With politicians always stressing the need to boost new home building in the UK to meet heavy demand, the market for building bricks continues to face stock shortages amid supply constraints and cost inflation.
Office for National Statistics data earlier this year showed brick production in the UK rose just by over 4% in 2017 from the previous year, while brick deliveries increased by 11%, with 2017 being the strongest year for despatches since 2007. Brick stocks also fell by nearly 28% towards the end of the year against a background of flat pricing.
This positive scenario saw high-end producer Michelmersh Brick Holdings Plc (LON:MBH) deliver strong annual results in March, helped by a first meaningful contribution from June’s acquisition Carlton Main Brickworks.
WATCH: Carlton acquisition sees Michelmersh Brick post strong annual results
Yorkshire brick maker Carlton cost the group £31.2mln and was largely behind the 26% jump in revenue to £37.9mln in 2017, with organic growth just 3%
Michelmersh’s 2017 underlying profits [EBITDA] rose by 42% to £7.33mln, though pre-profits fell to £3.34mln due to the cost of integrating the acquisition.
Carlton operates from a 93-acre site in Barnsley, Yorkshire that has been churning out bricks since the 1880s.nd was expected to increase Michelmersh’s annual production by more than 40% to more than 100mln bricks a year.
READ: Michelmersh Brick acquires Yorkshire bricks maker, Carlton
A big number of those bricks in one of London’s most iconic buildings, Battersea Power Station which is being redeveloped and will feature bricks supplied by Michelmersh.
The firm revealed last July that, in conjunction with its distribution partner EHSmith, it will supply 440,000 purpose-made, wire-cut bricks from its Blockleys plant in Telford, Shropshire for the prestigious development.
The bespoke Blockleys product was meticulously chosen to complement the existing contextual built environment of Battersea, matching the conservational standards of the original existing facades, Michelmersh said.
WATCH: Battersea Power Station redevelopment 'a tremendous project' for Michelmersh
The firm said being chosen to deliver this order is a testament to Michelmersh's ability to create a product that meets very particular requirements and match the existing, iconic Battersea Power Station brickwork.
Prospects for this year are equally buoyant
As the group’s chairman Martin Warner commented at the time of the finals in March: “The UK construction industry remains stable with a level of activity that keeps UK brick manufacturing operating at capacity with limited options for expansion. The Group's order book is strong and 2018 promises to be busy,”
Michelmersh shareholders were rewarded with a 7.5% hike in the 2017 dividend to 2.15p, and this was a nice boost to a strong performance from the group’s share price which has gained around 50% on a one-year view, with the stock currently trading at 95.5p.
This should provide solid foundations for investors looking for a solid play on the ongoing demand squeeze in the UK housing market.