(MBH:AIM) 92.3p


Gain to date: 9.9% Orig­i­nal en­try point: Buy at 84p, 29 March 2018

AN EX­TREMELY POS­I­TIVE set of first half re­sults from brick maker Michelmersh Brick (MBH:AIM) helps build some mo­men­tum be­hind our pos­i­tive call on the shares.

As we ex­pected the ac­qui­si­tion of Barns­ley’s Carl­ton Main Brick­works has re­sulted in a sub­stan­tial in­crease in earn­ings and cash flow. This helps un­der­pin a very healthy 51% in­crease in the in­terim div­i­dend to 1.06p. A sim­i­lar in­crease in the full year div­i­dend would im­ply a yield push­ing 4%.

Though our other favoured brick maker Ib­stock (IBST) has been strug­gling this ap­pears to be linked to com­pany-spe­cific is­sues with the fun­da­men­tals be­hind the UK brick mar­ket re­main­ing pos­i­tive. As Michelmersh ob­serves, brick de­mand re­mains strong with im­ports re­quired to meet short­falls and stocks near to his­tor­i­cally low lev­els.

The im­proved cash gen­er­a­tion of the busi­ness is en­abling it to pay down the bor­row­ings associated with the pur­chase of Carl­ton with the com­pany guid­ing for net debt to be be­low one times earn­ings by 2019 and the com­pany is on track to meet full year ex­pec­ta­tions.

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