Brick maker issues profits warning
Brick producer Michelmersh has warned investors that its pre-tax profits this year will be ‘significantly below’ market expectations.
Michelmersh Brick Holdings made a pre-tax loss of £84,000 in the six months to 30 June 2012 on turnover down 2.5% at £11.9m. In the same period last year it made a profit of £150,000 on a £12.2m turnover. The number of bricks sold declined from 36m last year to 33m this time.
The average selling prices across the business have increased from £336 to £355 per thousand in the past 12 months. Construction material prices have increased by 25% since 2007 whereas brick prices have increased by only 8%, the company said.
The accounts have also been hit be a delay in the sale of some land to housebuilder Persimmon in Telford.
Chairman Eric Gadsden said: "Our business model has been based for some time now on a flat market, focused on the southeast of England, with funding constraining demand despite the many government initiatives to attempt to arrest these conditions. We can survive in these conditions and will thrive when conditions improve.
"The board now expects that while the group's revenues for the year ending 31 December 2012 will be marginally below market expectations, the group's profit before tax is likely to be significantly below market expectations as the shortfall encountered in H1 will not be recovered in the second half and therefore the board expects the Company only to break even for the full year. The contribution from landfill is also expected to be below expectations. Although sales prices and income from carbon surpluses are usually stronger in the second half of the financial year, economic conditions do not suggest this will be the case in 2012.
“In addition, higher than anticipated interest costs will arise following the delay in receipt of the expected cash proceeds of the land disposed under the Persimmon option. Despite the difficult trading conditions, positive trading cash flow and proceeds of future land asset sales will mean that the group will continue to develop the business while seeking opportunities for growth.”
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This article was published on 24 Sep 2012 (last updated on 24 Sep 2012).