pa. MBH has 90 acres at Telford which it hopes to develop. So a total of £27m (less remedial works?) spread over goodness knows how many years. It owes £18m and eaks out £1m pa profit despite near enough £1m finance costs which presumably should gradually reduce. Market cap is £19m.

So what's MBH worth? More than £19m? Will there be a dividend?

28-1-10>>>>>>>>>>>>Michelmersh Brick Holdings plc (AIM: MBH), the specialist brick, land development and landfill company, is pleased to announce that planning permission has been granted by Telford & Wrekin Council for the construction of 170 houses on 16 acres of development land at the Company's site at Hadley, Telford. This constitutes the first phase of the development of 90 acres over the next 10 years in partnership with Persimmon Homes plc.
>>>>>>>>>>>>>>>>>>>>>>>>>>>> seems the partnership with PSM hasn't gone according to plan - perhaps no bad thing.

[shanklin] 29/5/2013 10:35

Ed,

What today's RNS shows is that MBH is actually capable of selling land, something which could be doubted due to all the faffing around with PSN over many years.

AIUI, the contract with PSN is such that the first 15 acres should have a selling price materially higher than what BVS paid for the factory site.

It would be interesting to know how much by way of remediation costs BVS will have to pay before building the site out.

Cheers, Martin

[ed 123] 29/5/2013 10:27

It's been a long time coming, but now exchanged contracts for the sale of 15 acres (to Bovis). I read into this rns (rightly or wrongly) that Persimmon have been trying to get their first 15 acres for less than Bovis paid, but the market evidence will help MBH to get a fair market price.

Little impact on MBH finances immediately. It does, though, mean they can look forward with more confidence, both paying down some of the debt and moving on with some capital expenditure on the core businesses.

Brick business still slow. (Thanks to Stuart Little for industry updates.) The UK appears to be very slowly climbing out of the Credit Crunch recession. I'm assuming this will continue. Therefore I'm expecting MBH's trading performance to slowly improve. This, allied to its reduction in debt, should give a few years of growing eps.

Not sure of MBH's potential. Anyone got a view on the profit margin for MBH's bricks in a more bouyant market?

[davidosh] 21/5/2013 18:04

Thanks and appreciated. That is now eight more than they normally get.

Evening update....numbers now up to 11

[puffintickler] 21/5/2013 17:48

davidosh - done, you have foolish mail (I hope)

[davidosh] 21/5/2013 16:23

puffintickler....done !



Just let me have your full name is all I need or you can telephone Tavistock to confirm attendance. All are welcome and I aim to have twenty investors there to show the benefits to all parties for doing this.

[puffintickler] 15/5/2013 07:33

hi David

if you arrange an advance presentation I will definitely be there! I hope they won't be sniffy about nominee shareholders attending.

[stuart little] 14/5/2013 17:00

Just been informed Ibstock are closing one of their oldest factories at Nostell, Wakefield. Goes to show that even as the sales pick up some factories can't be profitable making bricks anymore. Not enough computers and technology at some of these older places....

stuart

[davidosh] 14/5/2013 14:46

I am trying to arrange a company presentation in advance of the Agm to make a visit and meeting all the more worthwhile. Not many of you coming though !!?

[shanklin] 14/5/2013 13:12

Stuart

Thank you for the industry information. It will be interesting to hear the extent to which demand at MBH is correlated with that at the higher volume producers.

For me, at least in the shorter term, the key is for MBH to start getting the cash in on these land deals. I understand MBH are confident that they can achieve a significantly profitable brick business in due xourse but it would be good for them to show that these land deals are not just hot air.

Cheers, Martin

P.S. hastings, no worries :-)

[stuart little] 14/5/2013 13:01

It is true that the brick industry has seen a notable upturn in business in the last couple of months. This has caused some Ibstock and Hanson factories to put their bricks on extended delivery, anywhere up to 12 weeks for some!! Also hauliers are stretched at the moment which is a good barometer of volumes being shifted. Although the number of them still in business is bound to have an affect as things get busier!!
However the factories affected are the high volume, housebuilder factories so whether MBH have seen the increase too is unknown....

stuart

[hastings] 14/5/2013 12:45

Oops! sorry Shanklin,I should pay more attention.

[shanklin] 14/5/2013 12:38

LOL hastings

[puffintickler] 14/5/2013 12:20

Only a small holding for me but might go if nothing else on. It would be my first agm though.

[davidosh] 14/5/2013 11:19

How many of you are coming to the Agm next Wednesday ?