Analysts at Shore Capital have repeated a 'Buy' rating on Brickability Group PLC (AIM:BRCK) following the release of the company's interim results, which met their expectations.
The analysts noted that Brickability's management confirmed it expects full-year 2023 underlying EBITDA to be around £44.5mln which is broadly consistent with their unchanged forecast of £44.9mln.
They said: "We note the ongoing tightness in UK brick supply with inventories at historical low levels. This, in our view, is a significant shock absorber to any cyclical downturn in demand from the housebuilding sector in CY2023. Management notes that the impact of the current UK economic environment on Brickability's trading is in common with most other building materials companies."
The analysts added: "Balance sheet remains sound with net debt/adj. EBITDA rising YoY to 1.1x (FY22F H1: net cash) due to two debt-funded acquisitions, MCP and ET Clay. We expect this ratio to fall to 0.5x by March 2023 year-end, which we think is well within the group's covenant ratios."
The analysts noted that Brickability shares trade on a forward price-earnings ratio of 6.6 times and offer a dividend yield of 4.6%.
They concluded: "We think this prices in a steep decline in Brickability earnings post FY23F, which in our view is pessimistic."
Brickability's results for the six months ended 30 September 2022 showed revenue increased by 57.8% to £352.7mln (H1 FY22: £223.5mln), with group like-for-like revenue growth of 9.3%.
Brickability said its first-half profit before tax increased by 71.9% to £15.3mln (H1 FY22: £8.9mln) with adjusted EBITDA up by 45.7% to £25.5mln (H1 FY22: £17.5mln). The company is to pay an increased interim dividend of 1.01p per share (H1 FY22: 0.96p).
The company noted continued strong order intake moving into the second half and said although its board remains vigilant of wider macroeconomic challenges, it is confident in the group's ability to deliver performance in line with market expectations for the full year.