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[May 2009]
Michelmersh Brick Maintains Revenues – Management Team Strengthened
In his review of 2008 full year for Michelmersh Brick Group, Chairman Eric Gadsden reported on figures and made the following comments, amongst others: “I am pleased to report our results for 2008, a very challenging year for the Michelmersh Group but a year in which, despite such challenges, revenue has been maintained and the Group has repositioned itself in order to best align itself with its niche markets.
Despite the turbulent economic conditions, the Group achieved higher revenues in 2008, up 1% on the previous 12 months, although revenues in the second half fell by 4.0% compared with the same period for 2007. …..Turnover for the year amounted to £24.2 million (2007: £24.0 million) and operating losses for the year totalled £1.8 million compared to the loss in 2007 of £0.5 million, excluding the profit on the sale of Baggeridge Brick shares. The operating loss for 2008 includes the impact of temporarily ceasing production for three weeks from early December at three production units, which has enabled the Group to manage stock levels against demand, and also mitigate the impact of increased fuel costs particularly during the winter months. Production at each of these plants resumed in January. Sales have remained satisfactory and stock levels are at around normal levels.
….We have strengthened our management team in the period with the appointment of Mike Thomas, announced in October 2008. Mike is a manufacturing expert with considerable experience in creating and executing profitable change in a diverse range of international operations. He is driving the review of our product range, manufacturing costs and sales effort and we are already seeing positive results from this process.
…..The continued turbulence in the credit market leads us to take a cautious view of the business in the current year, especially as the market place continues to change. However, there is strong underlying demand for housing and building materials and although it is doubtful whether activity will recover to the high levels experienced in 2004, in the near future, we remain confident that our fully integrated business model is resilient and we are confident of the Group’s ability to deliver long term shareholder value.
We are pleased to report that we have achieved a double-digit percentage increase in selling prices during the year and that these are being maintained. With over 90% of brick production now in the hands of only three internationally owned companies we believe that many works mothballed by our competitors over the winter months will not reopen and the long needed adjustment of supply to demand will now accelerate. Furthermore, the increasing demand for materials for the repair, maintenance and improvement market, and the inevitable shift from flats to houses, all favour our business.
Over the period, Michelmersh has been fortunate to have the full support of its bankers, highlighting the confidence in the long-term ability of the business and as such, the Group’s bank covenants have been successfully renegotiated. Our market and asset position is strong and we have an experienced management team in place. Even in the present economic circumstances we believe we are well placed and ambitious to take advantage of opportunities to grow the business.
The current year to date, despite poor weather in February, has been encouraging despite the lower level of production and sales, which will affect profitability. Overall, taking account of seasonal trends, sales have been satisfactory. In the present conditions there will be unprecedented opportunity to apply our integrated business model to expand. We continue to consider an appropriate structure to enable this to happen. Conditions will continue to be challenging until the credit markets stabilise but those companies that can maintain their position will prosper in the future.”
ENDS