Michelmersh Brick Share Discussion Threads

[bamboo2] 01/8/2017 08:07

Thanks Brummy. Any idea when the next update is here? That could give us some confirmation on the return of pricing power.

[brummy_git] 01/8/2017 07:36

Thanks bamboo2 - similar message reiterated by Forterra this morning wrt their H1 results; "Double digit increase in brick and block revenue reflecting good demand from the new build residential market".

Adding "Current levels of activity from our housebuilder customers and our order book growth continue to be positive, but we remain watchful over any negative impact from a weakening of consumer confidence on the housing and RMI markets."

[bamboo2] 31/7/2017 08:54

Hi Brummy, I went back and had a look again, this is the snippet from BBC R5, under the headline 'Soaring building material costs'...



"Bricks are up by 10% some steels and metals are up by 45%," says Tony Passmore, Managing Director of the Passmore Group, a Leeds-based building firm.

His experience backs up a report from the Federation of Master Builders (FMB), which found that a third of small building firms have been hit by squeezed profit margins due to soaring prices for materials.

Mr Passmore suspects there is some speculative price inflation going on, but "that's only because it's been so depressed for so many years."

[brummy_git] 31/7/2017 08:49

bamboo2 - sounds as though Passmore reckon its brick volumes (ie say 1.7-1.8bn pa), not prices

[priteshpatel9] 31/7/2017 08:26

Worth a listen to today's BBC wake up to money podcast which focuses on building material price rises."Pretty much everything is rising - by much more than the 3% average"

[bamboo2] 31/7/2017 08:25

I think he was referring to prices.

Be a laugh it was the size of the bricks though! :-)

[brummy_git] 31/7/2017 08:22

Is that brick volumes or prices bamboo2?

[bamboo2] 31/7/2017 07:08

"Bricks are up by 10%...." says Tony Passmore, Managing Director of the Passmore Group, a Leeds-based building firm.

[bamboo2] 28/7/2017 15:24

Bought some more today.

[pizzabuffet] 26/7/2017 22:39

No talk of takeover at our place.

[mw8156] 26/7/2017 20:20

difficult to see how any of the big 3 could take it over on competition grounds so would have to be a new entrant eg Austrian

[bamboo2] 26/7/2017 19:48

Bought a few back today. T/O potential?

[alanrussell] 26/7/2017 11:07

And a 3M trade this morning. So about 4M shares have changed hands over the last three trading days - 86M in issue so 4.6% of the company has changed hands.

[bamboo2] 25/7/2017 20:49

I sold the last of mine just below 80 thinking it would become resistance, but have been proved wrong.

There is a gap on the chart that I think is likely to be filled 84-85, then it could be up and away to 100

edit, having looked closer, it could be a breakaway gap that instead of filling, becomes a support zone.

[alanrussell] 25/7/2017 19:48

All very interesting.

Through last week the share price moved quietly up on no great volume until Friday when it hopped up on big volume. Yesterday dead quiet and today a jump on even bigger volume. FORT and IBST have drifted sideways on modest volume through this period so this is MBH specific.

I thought it might have been results due but they are not scheduled until 4/9 despite being 25/7 last year. Odd that, perhaps the Carlton Main effect.

So presumably someone thinks MBH are worth buying either on their trading or the acquisition. 1M bought over the last week, maybe tomorrow will bring a holdings RNS.

[trewinney] 29/6/2017 11:16

Have changed from a nimble niche outfit,to a more unwieldy outfit.I am out!

[alanrussell] 27/6/2017 23:31

Good point simso. I may have fallen into the trap of comparing the post deal balance sheet with the pre deal b/s instead of the wider market.

As with any business in the construction sector the wisdom of this acquisition, and the prospects of MBH, will be largely determined by the continuing health of the sector.

Can't fault your thinking MRF - first rule of investing - protect your capital. I will continue to hold, maybe my twitching will subside.

[simso] 27/6/2017 09:56

Interesting post thanks alanrussell.
I have reflected on this and take a more positive view of the acquisition. I think Michelmersh Balance Sheet was so asset rich/unleveraged to start with, and even after this acquisition, it is much stronger than 90%+ of companies I evaluate. A forecast Net Debt / EBITDA of 1.3 times for 2018, and with over £30m of Freeholds in the balance sheet, this is still a very asset rich and unleveraged business. As an acquisition, Carlton does make sense as it is a single site, highly profitable business well within Michelmersh area of expertise and competence. One would hope for further synergies and cross selling opportunities, which are not reflected in the forecasts.
There is always a risk with any acquisition, but I think this one makes more sense than most.

[my retirement fund] 27/6/2017 08:14

Good assessment and for that reason I've taken half my money off the table. I would think they have put a lot of lipstick and make-up on to be able to sell such a pig for such c copious levels of goodwill. Better safe than sorry is my moto.

[alanrussell] 27/6/2017 00:00

Well this is a BIG deal. Cap before today’s RNS was £59M so an acquisition of £31M makes MBH a rather different animal. MBH produces about 72M bricks/tiles/pavers pa so an addition of 37M bricks greatly increases its volume/revenue.

But is it a good deal?

On the face of it the existing owners are bowing out (apart from two year consultancy for Oliver Stephenson) and selling to MBH at what looks like a modest multiple of (very) adjusted earnings. Perhaps hard to find a buyer for this type of business if you want to retire. Immediately earnings enhancing. All very well.

But look at the assets being acquired. Net assets at 31/3/16 amounted to £9.3M, including land and buildings at book value of £0.6M independently valued at £6.3M. So presumably net assets included cash at 31/3/16, unspecified then but £7.2M now. For this MBH is paying £38.4M – huge goodwill coming onto MBH’s balance sheet while cash departs.

A rather different animal indeed. MBH goes from strong balance sheet with cash in hand to much weaker b/s with significant borrowings. Net effect the company is now much more exposed to trading conditions. If trading continues strongly, or even at a more modest pace, this should prove a good deal. But if trading conditions deteriorate ………;…

It’s all very well speaking of accessing new geographical markets but if the economy contracts the north will inevitably suffer most.

The economic cycle will not be denied despite record loose monetary conditions. It is eight years since the last recession and for sure we are closer to the start of the next recession than we are from the end of the last recession. A quick search tells me that OS was born in 1962, a little young to be retiring at 55. Perhaps he sees the market turning and has decided to get out while the going is good.

I have been in (and out of) MBH for very many years. It is by far my largest holding and I have been delighted to see dividends resume and was looking forward to a solid boring income paying stock. Management has been excellent. Now a change of chairman and we are off to the races with a big acquisition. Acquisitions always make me twitchy and this is no exception.

[simso] 26/6/2017 14:57

I Understand that Carlton made an Operating Profit of £4.9m on T/o of £13.5m to March 17, and it therefore makes more Operating profit and an appreciably better Profit/Sales than the existing MBH business (£4.5m on £31.5m turnover). Even if there are no synergies on acquisition, one would expect the profit to more than double, just by adding the two Operating profits together - and it appears the new Cenkos note this morning has done exactly that for 2018.

The key reason for Carlton's better profit / sales appears to be Gross Margin, which is 33% for MBH and 53% for Carlton. I wonder why on earth they are so different...i thought they both made high quality bricks?

[my retirement fund] 26/6/2017 11:07

Wow up 11 %

[bamboo2] 26/6/2017 08:18

Looks like quite a good fit geographically.

End of day close above 83 targets approx 97. Wonder if we could get confirmation of the chart pattern today?

[fishyneck] 26/6/2017 08:09

Complete different business to MBH current factories. Carlton are predominantly a merchant business, selling most of their products into stockist rather than the higher end spec jobs that this company is used to. Carlton are a very good company with an excellent range of merchant products.

fn

[panic investor] 26/6/2017 08:05

Lordy somebody actually posted !Morning Bamboo