Part 1
Michelmersh Brick Holdings (LON:MBH) – Britain’s Brick Specialist Is Bouncing Back
We already know that the current year will see this outfit substantially reduce its adjusted pre-tax profits, from £13.8m to an estimated £9.7m for the year to the end of this month.
That does not bother me, because I consider this business to be a ‘class act’ and that its shares will respond well to the sales and profits advance in 2025.
Producing over 120m clay bricks and pavers per annum, this group currently owns most of the UK's premium manufacturing brick brands and is a leading specification brick and clay paving manufacturer.
It has seven market-leading brands, and is involved in the production of premium, precision-made bricks, pavers, special shaped bricks, bespoke Terra Cotta products and prefabricated brick components.
Two weeks ago, the company issued a Pre-Close Trading Update for its 2024 trading year.
It inferred that the trading performance had continued to be resilient into the final quarter.
The order intake continued to run ahead of manufacturing capacity, due to focusing on growing a well-balanced forward order book with appropriate pricing to support demand.
It could be ‘touch and go’ when deciding when the swing around will occur within the construction sector, but it is working closely with its customers on the expected timing of despatches.
The group stated that trading was also benefiting from the quality of the order book built up during the year across its broad and diverse customer base.
“We remain resolute in our focus on delivering excellent products and services.
Given the resilience of trading during the second half of the year, the Board expects revenue, profit and cash for the group to be in line with market expectations.”
Analyst James Wood at Canaccord Genuity Capital Markets rates the shares, now 105p, as a Buy, looking for 170p.
He estimates that 2024 will show sales of £72.5m (£77.3m) while adjusted pre-tax profits will fall back to £9.7m (£13.8m), with earnings of 7.7p (11.5p) and an improved dividend of 4.8p (4.5p) per share.
For the coming year he sees £82.0m sales, £13.0m profits, 10.3p earnings and a 5.0p per share dividend.
His figures for the 2026 year show £86.0m revenues, £14.7m profits, 11.7p earnings and a 5.2p dividend.
Wood concludes that the shares are trading on a 35% peer discount and that the rating is undemanding, given market share gains, above-average margins and a strong balance sheet.
As I said earlier – a ‘class act’ – a strong recovery Buy for 2025.
(Profile 27.03.23 @ 91p set a Target Price of 115p)
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