Finance

SHARE PUNT OF THE WEEK: Brick maker Michelmersh could reap the rewards of sterling’s plunge

Who are they? Established in 1997, AIM-listed Michelmersh Brick Holdings makes top-quality bricks used in buildings such as London’s St Pancras International station, the Holiday Inn in Manchester, and high-value homes around the country.

What’s the latest? The firm has come some way since the financial crisis, when it was forced to lay off staff and close down some operations.

Last month it announced the acquisition of family-owned Carlton Main Brickworks for £38.4million, which sent shares soaring 11 per cent.

The acquisition will increase Michelmersh’s output by 40 per cent to more than 100million bricks a year, and will give the company access to new regional markets.

Who backs it? Chairman Eric Gadsden owns a 26.3 per cent share of the firm.

He founded the company in 1997 with Martin Warner – currently executive deputy chairman with a 6.3 per cent stake – and has spent all his working life in the construction industry.

Investment house Hosking Partners also has an 18.5 per cent stake, while fund managers Charles Stanley and Hargreaves Lansdown also own chunks.

Why should you invest? The recent decline in sterling has made importing bricks more expensive. Michelmersh has benefited because all of its manufacturing and distribution is in the UK.

With sterling likely to stay weak for some time, and Michelmersh increasing its share of the smaller end of the brick market, shares could go even higher than the 46.6 per cent they have already risen by this year.

…And why you shouldn’t Broker Davy points out that while buying Carlton is big news for Michelmersh, it does little to change the fundamental dynamics of the UK brick market, which continues to be dominated by Ibstock, Forterra and Wienerberger.

‘Michelmersh will add around 40 per cent to its production capacity but remains a distant number four in the brick sector with a market share of between 5 per cent-6 per cent’, said Davy.

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