Brick maker all fired up by recovery in building
MICHELMERSH Brick Holdings was founded in 1989 by Eric Gadsden and Martin Warner, who remain chairman and chief executive to this day. The company makes top quality bricks, used in buildings such as London’s St Pancras station, the Holiday Inn in Manchester and high value homes around the country.
The shares are 70½p and should benefit from economic growth and persistent demand for decent housing.
The brick industry spent many years suffering from oversupply. Now, however, the market has completely changed. The UK needs more bricks than it can make and has been forced to start importing stock from countries such as Belgium and Holland.
This has had a dramatic impact on Michelmersh. During the recession, it was forced to lay off staff and close down some operations. It survived largely by supplying bricks for renovation projects, but times were tough and the group stopped paying a dividend in 2009.
Last year, by contrast, the company was operating at full tilt. Prices were raised for the first time in years and Gadsden and Warner were forced to raid their stockpile to satisfy demand. Just before Christmas, they said that profits for 2014 would be better than expected and the outlook for this year is promising.
Political uncertainty may affect construction activity but houses still need to be built and Michelmersh is one of the best brick makers in Britain, with a reputation for quality and aesthetic appeal.
The group is also making money from selling surplus land to housebuilders and that should continue this year.
Michelmersh will be updating the market on trading in January and reporting figures for 2014 in March. Analysts expect a surge in profits from £200,000 in 2013 to £2.8million for last year.
There is also an expectation that the company will resume dividend payments in the current year.
Midas verdict: Michelmersh is a small but well formed brick maker, which has survived the downturn and emerged stronger than ever. Buy.