Brickability Group Plc (LON:BRCK) delivered a solid first half financial performance as the construction materials distributor bounced back strongly from the coronavirus (COVID-19) lockdown along with the rest of housebuilding the sector.
Chairman John Richards told investors in the interim results statement: “The recovery that we have seen is V-shaped and continues to improve.”
While first-half revenues slid to £75.3mln from £97.9mln, the group’s gross margin increased by 1.5 percentage points giving underlying earnings (EBITDA) of £8mln and profit before tax of £5.4mln, down just £1.1mln on the year earlier.
Brickability said it was now in a position to reinstate guidance and said it expected to deliver adjusted EBITDA of at least £15mln for the current financial year.
“Looking forward, the market for our products continues to improve and the fundamentals for the housebuilding sector continue to be strong,” said chief executive Alan Simpson.
Drivers such as increased demand for houses (rather than flats), the stamp duty cut, Help to Buy and the Affordable Homes Programme should underpin the markets in which Brickability operates, he added.
“The demand for quality building materials will remain robust and our order books reflect this,” Simpson told investors.
The group’s cash balance was £13.8mln as of September 30, 2020, while investors will receive a 0.8678p a share dividend.
Brickability fulfils a pivotal, but largely unseen role in the building supplies market. It is the link between big brick companies and regional builders.
It is also has a growing heating, plumbing and joinery business and supplies and fits roofs.
Acquisitions are key as it expands its offering to builders and looks to infill geographically.
The integration of the latest additions to the Brickability stable is complete, while there is a strong pipeline of future opportunities, the company said.
“The group continues to pursue its strategy of bolt-on acquisitions alongside organic growth and the pipeline for such acquisitions remains strong,” added CEO Simpson.
“We are, however, exercising caution given market conditions and our criteria remain stringent.”
The company’s broker, Cenkos, said Brickability had traded through COVID-19 with “great resilience, giving credibility to the operating model and to management”.
However, the share price, steady at 49.2p Thursday and off around a third from its pre-pandemic high, doesn’t appear to reflect this.
“The underperformance of the stock since COVID-19 is an opportunity for investors, not a reason to fear that Brickability has gone ex-growth or become strategically impaired,” said Cenkos, which said its ‘fair value’ for the shares is 70p.
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