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Michelmersh Brick Benefits From Demand for New Build Homes

2015 was a strong year both financially and operationally for Michelmersh Brick Holdings and it appears that the company’s momentum remains strong in 2016.

The company has been benefiting from a robust UK housing market. The Council of Mortgage Lenders (CML) released figures confirming that the first quarter of 2016 saw homeowners borrow £30.9bn to purchase new homes. This amount represents a year-on-year increase of 33%.

New builds would have accounted for only a small percentage of these loans, but the figures indicate the strength of the current housing market. Housebuilder Taylor Wimpey recently announced that the the new build housing market in the UK remains positive overall.

The housebuilder said that increasing consumer demand and confidence, combined with a strong and controlled lending environment, is enabling access to mortgages at a competitive rate.

The demand for new homes equals demand for bricks, an equation that is benefiting Michelmersh.

The company witnessed a 3% increase in output in 2015 compared to the year before, while there was also a 9% increase in the average selling price. These factors listed turnover to £29.1m, while pre-tax profits came in at £4.6ml, an increase of £2.6m in 2015.

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Michelmersh earned £6.6mln in cash last year while the payout increased from 0.5p to 1p a share. The brick maker is expected to realise a pre-tax profit of £5m on a £31.9m revenue, resulting in another dividend increase to 1.2p.

At the present price of around 75p each, the shares realise around 1.6%, which is an improvement over most savings rates.

Michelmersh did not reveal too much at its annual general meeting in May, except to say that trading performance had been strong in 2015 and the first four months of 2016 had been positive.

The group has five leading brands (Blockleys, Charnwood, Freshfield Lane, Hathern Terra Cotta, and Michelmersh), all of which target the premium sectors. It produces close to 72 million clay bricks, paving stones, and tiles per year.

In 2015 Michelmersh increased prices for the first time in years as oversupply problems in the industry began to dwindle.

The group also includes New Acres Limited, a landfill operator, but it is not as prominent in the public eye. New Acres is striving to develop future development and landfill opportunities on ancillary land assets.

The current trend is to convert odd parcels of land around town, and Michelmersh has jumped into that fray, realising a profit by selling surplus land to housebuilders.

Michelmersh has also contributed to historically significant projects, such as the St Pancras station in London, where additions need to be built with the style of the older components.

The brick maker has also shown that it has its eyes on the future, as evidenced by the implementation of packaging robots at its Blockleys location in Telford, Shropshire.

These developments, as well as the Freshfields Lane site expansion in West Sussex, were accomplished at relatively little cost but lay the foundation for future periods

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