Michelmersh Brick Holdings shares drop 5.7% after H1 profits fall on plant shutdowns and Belgian slump

Michelmersh Brick Holdings PLC (LON: MBH), the AIM-listed brick and prefabricated masonry specialist, saw its share price fall 5.74% to 92.00 GBX as of post-close trading on 2 September 2025. The decline came after the company posted a muted set of half-year results, marked by declining profits despite a marginal uptick in group revenue.

Although revenue for the six months ended 30 June 2025 rose by 1.1% to £35.8 million, group profit before tax tumbled 29.3% year-on-year to £2.9 million. Earnings per share fell in tandem to 2.47p from 3.37p, as the Group’s profitability was squeezed by a combination of capital-related production downtime at its Carlton facility and further deterioration in the Belgian housing market.

Investor sentiment appeared negatively skewed by the wider margin compression, with operating profit falling 26.8% and adjusted EBITDA sliding 18.1% to £5.9 million. While the UK market provided a relative cushion through a 3% rise in despatches, investors were clearly pricing in the drag from one-off shutdowns and persistent demand-side softness in Europe.

How did capex shutdowns and weak European conditions impact Michelmersh’s performance in H1?

The largest impact to Michelmersh’s H1 profitability stemmed from a planned capital expenditure program, which included a two-week extended shutdown at the Carlton facility in January 2025. The closure, which resulted in a three-million-unit shortfall, was aimed at completing a long-term upgrade initiative. However, the timing of the disruption—combined with delays in commissioning—was cited as the most significant drag on H1 earnings.

Further complicating the Group’s regional diversification strategy was the underperformance of its Belgian operation, Floren. Due to a 20% decline in Belgian building permits—leading to a cumulative 42% drop in housing activity since 2022—revenues and despatches from the Floren site declined approximately 23%. Michelmersh has now suspended production at Floren for Q3 2025 and plans to resume operations in Q4. The company said it had front-loaded inventory in anticipation of the shutdown to minimize disruption.

Together, these events compressed gross margins from 36.2% to 33.6% year-on-year and reduced adjusted operating profit by nearly a quarter to £4.0 million.

What do Michelmersh’s earnings metrics reveal about current sector trends and operational resilience?

Michelmersh’s performance mirrored many of the macro headwinds confronting the UK and European construction sectors. Despatch volumes across the broader UK brick market remain around 25% below their 2022 peak, dragged down by weak planning approvals and continued delays in major residential developments—especially in London and the South East.

Despite these trends, Michelmersh highlighted that its own order intake is running ahead of manufacturing volumes, reflecting the Group’s strong position in premium brick categories and the diversity of its end-market demand across housing, commercial, and RMI sectors. The Group maintained stable average selling prices, even amid a highly competitive pricing environment, which management attributed to deep customer relationships and brand positioning.

From a financial operations standpoint, Michelmersh delivered £3.2 million in cash from operations in H1, a sharp improvement from £0.9 million in the same period last year. However, aggressive front-loaded capex of £3.8 million, coupled with £1.5 million in dividend payouts and £0.3 million spent on share buybacks, pulled net cash down to £1.5 million from £4.1 million in June 2024.

Operating cash conversion was 54.2% of adjusted EBITDA, better than last year’s 12.5%, but still below the company’s historical first-half rhythm of 80% or more.

What guidance has management given for the full year, and what’s expected in H2?

Management reiterated its guidance that full-year FY25 results are expected to be broadly in line with FY24, though a recovery in the second half is anticipated. A normalised manufacturing cadence is now in place following the Carlton commissioning period, and the company expects to avoid any further plant-related disruptions for the remainder of the year.

However, the timing of broader construction recovery remains uncertain. The company noted that housing activity in Belgium has fallen 40% below long-term norms, and the UK construction sector continues to grapple with suppressed demand, regulatory drag from the Building Safety Act, and higher-for-longer interest rates.

Nonetheless, the company’s capital allocation strategy remains balanced. It plans to continue investing in sustainability-linked operational upgrades while maintaining its dividend and buyback programmes. A newly secured £20 million borrowing facility, with a term to 2028, provides liquidity headroom to support this dual-track strategy.

In that context, the declaration of a 1.60p interim dividend—unchanged from the prior year—signaled confidence in the Group’s cash position and forward order visibility.

What’s changed in Michelmersh’s leadership, and how might it affect strategy execution?

The half-year also marked a key leadership transition, with long-serving CEO Peter Sharp stepping down to become an industry adviser to the Board. Sharp, who joined in 2016, oversaw Michelmersh’s expansion from 70 million to over 120 million bricks per year. His replacement, Ryan Mahoney, now takes over as CEO, supported by newly appointed CFO Rachel Warren, who joins from Wincanton.

Warren brings experience in financial transformation and operational integration, particularly from her prior roles at Aer Lingus and British Airways within the IAG Group. Her addition to the leadership team reflects Michelmersh’s growing focus on capital discipline, operational efficiency, and sustainability-linked investments.

With these appointments, the Group believes it has the right balance of strategic and operational capability to deliver on its medium-term goals—particularly as it navigates a sluggish but structurally sound construction market.

What are the investment takeaways from Michelmersh Brick Holdings’ H1 2025 results?

Michelmersh Brick Holdings finds itself in the crosswinds of cyclical headwinds and structural resilience. While the share price correction to 92.00 GBX—down from an earlier high of 97.60 GBX—reflects near-term investor caution, the longer-term thesis remains intact for shareholders with patience.

The group’s premium positioning in UK and Benelux markets, forward order coverage, and ability to defend pricing through customer collaboration give it a cushion that many peers in the building materials sector lack. Its well-invested manufacturing base, strategic inventory planning, and new debt facility provide further flexibility to absorb volatility and capitalise on eventual sector recovery.

The real unknowns lie in macro-level inflections: interest rate cuts, housing stimulus, and planning reform. Until those break the current demand inertia, investors may continue to price in flat earnings—even if fundamentals suggest upside in 2026 and beyond.

With dividend support, improving operational cadence, and a high-quality asset base, Michelmersh Brick remains one of the few mid-cap construction plays that can wait out the downturn without blinking.