Michelmersh Brick : Final Results Statement 2020 – 30th March 2021

30 March 2021

Michelmersh Brick Holdings Plc

("MBH" or the "Group")

FINAL RESULTS

Resilient trading through Covid-19 interruption, dividend payments resumed

Michelmersh Brick Holdings (AIM: MBH), the specialist brick manufacturer, is pleased to report its audited final results for the year ended 31 December 2020, representing a strong performance and continued progress.

Financial Highlights

• • £52.0 million of revenue generated, in line with the prior year despite Covid-19 shutdown and loss of output (2019: £53.5 million)

• • EBITDA of £12.3 million, down 10% (2019: £13.6 million)

• • Robust operating performance driving improved gross margin 41.3% (2019: 40.9%)

• • Strong cash generation building to a year end cash balance of £12.2 million and a positive net cash position

• • Repayment of furlough monies drawn during shutdown

• • Final single payment dividend of 2.50 pence, being a 117% increase year on year (2019: 1.15 pence)

Operational Highlights

• • Strong operational and financial performance during year which has continued into 2021

• • Comprehensive support for staff through shutdown and home working

• • Commencement of road construction at Telford for long-term benefits of the brickworks and restoration

• • Launched sustainability steering committee

• • Completion of new Floren offices, welfare & technical testing building

• • Exercised option securing additional mineral reserves at Michelmersh

Commenting on the 2020 performance, Martin Warner, Chairman at Michelmersh Brick Holdings, said:

"To almost equal 2019's revenue level and deliver such robust earnings after operations were suspended for most of April is an incredible achievement. The Group worked tirelessly to make its plants Covid-19 safe and minimise the impact. With Michelmersh being such an effective operator, production was able to return to optimal levels within a few weeks of recommencing.

"Michelmersh is operating in a sector that is currently buoyant and supported by government incentives. As such, it is well placed to capitalise on the UK and Benelux markets with its strong brands, well-invested operational structure and sound financial footing. We are still conscious that Covid-19 continues to cause a level of uncertainty, whilst the UK and Europe are both getting used to post-Brexit conditions. However, the Group has had a good start to 2021 and I remain confident that the Company can look forward to continued growth and prosperity with the longer-term market fundamentals in our favour."

An online analyst briefingmichelmersh@yellowjerseypr.com.

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9.30amtoday.

Toattendpleaseemail

Michelmersh Brick Holdings plc Frank Hanna, Joint CEO

Tel: +44 (0)7384 259 407

Stephen Morgan, Finance Director

Canaccord Genuity Limited (NOMAD and Broker) Tel: +44 (0)20 7523 8000 Bobbie Hilliam

Georgina McCooke

Yellow Jersey PR Charles Goodwin Annabel AtkinsTel: +44 (0)7747 788 221

The information contained within this announcement is deemed to constitute inside information as stipulated under the UK Market Abuse Regulation. Upon the publication of this announcement, this inside information is now considered to be in the public domain.

About Michelmersh Brick Holdings PLC:

Michelmersh Brick Holdings PLC is a business with seven market leading brands: Blockleys, Carlton, Charnwood, Freshfield Lane, Michelmersh, Floren and Hathern Terra Cotta. These divisions operate within a fully integrated business combining the manufacture of clay bricks and pavers. The Group also includes a landfill operator, New Acres Limited, and seeks to develop future landfill and development opportunities on ancillary land assets.

Established in 1997, the Company has grown through acquisition and organic growth into a profitable and asset rich business, producing over 120 million clay bricks and pavers per annum. Michelmersh currently owns most of the UK's premium manufacturing brick brands and is a leading specification brick and clay paving manufacturer.

Michelmersh strives to be a well invested, long term, sustainable, environmentally responsible business. Opportunity, training and security for all employees, whilst meeting the needs of stakeholders are at the forefront of everything we do. We aim to lead the way in producing some of Britain's premium clay products and enhancing our environment by adding value to the architectural landscape for generations to come.

We are Michelmersh Brick Holdings PLC: we are "Britain's Brick Specialist".

Please visit the Group's websites at:www.mbhplc.co.uk and www.bimbricks.com

Chairman's Statement

Introduction:

It is extremely gratifying to be able to report that your Company has successfully navigated a very challenging year, delivered a very commendable result and retained a strong financial position. After Covid-19 led to our manufacturing operations being suspended for most of April 2020, the Group worked tirelessly to get the business back up to speed in a safe manner. Whilst construction site activity also slowed in early spring due to Covid-19, by the beginning of May activity had picked up, which we experienced with customer orders and sales returning quickly.

Throughout the pre- and post-Covid-19 interruption, the Board has striven to uphold the Group's 'good corporate citizen' principles and sought to balance the Group's responsibilities to all stakeholders. The Group's financial resilience has allowed us to support and reward our staff, maintain responsibilities to customers and suppliers, return furlough monies drawn to HMRC and re-instate the dividend stream to shareholders.

Financial Highlights

1Underlying excludes items regarded as exceptional and amortisation of intangibles

The Group has for some time operated on the basis that production output should be maximised and all product will be sold to a customer. Covid-19 regulations caused operations to cease in late March and production output was lost and, despite a strong performance once this recommenced, the Directors consider that output was negatively impacted by 6.5 million bricks. Despite the Group being able to return to production swiftly, the customer markets reopening lagged production output and this impacted deliveries. This led to a small reduction in turnover during the year.

Given the challenges, the Directors believe the overall financial results of the Group are impressive with turnover and volumes only 3% lower than the Group's strongest ever performance in 2019. Increased costs eroded earnings as Covid-19 related cleaning costs, continued IT development costs and unfavourable currency rates had an impact. This led to earnings metrics being below that achieved in 2019. However, the return to full capacity and operational performance in the second half of the year gives me confidence that the worst is over and the business is in a strong and stable position moving forward.

Cash and Net Debt

The Group ended 2020 in a modest net cash position after opening the year with net debt of £6.3 million. Cash preservation measures were taken in the early part of the year in the face of Covid-19 but strong trading put the Group on a solid financial footing by the end of the year.

In the early stages of Covid-19, the financial backdrop held uncertainties and the Board took certain measures to protect the business - drawing down £3 million from existing bank facilities, accepting government support through furlough payments and deferring VAT payments, holding back capital projects, cancelling the final dividend in respect of 2019 and stress testing the business prospects. As trading recovered from early summeronwards, uncertainties receded and cash reserves recovered, which enabled the Group to reverse the measures taken by repaying furlough payments, schedule the repayment of deferred VAT payment and reinstate dividends. Moreover, the Group has made a voluntary prepayment of £10 million of bank debt as well as £3.3 million of scheduled repayments. The Group entered 2021 in a net cash position including substantial cash balances which, along with undrawn bank facilities, afford headroom against risk, the opportunity to invest and to pay a progressive dividend.

Dividend

As mentioned above, the Board reluctantly withdrew the final dividend in respect of 2019, but the business has now achieved the stability and cash resources to recommence dividend payments. The Board proposes a single dividend in respect of 2020 of 2.5 pence per ordinary share to shareholders on the register on 4 June 2021 which will be paid on 14 July 2021. The Company will again offer shareholders a scrip alternative to a cash dividend with a scrip election date of 23 June.

The dividend exceeds previous levels as a proportion of earnings in recognition of the withdrawal of the 2019 dividend.

Board and Employees

This year has seen an impressive response from the Group's staff to significant challenges both as individuals and in demonstrating significant and outstanding teamwork. Operational and financial outcomes owe much to their skill and commitment and on behalf of the shareholders and the Board, I would like to pass on my sincere thanks.

The Board is also undergoing a period of change with the addition of two new non-executive directors within the year. Paula Hay-Plumb joined at the 2020 AGM and is already ensconced as Chair of the Audit Committee and contributing to the effectiveness of the Board. In November, Tony Morris was appointed bringing energy and experience that will help the Group explore and develop commercial opportunities. I welcome them to the business.

The role of Company Secretary has been transferred to a professional third-party corporate entity, Prism Cosec, adding front-line expertise and guidance to the Board.

We will, however, be losing two long established members of the Board in 2021 as Bob Carlton-Porter and Stephen Morgan step away from the Company at the forthcoming AGM, having served 17 and 11 years respectively. On a personal note, and on behalf of shareholders, can I extend my thanks to them for their contribution and support which have helped to make Michelmersh the Company it is today through a period of remarkable growth. They will be hugely missed and I wish them well.

The CFO role has been filled following a rigorous and wide-ranging recruitment process. The new appointee, Ryan Mahoney, will join us following our 2021 AGM in early June, bringing significant financial and operational experience. His expertise will help the business secure continued growth and we look forward to working with him.

Ryan joins from Avon Rubber, the FTSE 250 defence engineering and manufacturing group where he has been Deputy Chief Financial Officer since April 2018. Prior to that, Ryan had been Group Financial Controller for Unite Students, the FTSE 250 property group, since November 2015, and before then held other senior finance roles within the business. Prior to joining Unite, Ryan worked for KPMG for 9 years in both audit and advisory roles. Ryan is both a qualified accountant and a member of the ICAEW.

OUTLOOK

Michelmersh is operating in a sector that is currently buoyant and supported by government incentives. As such, it is well placed to capitalise on the UK and Benelux markets with its strong brands, well-invested operational structure and sound financial footing. We are still conscious that Covid-19 continues to cause a level of uncertainty, whilst the UK and Europe are both getting used to post-Brexit conditions. However, the Group has had a good start to 2021 and I remain confident that the Company can look forward to continued growth and prosperity with the longer-term market fundamentals in our favour.

Martin Warner

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