Updates

Michelmersh

May 2023

Investing in shares may lose you all or some of your money. Past performance is no indication of future performance. Some of the shares recommended here may be small company shares, which can be relatively illiquid and hard to trade and this makes such shares more risky than other investments.

In spite of tough conditions for brick manufacturing Michelmersh’s results were ahead of expectations. Helped by price rises to mitigate cost inflation revenues and pretax profit rose 15% to £68.4m and £12.5m, respectively. Net cash was £10.6m thanks to strong free cash flow while there’s a £20m undrawn borrowing facility to support M&A. Last November it acquired FabSpeed, a fabricator of pre-built brick products such as chimneys, arches and dormers, for an initial £6.25m (just 5.3x EBITDA) and more deals are set to follow. Berenberg puts its outperformance down to its smaller volumes and high end / specialist projects and more diversified order book, allowing it to charge premium prices; EBIT margins were a resilient 18.6%. ...

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With small companies there is an above average degree of risk compared to buying blue chips. Please be aware that we have not assessed the suitability of any of these investments for you. The newsletter simply states a personal view and diarises the editor’s investment decisions. Please speak to your stockbroker or other qualified individual to ascertain whether any of these companies mentioned would form useful additions to your own portfolios. Past performance is no indication of future success.

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