Another upgrade as Michelmersh Brick beats targets

Michelmersh Brick Holdings featured in our recent study of AIM's fastest growing companies. And it has justified its inclusion with a bullish trading update and prediction that it will smash forecasts at both the top and bottom line.

"The board is pleased to announce that strong trading conditions have continued late into 2014 and both brick volumes and selling prices are better than expected," it said in a brief statement. "As a consequence, the group is likely to exceed the market expectations of turnover and profit before taxation for the year."

That's great news. Earnings fell last year, but a better-than-expected set of first half results forced a round of profit upgrades. And higher brick prices had meant adjusted earnings per share (EPS) were tipped to rocket by 1,000% in 2014, up from 0.2p to 2.2p.

Now, Cenkos Securities has upgraded sales forecasts by 6% to £28.1 million and pre-tax profit estimates by a fifth to £2.8 million, giving underlying EPS of 2.6p. And, with the project to increase production capacity at its Freshfield Lane site by 6 million bricks a year nearly complete, output should increase from the first quarter of 2015. The house broker reckons Michelmersh will make £3.1 million, or 2.9p per share, in 2015. It says:

Today's statement should provide investors with confidence as the industry displays sustained demand through the typically lower volume winter reflecting the strength of the recovery due to the unique industry characteristics - a supply demand deficit and high barriers to entry preventing additions to supply capacity.

Cenkos believes the order book is strong and that prices are on an improving trend. It's also worth remembering that Michelmersh's investment land is valued at 26p per share. Strip that out, and the shares trade on 13 times forward earnings estimates for 2014 and just 11.7 for next year.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.