Michelmersh Brick Holdings — FY24 a nadir, but FY25 looks more promising

Michelmersh Brick Holdings (AIM: MBH)

Last close As at 31/03/2025

GBP0.97

0.00 (0.00%)

Market capitalisation

GBP91m

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Research: Industrials

Michelmersh Brick Holdings — FY24 a nadir, but FY25 looks more promising

Although Michelmersh’s (MBH’s) FY24 results reflected tough markets, there are reasons for investors to be more enthusiastic about the outlook. H224 revenue was less poor than H1 and the early weeks of FY25 saw order intake continue to build. Furthermore, with the direction of interest rates expected to be down and government policies supporting spending, the outlook is promising. MBH is also attractively valued versus peers, trading at a material discount, while its yield is close to 5%. Its balance sheet remains ungeared, further reducing risks.

Andy Murphy

Written by

Andy Murphy

Director of content, industrials

Construction and materials

QuickView

31 March 2025

Price 101.50p
Market cap £95m
Price Performance
Share details
Code MBH
Listing AIM

Shares in issue

93.7m

Net cash at 31 December 2024

£6.0m

Business description

Michelmersh Brick Holdings is a fully integrated business, combining the production of premium, precision-made bricks, pavers, special shaped bricks, bespoke terracotta products and prefabricated brick components. The group also includes a landfill operator, New Acres.

Bull points

  • New residential and social housing under-supplied for many years, implying strong underlying demand.
  • RMI demand likely to increase as legacy housing ages and requires remedial or expansionary work.
  • Self-sufficient in clay raw materials and a market leader in low-carbon brick technology.

Bear points

  • Construction remains an interest rate-sensitive industry.
  • Michelmersh’s market share is low compared to its larger competitors.
  • Government policy may be slow to be implemented.

Analyst

Andy Murphy
+44 (0)20 3077 5700

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Resilient results in tough markets

MBH’s FY24 results were slightly ahead of market expectations. Revenue fell 9.3% (£70.1m) and operating profit fell 33.3% (£8.2m) as pricing pressurised gross margins. PBT and EPS were down, but the full-year figures obscure a better revenue performance in H224, which carried into 2025. Despite the EPS decline, MBH increased total DPS to 4.6p, ending FY24 with net cash of £6m (H124: £4.1m).

Balanced capital allocation strategy for growth

MBH is consciously pursuing a strategy designed for sustainable growth while returning value to shareholders. It engages in an organic capex programme to maintain its facilities, deliver sustainability initiatives and develop its premium product portfolio. It retains a disciplined shareholder return policy and, finally, endeavours to maintain a strong balance sheet to support planned investment and shareholder returns.

Management change signals stability

In the last year there has been considerable management change, which we believe is almost complete. Tony Morris took over as chairman after the founder, Martin Warner, retired in May 2024. Peter Sharp, the CEO, had previously announced his intention to retire from the board and will be succeeded by Ryan Mahoney, the CFO. The search for a new CFO is well underway.

Valued at a material discount to peers

FY25 has started well for MBH, with order intake continuing to accelerate from a range of customers across numerous business lines. MBH is planning to raise prices at the end of Q1 to offset some of the cost pressures facing it and its peers. The stock is valued at a discount to its larger peers, trading on a forward P/E of c 10x versus Forterra on c 16x and Ibstock on c 18x. It has an underutilised balance sheet that could support further investment or M&A.

Source: company data, LSEG Data & Analytics. Note: PBT and EPS are company definitions of adjusted measures.

Consensus estimates

Year end Revenue (£m) PBT (£m) EPS (p) DPS (p) P/E (x) Yield (%)
12/23 77.3 13.8 11.90 4.50 8.5 4.4
12/24 70.1 9.9 8.20 4.60 12.4 4.5
12/25e 75.8 12.0 9.70 4.70 10.5 4.6
12/26e 80.8 13.4 10.80 4.90 9.4 4.8

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