Last checked at 4 Jun 2008 07:00
4 June 2008
Michelmersh Brick Holdings plc
("Michelmersh", the "Company", or the "Group")
Preliminary results for the year ended 31 December 2007
Michelmersh Brick Holdings plc (AIM: MBH), the specialist brick, land development and landfill company, today announces preliminary results for the year ended 31 December 2007.
Highlights:
Turnover increased by 13.7% to £24.0 million (2006: £21.1 million).
Bricks volumes increased by 17% compared to the previous year, despite slower demand as a result of poor weather conditions.
Profit before tax £254,000 (2006 loss: £61,000).
Sale of Baggeridge Brick Plc shareholding yielding a profit of £2.6 million before other costs.
£8.5 million property asset revaluation uplift from £35.2 million at 31 December 2005 to £43.7 million at 31 December 2007.
Proposed dividend of 1.1p (2006: 1.1p).
Further strengthening of Operating Board.
Continuing growth in the first five months of the current year - sales volumes up 10% on the same period for 2007.
Commenting on the results, Eric Gadsden, Chairman, said: "Clearly these are unsettled times in the housing and financial markets. Energy costs are now rising as are other input costs but demand for bricks, after a stable year in 2007, is reducing, reflecting current demand in the housing market.
"Despite the uncertainties in the current market place, sales volumes in the first five months of the current financial year are 10% ahead of the same period last year and the Board believes that the Group, with its improved cash position, asset base and strongly rising landfill rates, is well placed."
For further information:
| Craig Robinson, Finance Director, Michelmersh Brick Holdings, plc: | 01952 265 365 |
| Russell Cook, Charles Stanley Securities, Nominated Adviser: | 020 7149 6000 |
| Jeremy Carey/Paul Youens, Tavistock Communications: | 020 7920 3150 |
The new web site, www.michelmersh.com, complies with the latest AIM regulations, giving up to date financial information and also comprehensive details of the Company's products.
Chairman's Statement
I am pleased to report our results for 2007, a year in which the Group consolidated its position as the leading manufacturer of specialist bricks in the UK. We experienced strong demand for our products across all our works, a significant increase in landfill rates and good progress with our property assets. Despite the uncertainties in the UK construction sector, sales volumes across the Michelmersh Group in the first five months of the current year are 10% higher than in the same period for 2007.
Turnover increased by 13.7% to £24.0 million (2006: £21.1 million) and the number of bricks sold increased by 17% compared to the prior year despite reduced demand in the autumn and latter part of the year due to the adverse weather conditions.
During the year we announced our intention to make an offer for Baggeridge Brick Plc and, although we were ultimately not successful, we were able to sell our shareholding to Weinerberger Finance Service BV which has yielded a profit of £2.6 million, before related costs of £1.1 million and interest of £0.4 million, and increased our available cash by £5.0 million.
We place great emphasis on maximising the value of our land and landfill operations and in addition to progressing with the preparation of our initial phase of land at Telford, for sale to Persimmon, we are actively pursuing land fill and development options for our sites at Dunton and Charnwood.
Our property assets were revalued by Gerald Eve at the year end in accordance with our stated accounting policies, resulting in an uplift in value from £35.2 million at 31 December 2005 to £48.9 million at 31 December 2007 against which management have made certain adjustments and additional provisions for works which may be needed to maximise the long term value of our assets, reducing this valuation to £43.7 million
Once again we achieved success as supreme winner at the Brick Awards with the Pallant House Gallery New Wing, Chichester. This project also won the best refurbishment and public buildings awards. This highlights again the strength of our product offering. We were also shortlisted in a further six categories.
We have had to delay publication of our accounts following a disagreement with the professional audit firm that we appointed as auditors to the business following the work that they undertook for the Group in connection with our attempted acquisition of Baggeridge Brick Plc. This disagreement related to our accounting policies which have, in principle, remained unchanged since the Company's acquisition of Blockleys in 2000. These policies have been reviewed for compliance with International Financial Reporting Standards and are in accordance with the policies of our peer group. The Directors remain of the opinion that these policies remain appropriate as the adoption of International Financial Reporting Standards, has not resulted in any significant changes in accounting policy.
Financial Highlights
The Financial Statements for the year ended 31 December 2007 are prepared under International Financial Reporting Standards for the first time. The 2006 accounts have also been restated. The main impact of the transition is evident on the Consolidated Balance Sheet where the Group has recalculated its deferred tax liabilities at the transition date of 1 January 2006 to include an additional £8.0 million deferred taxation provision on the revaluation of the operational property. This additional provision has risen to £9.3 million at 31 December 2007 following the revaluations of these properties.
Despite the increase in the deferred tax liability, the Consolidated Balance Sheet remained strong. Net assets totalled £44.6 million (2006: £36.4 million) incorporating a revaluation of the Group's property assets carried out by Gerald Eve as at 31 December 2007 resulting in a gain of £8.0 million being taken to the revaluation reserve before the additional deferred tax provision of £1.9 million.
The trading results for the year ended 31 December 2007 are in line with the company's and market expectations. Group turnover for the year totalled £24.0 million (2006: £21.1 million) and profit before finance costs and taxation for the year increased by 119.3% to £2.0 million (2006: £0.9 million) including the £2.6 million profit on the sale of the Baggeridge Brick Plc shares. Administrative expenses, including legal and professional fees associated with the purchase and subsequent disposal of the Baggeridge Brick Plc shares were £6.2 million (2006: £4.8 million).
Total recognised income and expense for the period totalled £5.9 million (2006: £0.6 million), incorporating a gain on revaluation of the Group's assets of £6.1 million (net of deferred tax).
Dividend
We propose a final dividend of 1.1 pence per share, unchanged from last year. Subject to shareholder approval, the final dividend will be paid on 31 October 2008 to shareholders on the register at the close of business on 3 October 2008 and the shares will trade ex dividend from 1 October 2008.
People
We continued to strengthen our management team and made an additional appointment to the Operating Board of a Northern Sales Director; Martin Jump, to complement the work of Mark Wall in a corresponding role in the south.
We have already announced the introduction of a Long Term Incentive Scheme and this will be introduced, subject to shareholder approval, after the Annual General Meeting.
We have recognised further long service at Charnwood where three employees have completed 25 years service. Each of these played a key role in the company's success with the St Pancras redevelopment, as did Geoff Mitchell who retired during the year.
David Roberts also retired from his position as Operations Director at Blockleys, but will continue to work as a Consultant to the Group. We are delighted that David will contribute to the Group in the future.
We have a highly committed team and I thank them for their continued hard work during the year.
Outlook
Clearly these are unsettled times in the housing and financial markets. Energy costs are now rising as are other input costs but demand for bricks, after a stable year in 2007, is reducing, reflecting current demand in the housing market.
The landscape of the UK market has changed dramatically over the last year. Brick stocks are at a record high in relation to production and represent approximately five months supply at the year end.
Since the autumn of 2004, the volume of bricks manufactured in the UK has exceeded demand partly reflecting the use of other materials particularly in large apartment blocks and a higher percentage of flats built as against traditional family homes. This may have now reached saturation point and demand is likely to be relatively stronger for family houses in the future. National price increases this year have been subdued in contrast to other building materials.
Over 90% of UK brick production is, for the first time, in the hands of three international manufacturers. Michelmersh, with its specialist focus, is the next largest, followed by a relatively small number of single works mainly serving local markets. As a result, the Group's position in the market has been significantly strengthened during the period.
The present overcapacity, combined with increasing input costs and reducing demand, is clearly unsustainable, but it is not clear how it will be resolved. The Board believes that Michelmersh is the only potential consolidator but we must be cautious in the present market place.
Despite the uncertainties in the current market place, sales volumes in the first five months of the current financial year are 10% ahead of the same period last year and the Board believes that the Group, with its improved cash position, asset base and strongly rising landfill rates, is well placed.
Eric Gadsden
Chairman
3 June 2008
Chief Executives' Review
As noted in the Chairman's Statement we are focusing on the three key areas of our business which all interrelate. Brick making creates void space for increasingly valuable inert landfill and in turn, wherever possible, we are promoting the long term restored land for development.
Clay Products
Over the past twelve months industry brick volumes have stabilised, although production has again remained above sales levels. To increase our sales against this background is a great achievement and in view of the further consolidation in the industry this has once again strengthened our unique position in the market place.
Sales and Products
Our sales have strengthened over the period particularly in the Repair, Maintenance and Improvement Market. We have experienced strong demand for all our specialist products, many of which serve local marketplaces. Sales volumes increased by some 17% while production increased by 7% to maintain suitable stock levels.
Last year we obtained some high profile work for our Hydrosmart System of permeable paviours. As anticipated, helped by the wet weather conditions last summer and planning pressure for sustainable drainage solutions, this has now translated into a high level of interest and enquiries for the product which we are following up.
The new wire cut and imperial ranges of bricks from Blockleys in particular, achieved good sales during the year as they became established in the market.
We have now successfully commissioned the new gas kiln at Dunton, which will give better yields and higher fuel efficiency. Whilst this caused some disruption to production at this works last autumn the benefits are now apparent and will serve us well in the future. This is now a major benefit against the current cost of gas oil.
We will continue to focus on projects that provide efficiency savings, but future spending will be at or below depreciation as we place strong emphasis on cash management at the present time.
During the year we obtained planning permission and completed the purchase of the eight acres of land adjoining our Michelmersh plant, thus ensuring clay supplies for this works for the foreseeable future.
Landfill
Our landfill operation, New Acres, performed strongly during the year with substantial increases in value per tonne. Turnover increased by 54.9% to £734,000 (2006: £474,000) and profit before tax by 179.4% to £352,000 (2006: £126,000) after adjusting for amortisation charges from the parent company.
In view of the significantly increasing landfill values and a long term shortage of void space we are reviewing options for the voids at our Charnwood and Dunton sites. Both these sites have substantial consented air space and we believe that, following an update of these licences, this will be an increasingly significant profit driver for the Group in the medium term. We are also actively looking at other opportunities to develop this area of the business.
Development Land
By the end of June 2008 we will have completed the physical restoration of 16 acres of land at Telford for residential development, which will be ready to be built on by the end of the year. We continue to work with Persimmon and the planning authority to finalise the detailed application for this phase, which is in the Local Development Framework, together with indicative proposals for the remaining 64 acres. Due to the need for further consultation we anticipate the application will now be made in mid July 2008.
The planning process continues to be challenging but we believe that land with appropriate consent is a substantial long term asset.
Assets
In accordance with our policy our property assets were revalued by Gerald Eve at the year end and the gross value of the Group's properties increased from the 2005 valuation by some £13.7 million to £ 48.9 million. However the Board has decided to make adjustments to these values, which included clay reserves now included within stock at 31 December 2007, as there will be costs in maximising the full potential of these over time. This has reduced the valuation to £43.7 million. It is our intention to have these assets revalued annually from now on.
Outlook
Our trading businesses continue to generate cash and we are confident we can make significant progress with our property assets. It is not yet clear how the recent industry consolidation and overcapacity issues will be resolved although there have now been a number of works closures and publicised shutdowns in the past few weeks.
Our market position, the past investments made, and management team, give us a strong defensive position in an uncertain world.
Martin Warner
Chief Executive
3 June 2008
Consolidated Income Statement
| 12 months | 12 months | |
| to 31 December 2007 | to 31 December 2006 | |
| £'000 | £'000 | |
| (As restated) | ||
| Revenue | 24,008 | 21,097 |
| Cost of sales | (18,401) | (15,662) |
| ________ | ________ | |
| Gross profit | 5,607 | 5,435 |
| Administrative expenses | (6,180) | (4,804) |
| Other income | 77 | 309 |
| Profit on disposal of investments | 2,557 | - |
| ________ | ________ | |
| Operating profit | 2,061 | 940 |
| Finance costs | (1,807) | (1,001) |
| ________ | ________ | |
| Profit/(loss) before taxation | 254 | (61) |
| Taxation | (425) | 15 |
| ________ | ________ | |
| Loss for the financial period | (171) | (46) |
| ________ | ________ | |
| Earnings per share (note 4) | ||
| Earnings per share | (0.44)p | (0.12)p |
| Diluted earnings per share | (0.42)p | (0.12)p |
| Statement of Recognised Income and Expense | 12 month to 31 December 2007 £'000 | 12 month to 31 December 2006 £'000 | |||||
| Gain on revaluation of property, plant and equipment | 7,977 | - | |||||
| Deferred tax on revaluation movement | (1,943) | 639 | |||||
| __________ | _______ | ||||||
| Net income recognised directly in equity | 6,034 | 639 | |||||
| Loss for the financial period | (171) | (46) | |||||
| __________ | _______ | ||||||
| Total recognised income and expense for the period | 5,863 | 593 | |||||
| ═══════ | ═════ |
Total recognised income and expense is attributable to the equity holders of the Parent Company.
Consolidated Balance Sheet
| As at | As at | |
| 31 December 2007 | 31 December 2006 | |
| £'000 | £'000 | |
| Assets | (As restated) | |
| Non-current assets | ||
| Intangible assets | 100 | 69 |
| Property, plant and equipment | 62,660 | 54,100 |
| ________ | ________ | |
| Total non-current assets | 62,760 | 54,169 |
| ________ | ________ | |
| Current assets | ||
| Inventories | 9,398 | 8,171 |
| Trade and other receivables | 4,245 | 3,603 |
| Cash and cash equivalents | 328 | 195 |
| ________ | ________ | |
| Total current assets | 13,971 | 11,969 |
| ________ | ________ | |
| Total assets | 76,731 | 66,138 |
| ________ | ________ | |
| Liabilities | ||
| Current liabilities | ||
| Trade and other payables | 4,872 | 2,629 |
| Interest bearing borrowings | 6,457 | 3,533 |
| ________ | ________ | |
| Total current liabilities | 11,329 | 6,162 |
| ________ | ________ | |
| Non-current liabilities | ||
| Deferred tax liabilities | 11,544 | 9,176 |
| Interest bearing borrowings | 9,286 | 14,416 |
| ________ | ________ | |
| 20,830 | 23,592 | |
| ________ | ________ | |
| Total liabilities | 32,159 | 29,754 |
| ________ | ________ | |
| Net assets | 44,572 | 36,384 |
| ________ | ________ | |
| Equity attributable to equity holders | ||
| Share capital | 8,073 | 7,604 |
| Share premium account | 5,671 | 3,432 |
| Reserves | 26,103 | 20,240 |
| Retained earnings | 4,725 | 5,108 |
| ________ | _________ | |
| Total equity | 44,572 | 36,384 |
| ________ | ________ |
Consolidated Cash Flow Statement
| 12 months to | 12 months to | |
| 31 December 2007 | 31 December 2006 | |
| £'000 | £'000 | |
| Cash flows from operating activities | (As restated) | |
| Profit/(loss) before taxation | 254 | (61) |
| Share based payment | 59 | 64 |
| Finance costs | 1,807 | 1,001 |
| Depreciation | 1,491 | 1,433 |
| Amortisation | 2 | 2 |
| Profit on sale of property, plant and equipment | (8) | - |
| Profit on sale of investment shares | (2,557) | - |
| ______ | _______ | |
| Operating profit before changes in | ||
| working capital | 1,048 | 2,439 |
| Increase in inventories | (205) | (801) |
| (Increase)/decrease in receivables | (642) | 623 |
| Increase/(decrease) in payables | 1,017 | (683) |
| _______ | _______ | |
| Net cash generated from operations | 1,218 | 1,578 |
| Interest paid | (1,200) | (999) |
| _______ | _______ | |
| Net cash generated from operating activities | (18) | 579 |
| _______ | _______ | |
| Cash flows from investing activities | ||
| Purchase of intangible assets | (33) | (2) |
| Purchase of property, plant and equipment | (1,381) | (1,501) |
| Proceeds on disposal of property, plant and equipment | 34 | - |
| Purchase of investment shares | (20,546) | - |
| Proceeds on disposal of investment shares | 25,581 | - |
| Interest paid on borrowings for investment purposes | (599) | - |
| _______ | _______ | |
| Net cash generated from/(used in) investing activities | 3,056 | (1,503) |
| Cash flows from financing activities | ||
| Issue of share capital | 230 | - |
| Issue of interest bearing borrowings | 20,247 | 14,000 |
| Repayment of interest bearing borrowings | (21,265) | (5,782) |
| Repayment of hire purchase and finance lease obligations | (29) | (430) |
| Dividends paid to shareholders | (442) | (418) |
| _______ | _______ | |
| Net cash (used in)/generated from financing activities | (1,259) | 7,370 |
| _______ | _______ | |
| Net increase in cash and cash | ||
| equivalents | 1,815 | 6,446 |
| Cash and cash equivalents at beginning of period | (2,307) | (8,753) |
| _______ | _______ | |
| Cash and cash equivalents at end of period | (492) | (2,307) |
| _______ | _______ |
Group Statement of Changes in Equity
| Share | Share | |||||
| Share | Premium | Option | Revaluation | Retained | Total | |
| Capital | Account | Reserve | Reserve | Earnings | Equity | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| As previously reported | ||||||
| at 1 January 2006 | 7,604 | 3,432 | 26 | 19,770 | 5,408 | 36,240 |
| Prior period adjustment from interim report | - | - | 46 | (73) | (68) | (95) |
| ______ | ______ | ______ | ______ | ______ | ______ | |
| At 1 January 2006 as | ||||||
| restated | 7,604 | 3,432 | 72 | 19,697 | 5,340 | 36,145 |
| Loss for the year | - | - | - | - | (46) | (46) |
| Equity dividends paid | - | - | - | - | (418) | (418) |
| Transfer to retained earnings | - | - | - | (232) | 232 | - |
| Deferred tax on revaluation | - | - | - | 639 | - | 639 |
| Share based payment | - | - | 64 | - | - | 64 |
| ______ | ______ | ______ | ______ | ______ | ______ | |
| As at 31 December 2006 | 7,604 | 3,432 | 136 | 20,104 | 5,108 | 36,384 |
| Loss for the year | - | - | - | - | (171) | (171) |
| Equity dividends paid | - | - | - | - | (442) | (442) |
| Revaluation in the year | - | - | - | 7,977 | - | 7,977 |
| Deferred tax on revaluation | - | - | - | (1,943) | - | (1,943) |
| Transfer to retained earnings | - | - | - | (230) | 230 | - |
| Share based payment | - | - | 59 | - | - | 59 |
| Shares issued in the year | 469 | 2,239 | - | - | - | 2,708 |
| ______ | ______ | ______ | ______ | ______ | ______ | |
| As at 31 December 2007 | 8,073 | 5,671 | 195 | 25,908 | 4,725 | 44,572 |
| ______ | ______ | ______ | ______ | ______ | ______ |
Adjustments have been reflected to the balances reported at 1 January 2006 in respect of the share option reserve, the revaluation reserve and retained earnings resulting in a reduction in total equity of £95,000 at 1 January 2006.
In addition, adjustments have also been made to these reserves in the year to 31 December 2006 resulting in a further reduction in total equity at 31 December 2006 of £70,000 making a total reduction of £165,000. This relates to a prior period adjustment in respect of depreciation of landfill void. All other adjustments relate to movements between reserves.
NOTES TO THE GROUP FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES
The Group statutory financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union and those parts of the Companies Act 1985 applicable to companies reporting under IFRS.
The rules for first time adoption of IFRS are set out in IFRS 1, First time adoption of International Financial Reporting Standards. IFRS 1 requires the use of the same accounting policies in the IFRS transition balance sheet and for all periods presented thereafter. The accounting policies must comply with all IFRS effective at the reporting date for the first financial reporting under IFRS, which is 31 December 2007. The transition date to IFRS was 1 January 2006.
IFRS 1 permitted the Group, on adopting IFRS for the first time, to take certain exemptions from the full requirements of IFRS in respect of matters in the period before the transition date of January 2006.
The Group took the exemption and elected not to restate any business combinations that occurred before 1 January 2006.
2. FINANCIAL INFORMATION
The financial information set out in this Preliminary Announcement does not constitute the Group's statutory financial statements for the years 2006 and 2007. The audit of the Group's statutory financial statements for the year ended 31 December 2007 is not yet complete. These financial statements will be finalised on the basis of the financial information presented by the Directors in this Preliminary Announcement and will be delivered to the Registrar of Companies following the Company's Annual General Meeting.
The financial information for the year ended 31 December 2006 has been derived from the Group's statutory financial statements for 2006, which were prepared under UK GAAP and have been delivered to the Registrar of Companies. The auditors have reported on the Group's statutory financial statements for the year ended 31 December 2006; their report was unqualified and did not contain a statement under Section 237(2) or (3) of the Companies Act 1985.
The Group's financial statements are presented in sterling and all values are rounded to the nearest thousand pounds (£000) except when otherwise indicated.
A detailed explanation of the impact of the transition from UK GAAP to IFRS was contained in the notes to the Group Interim Report.
3. DIVIDENDS PAID AND PROPOSED
| 12 months to | 12 months to | |
| 31 December 2007 | 31 December 2006 | |
| £'000 | £'000 | |
| Declared and paid during the year | ||
| Final dividend for the year ended | ||
| 31 December 2006: 0.011p (2005: 0.011p) | 442 | 418 |
| ________ | ________ |
4. EARNINGS PER SHARE
The calculation of earnings per share is based on the loss of £171,000 (2006: loss of £46,000) and 39,060,116 (2006: 38,017,865) weighted average number of ordinary shares.
Diluted
The diluted figure is based on the same figures as above but takes into account the weighted average unexercised share options in existence during the period. These amounted to 581,570 options under the Michelmersh Brick Holdings Plc Group share option scheme (2006 - 681,054) and 667,275 options under the Michelmersh Brick Holdings Plc SAYE scheme (2006 - 756,859).
5. PROPERTY, PLANT AND EQUIPMENT
| Freehold land & buildings | Site development | Motor vehicles | Plant & machinery | Equipment | Fixtures & fittings | Total | |
| COST OR VALUATION | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
| At 1 January 2006 | 35,150 | 80 | 115 | 31,346 | 751 | 206 | 67,648 |
| Additions | 53 | 155 | 18 | 1,372 | 110 | 36 | 1,744 |
| Transfers to inventories | (101) | - | - | - | - | - | (101) |
| ──── | ──── | ─── | ──── | ──── | ─── | ──── | |
| At 31 December 2006 | 35,102 | 235 | 133 | 32,718 | 861 | 242 | 69,291 |
| Additions | 1,722 | - | 7 | 1,343 | 34 | 16 | 3,122 |
| Disposals | - | - | - | (183) | (2) | - | (185) |
| Transfers | 354 | (1) | 31 | (387) | 3 | - | - |
| Revaluation | 7,563 | - | - | - | - | - | 7,563 |
| Transfers to inventories | (1,022) | - | - | - | - | - | (1,022) |
| ──── | ──── | ─── | ───── | ───── | ──── | ──── | |
| At 31 December 2007 | 43,719 | 234 | 171 | 33,491 | 896 | 258 | 78,769 |
| ════ | ════ | ═══ | ════ | ════ | ════ | ════ | |
| DEPRECIATION | |||||||
| At 1 January 2006 (as previously stated) | - | 33 | 115 | 12,793 | 546 | 176 | 13,663 |
| Prior period adjustment | 95 | - | - | - | - | - | 95 |
| ──── | ──── | ─── | ──── | ──── | ──── | ──── | |
| At 1 January 2006 (as restated) | 95 | 33 | 115 | 12,793 | 546 | 176 | 13,758 |
| Charge for the year | 152 | 3 | 4 | 1,209 | 57 | 8 | 1,433 |
| ──── | ──── | ─── | ──── | ──── | ──── | ──── | |
| At 31 December 2006 (as restated) | 247 | 36 | 119 | 14,002 | 603 | 184 | 15,191 |
| Charge for the year | 167 | 3 | 9 | 1,246 | 52 | 14 | 1,491 |
| Transfers | - | - | 22 | (22) | - | - | - |
| Disposals | - | - | - | (158) | (1) | - | (159) |
| Revaluation | (414) | - | - | - | - | - | (414) |
| ──── | ──── | ─── | ─── | ──── | ──── | ──── | |
| At 31 December 2007 | - | 39 | 150 | 15,068 | 654 | 198 | 16,109 |
| ════ | ════ | ═══ | ════ | ════ | ════ | ════ |
NET BOOK VALUE
| At 31 December 2007 | 43,719 | 195 | 21 | 18,423 | 242 | 60 | 62,660 |
| ════ | ════ | ═══ | ════ | ════ | ════ | ════ | |
| At 31 December 2006 (as restated) | 34,855 | 199 | 14 | 18,716 | 258 | 58 | 54,100 |
| ════ | ════ | ═══ | ════ | ════ | ════ | ════ |
Revaluation of fixed assets
The Group's freehold land and buildings were revalued by the Directors on 31 December 2007, based on a valuation carried out by Gerald Eve, Chartered Surveyors, on a depreciated replacement cost basis for brickwork properties, and an existing use value for land used for mineral extraction or waste disposal. Other property has been valued at open market value. These valuations incorporate certain assumptions in relation to the future use of the properties and the estimated useful economic life relating to clay extraction and landfill facilities. The Directors have updated these valuations at 31 December 2007 in respect of the land used for mineral extraction and waste disposal where appropriate to do so. The Group's freehold land and buildings were valued at £43,719,000, resulting in an increase in the revaluation reserve of £7,977,000. Deferred tax liabilities were increased by £1,943,000 and have been debited to the revaluation reserve.
In respect of the freehold property stated at a valuation, the comparable historical cost and depreciation values are as follows:
| 31 December 2007 | 31 December 2006 | |
| Historical cost: | £'000 | £'000 |
| At 1 January 2007 | 7,427 | 7,374 |
| Additions | 2,076 | 53 |
| Transfers to inventories | (339) | - |
| Transfer to historical cost depreciation | (29) | - |
| __________ | __________ | |
| At 31 December 2007 | 9,135 | 7,427 |
| ═════ | ═════ | |
| Historical cost depreciation | £'000 | £'000 |
| At 1 January 2007 | 43 | - |
| Charge per year | 9 | 43 |
| Transfer to historical cost | (29) | - |
| __________ | __________ | |
| At 31 December 2007 | 23 | 43 |
| ═════ | ═════ |
All other tangible assets are stated at historical cost.
6. SHARE CAPITAL
Authorised share capital:
| 31 December 2007 | 31 December 2006 | |
| £'000 | £'000 |
| 60,000,000 Ordinary shares of 20p each | 12,000 | 12,000 |
| _______ | _______ | |
| 12,000 | 12,000 | |
| ═════ | ═════ |
Allotted, called up and fully paid:
| 31 December 2007 | 31 December 2006 | |
| £'000 | £'000 |
| 40,363,301 Ordinary shares (2006: 38,017,865) | 8,073 | 7,604 |
| ______ | ______ | |
| 8,073 | 7,604 | |
| ════ | ════ |
On 3 July 2007 1,998,230 Ordinary 20p shares were issued at a price of 124p in exchange for 808,000 Ordinary shares in Baggeridge Brick Plc at an average price of 308p per share. £2,088,150 has been transferred to the Share Premium account in respect of this transaction.
On 4 and 31 October 2007 the company issued respectively 116,515 and 46,986 Ordinary shares of 20p each upon the exercise of share options in the Michelmersh Brick Holdings Plc Group share option scheme. The subscription price per share on these dates was 70p. £81,750 has been transferred to the Share Premium account in respect of these transactions.
The company issued the following Ordinary shares of 20p as part of the Michelmersh Brick Holdings Plc SAYE Scheme.
| Date | Number of shares exercises | Subscription price per share | |||
| 28 November 2007 | 152,591 | 57.25p | |||
| 6 December 2007 | 8,606 | 57.25p | |||
| 12 December 2007 | 13,240 | 57.25p | |||
| 18 December 2007 | 9,268 | 57.25p |
£68,430 has been transferred to the Share Premium account in respect of these transactions.
7. AUDITORS
Michelmersh announced on 18 April 2008 that publication of the Company's results was necessarily delayed from the scheduled publication date of 22 April 2008. This was because, during the course of the annual audit, BDO who were appointed as the Company's auditor on 25 February 2008, believed that their independence had been compromised and as a result advised the Company of its intention to resign as auditor. Nexia Smith & Williamson LLP, was then appointed to undertake and complete the 2007 audit.
Section 520 Companies Act 2006 requires that BDO's letter of resignation be circulated to the Company's members. The letter of resignation, together with a letter from the Company commenting further on the circumstances of BDO's resignation, have been sent to its shareholders. Copies of each of these documents are available on the Company's website www.michelmersh.com.