H1 2025 at a glance: resilient sales, squeezed profits at Michelmersh Brick
Michelmersh Brick Holdings (AIM: MBH) has posted a mixed first half. Sales held up, but profits took a knock as tough European markets and planned UK downtime bit into margins. The Board is keeping the interim dividend at 1.60p and expects the full year to be broadly in line with FY24, with growth pencilled in for 2026.
Here are the key numbers the market will care about.
| Metric | H1 2025 | H1 2024 | Change |
|---|---|---|---|
| Revenue | £35.8m | £35.4m | 1.1% |
| Gross margin | 33.6% | 36.2% | (2.6%) |
| Operating profit | £3.0m | £4.1m | (26.8%) |
| Profit before tax | £2.9m | £4.1m | (29.3%) |
| Basic EPS | 2.47p | 3.37p | (26.7%) |
| Adjusted EBITDA | £5.9m | £7.2m | (18.1%) |
| Adjusted PBT | £3.9m | £5.3m | (26.4%) |
| Cash from operations | £3.2m | £0.9m | up £2.3m |
| Net cash | £1.5m | £4.1m | down £2.6m |
| Interim dividend | 1.60p | 1.60p | – |
Note: adjusted figures exclude exceptional costs and amortisation of acquired intangibles.
Why profits fell: UK outperformance vs Belgium slump
Revenue grew 1.1% thanks to stronger UK despatch volumes, which MBH says increased 3% from the start of the period. That is an outperformance versus an industry still about 25% below its 2022 peak. The company leaned on customer collaboration to keep average selling prices stable in what it calls a highly competitive market.
The drag came from two places. First, Belgium. Housing activity there declined another c. 20% versus last year, leaving approvals about 40% below historic norms. MBH’s Floren unit saw despatches and revenue fall by roughly 23%. Management has temporarily stopped production at Floren in Q3, with a planned restart in Q4, and says inventories should cover customer needs.
Second, the UK Carlton site. A sizeable capex programme overran by two weeks, creating a three million unit shortfall and a one-off profit hit in H1. The company says normal operating cadence is now restored and it expects to benefit from the investment in H2.
Margins under pressure and how costs are being managed
Gross margin slipped to 33.6% from 36.2%. Adjusted EBITDA margin of 16.5% is down from a 2024 exit margin of 20.0%, reflecting the Carlton downtime and weak trading at Floren. On the statutory line, operating profit fell 26.8% to £3.0 million and PBT dropped 29.3% to £2.9 million.
Cost control remains active. Energy is a big input for brick makers, so the hedging matters: more than 70% of 2025 energy has been hedged, about 50% for 2026, with additional contracts into 2027 and 2028. Exceptional items were £0.3 million, all related to restructuring, and amortisation of acquired intangibles was £0.7 million, in line with last year.
Cash, capex and dividends: a deliberate balance
Cash generation improved. Cash from operations rose to £3.2 million versus £0.9 million, with operating cash conversion of 54.2% of adjusted EBITDA. Management flags this is still below the typical first half run-rate of above 80% due to timing of receivables and front-loaded capex.
Investment was heavy in H1. Capex of £3.8 million focused on efficiency and environmental upgrades at Carlton, Michelmersh and Floren, plus consolidation of FabSpeed operations. That, plus dividends and working capital, pulled net cash down to £1.5 million at 30 June 2025.
Supportively, MBH has secured a new £20 million sterling and euro bank facility, committed to August 2028 with two potential one-year extensions. The interim dividend is maintained at 1.60p, consistent with the policy of paying one third at the half year. The share buyback programme was also relaunched in April 2025, with £0.3 million spent in H1 and 2,562,500 shares held in treasury.
Order book health and sector context
Order intake ran ahead of normalised manufacturing volumes in H1, which helped maintain a balanced order book into H2. That matters because sector-wide UK production has been running ahead of despatches, pushing industry inventories above the five-year average of around 500 million units and intensifying price competition. MBH’s niche at the premium end and its diversified end markets across RMI (repairs, maintenance and improvement), housing, commercial, social and specification projects have helped it hold share.
Leadership changes you should know about
There are notable Board moves. Peter Sharp has stepped down as CEO to become industry adviser. Ryan Mahoney formally becomes CEO, and Rachel Warren joins as CFO from Wincanton. Continuity should be reasonable given Mahoney’s existing senior role, and the company emphasises a consistent strategy.
Guidance and outlook: steady for 2025, aiming for growth in 2026
Management expects improved trading to continue into H2 and the full year outturn for FY25 to be broadly reflective of FY24. With Floren paused in Q3 and expected to restart in Q4, and UK operations back to a normal cadence, the near-term focus is on protecting pricing, serving the order book, and managing costs. The medium-term view is constructive, with secular demand from housing need and RMI, but the timing of an industry recovery remains uncertain.
My take: the good, the bad, and what really matters
Positives
- Revenue resilience and UK outperformance in despatch volumes despite a tough market backdrop.
- Order intake ahead of manufacturing supports H2 visibility and pricing discipline.
- Energy hedging materially reduces input cost volatility through 2026 and beyond.
- Dividend held at 1.60p and buybacks resumed – a clear signal of confidence.
- New £20 million facility extends financial flexibility to invest through the cycle.
Pressure points
- Profit squeeze is real: gross margin and EBITDA margin both down, with Carlton and Belgium the main culprits.
- Belgium is weak, with planning approvals c. 40% below historic norms and Floren temporarily halted.
- Sector inventory remains elevated, keeping pricing competitive and limiting mix-led margin recovery.
- Cash conversion improved but is still below typical levels; capex was heavy and will normalise only from FY26.
Overall, MBH is doing sensible things for a cyclical business: protecting balance sheet strength, investing in efficiency, hedging energy and keeping a disciplined order book. The call that FY25 will be broadly in line with FY24 feels prudent given the moving parts. For investors, the key question is margin rebuild as utilisation improves, and whether Belgium stabilises on the planned Q4 restart.
What to watch in H2 2025
- Order intake vs despatches – does intake continue to run ahead of production, sustaining pricing?
- Gross margin trajectory – any early benefit from Carlton’s upgrades and improved operational cadence.
- Floren restart in Q4 – timing, utilisation and demand signals in Belgium.
- Cash conversion – can operating cash conversion head back towards the typical 80%+ rhythm?
- Energy costs – confirmation of hedged positions translating into stable unit economics.
- Capital allocation – quantum of buybacks vs dividend as the year progresses, within the new £20 million facility.
In short, this is a solid hold-the-line performance in a choppy market. If order intake resilience is maintained and the sector works through excess inventory, MBH’s premium positioning and recent capex should set it up for a cleaner 2026.
