Michelmersh Brick Holdings (LSE:MBH) — Final Results

0:01 Good afternoon, ladies and gentlemen, and welcome to the MICHELMERSH BRICK HOLDINGS PLC Final Results Investor Presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged and could be submitted at any time using the Q and A tab The company may not be in a position to answer every question received during the meeting itself. However, company will review all questions submitted today and publish responses where it's appropriate to do so. Will These be available via your Investor Meet company dashboard. Before we begin, we would like to submit the following poll. And if you would give that your kind attention, I'm sure the company would be most grateful. And I'd now like to hand over to Frank Hannah, CEO. Good afternoon, Frank.

0:43 Thank you, Mark. Welcome, everybody, to our twenty twenty one full year results presentation. I'm Frank Hanna, and I'm joined by Ryan Mahaney, our CFO. In terms of today's presentation, I'll first talk about our corporate financial highlights. Ryan will then unpack some of the numbers in detail, and then we'll move on to a snapshot of where the sector is currently at, and we'll follow that with our outlook, and we'll take some questions at the end. So first and foremost, moving on to slide three, let's quickly recap on the structure of our group as a whole. We make about a 125,000,000 premium centric BRICK products per annum. We've got a strong core market, which is made up of RMI, some housing, commercial work, urban regeneration, specification work with architects.

1:39 We've got three lifetime revenue sources, at our plants, and that is bricks, landfill, and investment land at the end. We've got a very strong robust distribution policy. We only go through distribution, and we're very much margin focused, not market share focused. We also have our industry leading BIM BRICK's brand. The table on the bottom left hand side tells you what each of the plants are making and their approximate outputs, and then this corresponds with their location on the right hand side on the slide deck.

2:18 So moving on. I'm delighted to report that 2021 was another strong year for the group. It was a tremendous team effort by all our employees with the strong adjusted performance surpassing both 2020 and our 2019 record year. Our revenue and gross profit of 59,500,000 and 24,200,000 was ahead of 2019 with growth of 11.210.5%. The adjusted EBITDA of 14,700,000 supports an EBITDA margin of 24.7, and this is in line with our medium term margin target. Ryan will expand on this in a minute, but strong operational cash strong operational cash generation of 15,800,000 delivers a cash conversion to an adjusted EBITDA of a 107.5.

3:11 Net cash of 7,700,000 at the full year, giving us balance sheet optionality. A final dividend of 2.5 p resulting in a full year dividend of 3.65 p, up 46% on 2020, demonstrates a commitment to our progressive dividend policy and also our positive outlook.

3:36 We focused on cost control. 90% of energy was hedged in 2022, and we've taken forward positions as far out as 2023 and into 2024. We currently have a strong, well balanced opening order book, for 2022, and this positive order intake momentum is continuing in the first quarter of this financial year.

4:01 So let's look at the financial highlights. And note within the boxes, you can see there is a comparative to 2020 underneath in gray. So turnover grew to 59,500,000, and gross margin was 40.7%. Our adjusted EBIT was 11,100,000, and our adjusted EBITDA, 14,700,000. Our profit before tax, 9,700,000, and our cash flow from operations, as of GBP 15,800,000. Basic EPS, 6.5 p and adjusted EPS, 9.33. And our NAV increased to GBP 89 p.

4:44 Moving on to the operational highlights. It was an excellent performance in 2021 with the results for the year ahead of our record 2019, as I said, and this was across all key adjusted financial metrics. Our focused management of production efficiency and cost base supported profit growth ahead of the 2019 levels. We successfully implemented hybrid working practices throughout the year to prioritize the safety of our operational teams, and we also believe that the positive end market fundamentals are expected to continue for new housing and our key RMI markets, and we'll expand on a little bit on this in a bit. The strong operational cash generation supported capital investment with the completion of a new road at the Telford Quarry to access long term clay mineral reserves.

5:38 And this was at our Blockley site underpinning the value of that site. Importantly, we published a comprehensive sustainability report and road map to achieving carbon neutrality. We have a new 20,000,000 medium term bank facility. This provides us with financing flexibility and capacity for further strategic investments and also to support our potential acquisition strategy as we progress through the year. And finally, the team are continuing to lead the industry to, in essence, think longer and to achieve recognition that bricks are designed for two hundred years and beyond with our new marketing campaign, and I'll expand on this a little more shortly.

6:25 Now what I'd like to do is hand over to Ryan, and Ryan can go through some of the numbers in more detail on the following slides. Thank you, Frank, and good afternoon, everybody. I'm very pleased to present the financial review to you today. I'd like to start as you can see in front of you with the income statement, which is compared to both 2019 and 2020. 2019 was a record year for the business. It was also the pre COVID year. And as Frank mentioned earlier, 2020 includes the impact of the four week manufacturing shutdown. So we feel that comparing 2021 results to 2019 is a fairer comparison. Our revenue over the period to 11.2%, and this has benefited from the consistent growth in order intake highlighting the strong demand for our product portfolio, which has also supported a strong and well balanced opening order book for the start of our 2022 financial year.

7:29 As a result of the strong revenue growth, as expected, our growth gross profit has increased over the year with gross profit ahead of 10 and a half percent, but with gross margin marginally dropping back by 20 basis points, reflecting the impact of the the impact of the input cost inflation we experienced across the second half.

7:51 Central costs may look like they've increased, but, actually, they've stayed broadly in line with both 2020 and 2019 at around about 22%. And this includes the additional cost of maintaining a COVID safe environment for our people as we, really embedded our health and safety protocols into our operational rhythm across all of our facilities. These costs were not then clearly included in 2019. Moving further down the income statement, our adjusted EBITDA and adjusted operating profit are both ahead by 8.17.7% respectively. And our ability to swiftly repay our borrowings, in both December 2020 and once again in September 2021, really highlights the benefits of this action through the reduced finance expenses you can see on the page.

8:41 Our adjusted basic earnings per share has increased by 10.9% with our adjusted effective tax rate of 21.5%, reflecting the blended tax rates in our operating locations. Importantly, this is after adjusting for the change in UK corporation tax rates expected in 2023, which has impacted our lower than expected basic EPS, which Frank mentioned earlier at 6.5 per share. If I may now turn to the balance sheet. As expected, the shape of our balance sheet has remained broadly unchanged compared to December 2020 year end position. This is clearly aside from the growth in our net cash position highlighted on the slide in the middle of the page. I'd like to return to our net cash in more detail slightly later.

9:28 It's important to highlight that we continue to focus our manufacturing and on manufacturing and delivering the highest quality BRICK products to our customers. And to achieve this, we prioritize the annual improvement and maintenance of well invested and efficient manufacturing facilities. We also continue to focus and benefit from a very efficient working capital cycle and the consistency of balance of 9,100,000 at the end of both 2021 and 2020, and this is despite the significant growth in the business over that period. You can also see that our deferred tax liability has increased from the year end, and this is as a direct result of the corporation tax change I discussed earlier. This change was announced in the 2021 budget and will increase the standard rate of UK corporation tax from 19 to 25% and is effective from the 04/01/2023.

10:23 This change has impacted the assessment of the theoretical rate we might expect to incur potential future tax charges on the sale of our assets, and as a result, has increased this liability. With this consistent balance sheet profile, our net assets and NAV per share have increased by 5,000,000, principally as a result of the growth in our net cash position over the year. As I said earlier, I'd now like to turn to our cash flow, and I'd like to spend some more time discussing the summary for the year in a bit more detail. We're very proud of our operational cash generation, and this has once again been very strong for the year at 107.7% of our adjusted EBITDA being converted into operating cash of 15,800,000 highlighting the benefits of the working capital efficiency I mentioned earlier.

11:15 And importantly, this is the third year in a row we have now been above 100%, which really reflects on the consistent cash generation of the business. The strength of our operational cash flow generation underpinned the net increase in our net cash position of $6,900,000 from December 2020 and resulted in a closing net cash of $7,700,000 This net cash position is made up of cash on deposits of 8,500,000, offset by small remaining bank borrowings of 800,000. On the side, you can see that we remain committed to investing our facilities with CapEx of 4,200,000 well ahead of the same time last year as we rightly reduced our commitments due to the uncertainty caused by COVID-nineteen.

12:03 The most significant investment has been focused on the completion of the new road at Telford on the site of our block lease plant.

12:10 The works which began at the end of twenty twenty have been completed over the second half, and this investment is fundamental to the group as the road diversion has facilitated the release of the remaining mineral reserves on the site to support the long term operations at the Block Leeds plant as well as releasing the land for alternative use. Within the balance is the cost of installing new dryers at Carlton, which should help improve our energy efficiency and unlock future capacity expansion at the site. And finally, this also includes the cost of the option agreement we exercised for mineral in land adjacent to the MICHELMERSH BRICKWORKS, securing further clay reserves for at least a further fifteen years of brick making on the site. As Frank said earlier, our strong cash position supports our progressive dividend policy, with a final dividend declared of 2.5p per share and with the interim dividend of 1.15p per share paid in July, providing a total of 3.65p per share for the full year, which is a 46% growth on 2020.

13:17 The benefits of our strong operational cash generation are already further highlighted on this slide, which shows the net cash and net debt cycle over the last ten years of the business set against the prevailing EBITDA multiple. This notably shows the efficient repayment profile underpinned by our operational cash generation following our last two significant acquisitions in 2017 of the Carlton brickwork and 2019 of our Florham brickwork in Belgium. Neither acquisition overly stretched our balance sheet. And subsequent to both investments, we were below our stated long term targets of maintaining the ratio of net debt to adjusted EBITDA below one and a half times. This strong balance sheet position supports our organic strategic initiatives and underpins our CapEx profile as we continue to prioritize well invested and efficient manufacturing facilities.

14:11 But this also supports our progressive dividend policy, which is important as we look to balance our program of investment alongside rewarding our shareholders through this annual cash return. We were pleased to put in place, as Frank said earlier, a new and enlarged £20,000,000 revolving credit facility during the year. This remained undrawn at the end of the year and to the period to date. Taken together with our net cash, this importantly provides us with flexibility and confidence to swiftly pursue acquisition opportunities that meet both our commercial and

14:43 financial criteria. Thank you very much for your attention, everybody. And with that, I'd like to hand back to Frank. Thank you, Ryan. Okay. Let's talk through and touch on some of the market fundamentals in the sector review. Many of you are familiar with some of the bullet points below, but it's worth revisiting them. The market fundamentals show continued strong demand for new housing, and continued government and opposition parties are committed to construction as a key foundation of the economy. It makes up a significant portion of our GDP.

15:24 There is very much post COVID nineteen housing demand with the ongoing chase for space and a focus on the importance of home. There's continued shortage of new housing from long term underbuilding, and we have this twenty year disconnect between housing formations and actual housing completions. Mortgage availability remains good, and whilst interest rates are rising, the outlook still historically is favorable. Supported government policies such as Help to Buy remain in place, and we have the government's homebuilding fund loans between 250,000 and 250,000,000 to cover development and infrastructure costs, for small to medium sized house builders.

16:09 The government commitment to increase house building to 300,000 units per annum by the mid twenty twenties is very positive. We have Help to Buy in place until 2023. There's renewed effort around publicly owned homes and renewed commitment to social housing schemes. And from our perspective, from what we can see so far, the end of the stamp duty holiday hasn't really weakened the demand. In terms of RMI, the aging UK housing stock is increasing our own RMI opportunity as a company. BRICK is very much favorable material of choice for the high rise cladding remedial work that needs to be done. And as I've said earlier, the historically low interest rates are supporting our RMI demand.

16:56 We're also seeing some stability in demand for infrastructure and communal housing projects. Let's take a look at The UK brick manufacturing landscape itself. The The current UK brick industry stocks remain at an all time low of below 300,000,000 units, reflecting strong customer demand across the sector as a whole. As Ryan alluded to earlier, in 2020, there was a clear impact of COVID nineteen on dispatchers and output from March 2020. But despite continued operational challenges, there was a balanced production dispatch performance as we went through 2021.

17:41 Dispatches continue to run marginally ahead of production output throughout the year, and the imported BRICK volumes continue to be in line with the historic norms of around 18% with about 19% imports coming in across 2021.

17:59 The next slide, if we look at this briefly, it highlights a number of bullet points that we just alluded to earlier. Firstly, the graph to the left shows the continued undersupply of new housing stock relative to government targets and the demand. And the right indicates the continued robust levels of RMI demand.

18:29 Moving on to current market structure. In terms of the market structure for manufacturing, not much changed through 2021. The UK BRICK manufacturing sector is still highly concentrated, with the key players being Ipstock, Forterra, Veenaberger, and the current UK capacity is about at one point nine one point nine five billion BRICs on full output. We are operating at an average selling price premium around 25% to the rest of the marketplace. We've put slide 17 in, because it highlights some interesting key stats relating to our sector.

19:19 84% of new homes in The UK were built using Claybrook in 2021. It is without doubt the material of choice for house builders and developers. And as I said earlier, about 1.9, 1,950,000,000 Clay Bricks were manufactured in The UK in 2021, with the shortfall being met by imports predominantly from Belgium and Holland. As I alluded to on one of my earlier slides, we've been lobbying for an extension to EPDs on on brickwork because we feel we need to highlight its hundred and fifty, two hundred year minimum life expectancy. That's a really, really important message in in today's sustainability environment.

20:09 And a key takeaway fact for you to look at is that on average, there's about 12,000 clay bricks used in the average three bedroom semi detached house, two story detached house semi detached house. And this equates to an invoice value of around £5,000 plus VAT. So when one looks at that in context with kitchens, bathrooms, carpets, windows, internal and external doors, it's actually a very, very low number for what is the suit structure that is gonna be there for the time and period of the house. So why BRICK, and why is it the material of choice? There's so many compelling reasons that BRICK has been used to shape, form, create our built environment for hundreds of years and and for many, many generations.

21:03 And here's a few reasons. I won't go through all of them, but I'd just like to pick out the salient points. Financially, highly competitive with a low lifetime cost, low cost, strong value, very low maintenance. It's financially underwritten and has a competitive whole life whole life cost. It has very strong sustainability credentials. There's an industry preference because it's proven time and time again.

21:31 If you look at, LABC or an HBC details, certainly in the housing sector, they're all predicated around cavity brick wall construction. It has incredible high performance and and is very, very forgiving at its point of use.

21:50 On the next slide and briefly from a financial perspective, this highlights how financially competitive Brickwork is compared to other external cladding materials. And that price per square meter is laid including water, water ties, etcetera. So finally, moving on to Outlook, and Outlook as an industry. As I said, there's there is continued UK housing dynamics of short supply to meet the current strong demand.

22:27 BRICK continues to be the facade material of choice. There is continued demand for residential development, and there's continued demand within our RMI marketplace and space. And the process is very capital intensive, and there are very many complex barriers to entry. To give you some color around this, you have to look at around a spend of about €8,000,000 per million bricks of output for a new factory. And one, if you have a site which has clay mineral that can be extracted, one has to take into account all the complexities around putting a new factory down, which is, you know, environmental impact assessment, environmental licenses, traffic surveys. We've got birds, bats, newts, all of the aspects that go with the complexities that go with planning in section one zero six agreements.

23:20 And then you are looking at a gestation period of about thirty six to forty eight months to get this new facility up and running and operational. So as I said earlier in one of the earlier slides, enormous, barriers to entry. For us as a group, MICHELMERSH, we have a positive outlook. Our order intake momentum is continuing into the first half of twenty twenty two,

23:50 and we will look to convert the, balanced 2022 opening order book, which is, as I said, covering some RMI, some housing specification work, our commercial sector work, from our loyal customers and distributor relationships. In collaboration with our customers, we'll monitor, portfolio pricing to ensure that we're in a position to offset any further margin pressures with relevant incremental increases. Very importantly, we've secured 90% of the group's energy requirements for 2022. And as I said, you know, we have further energy contracts going out as far as 2024, where we felt that the position was to derisk and take some of that affordable energy in particular months or parts of the year.

24:42 We have a continued strong customer momentum for a new expanded core range at our Florence, Belgium plant, and that's doing very well in both Belgium and UK. Balance sheet. We have a strong balance sheet, and this supports flexibility to explore new acquisition opportunities to complement our core business strategy. And I think it's very important, as Ryan spoke about earlier, to reward the shareholders that have been on the journey with us for a long time, and we are committed to progressive dividend policy. And this demonstrates the board's confidence in the cash generation and positive outlook of the business itself. But finally, given the current uncertain macroeconomic conditions, these quality fundamentals in our business provide resilience, underpin our outlook, and as a result, we feel we are well placed to continue our strategic progress in 2022 and beyond.

25:41 And what I'd like to do now is open up to taking some questions. That's great, Frank. Ryan, thank you very much indeed for updating investors this afternoon. Ladies and gentlemen, please do continue to submit your questions using the Q and A tab situated on the right hand corner of your screen. Just type in your questions and press send. But just while Frank and Ryan take a few moments to review the questions submitted already, I'd like to remind you that the recording of this presentation along with a copy of the slides and the published Q and A can be accessed via your investor dashboard. Frank, Ryan, as you can see, we've had a number of questions submitted by investors today. So firstly, thank you so much to everybody that's taken the time to submit those questions. And if I may, just start off with the first one. I know you've just retouched on the market more broadly, but John asks, for those investors who don't know you so well, can you please explain the following? And I'll break this down into three questions, I may. What is the actual size of the addressable market that you can target?

26:37 And, you know, who are your biggest competitors? Okay. So the size of the market is that's that's interesting. So total BRICK consumption in The UK is around 2.5, 2,600,000,000 BRICKs, and that's based around, housing completions running at around 205,210,000 units around that kind of quantum. You go back to the previous recession, which started 2009, we were consuming about 2.5, 2,680,000,000 bricks for around the same amount of housing output. The average number of completions was about a 194 to 198,000 units back then.

27:27 So the numbers in terms of consumption and demand, they correlate. What's different this time is that back then we had production capability of about 3,000,000,000 bricks from about 84 UK plants. The recession came. It was a bit of a war of attrition and survival of the fittest, and we're now down to about 49 plants in The UK. And the difference is now that we have constrained production capacity of about 1.9, 1,950,000,000 bricks with the rest being made up of imports. Now for us being premium centric, taking on the second part of your question, most of the other premium centric products come from Belgium and Holland. We as a company and I very much look at at The UK, Belgium, and Holland as one entity. So we compete with some of those products that are coming from Bina Burger, their brand, for example, Nellison and, Vandersanden, which come into The UK through distribution.

28:23 And we also compete with some of the higher quality plants that are, with our competitors in The UK. But predominantly, we have most of the the premium centric marketplace to ourselves. That's great. Thank you very much. Some color around that. Yes. And it does. And and and the other part of the question, which is kind of what is your current market share and how do you view your growth compared to the others in the market? Are you growing faster than perhaps some of the competitors? It's difficult to answer that because what is happening and what one sees over time is that as building and life start life cycle of of building buildings being extended.

29:09 People are becoming more discerning about their built environment and vernacular in the way that brickwork looks. And if you look and you take a snapshot over time, the market as a whole and architectural fashion taste is migrating to more to more premium centric products at the mid and upper levels. We do an awful lot of work with companies, you know, good quality companies such as the Berkeley Homes or Crest, Countryside, etcetera. They're sort of mid to upper tier housing right up to aspirational individual homes and also complex office blocks or, you know, com complex school projects and what have you. So there is quite a lot to go at for us in terms of growing our portfolio and growing our influence through the marketplace.

29:57 Where would we like to be in the forms of time? If you look, we had we had, we set ourselves some goals and parameters. We want to be over a pound a share. We want it to be over 100,000,000 market cap. We want it to be over a 100,000,000 bricks in output. You know, we're now one twenty five million bricks in output. Then the next tier for us would be, you know, to get the business up to around the 200,000,000 brick output production capability. But, again, it would be very much premium centric in our offering and looking at our existing core competence. So the strategy is very much premium centric. Don't really wanna do too much middle ground stuff. Or if we're not doing premium centric, highly efficient, good quality, low cost, high volume production facility.

30:44 That's great. Thank you very much indeed. Perhaps expanding slightly further on that. And the questioner asks, what is your total manufacturing capacity and what is your current utilization rate? We are about a 125,000,000 BRICK output. We run and always have done and always will do run on a 100% utilization. That's our financial model, and that's how we run the business. So we set our stall out at the beginning of the year to to hit the production targets and metrics that we need to achieve, and then we build our sales budget around that. This is very important because the efficiency and margin gain and profit comes from a strong output. And if you diminish or reduce your production capabilities and outputs at a particular plant, it has a a negative impact on your margin and and obviously revenue stream. So this that's something we try to avoid wherever possible.

31:44 That's very kind. And John goes on to say that with demand outstripping supply, are you and competitors only slowly increasing the supply to really maintain that pricing power? No. As I came back to come if I come back to my earlier point, it's extremely difficult to simply increase supply. You need to make sure you have the mineral reserves to be able to do that, and you're not gonna put down new production capability or capacity without having many decades in advance of mineral that you can that you can utilize to to make the bricks. And the whole process in itself is complex, expensive, and has many challenges. So there is opportunity and there's opportunity for us and wherever we can, we can improve our our capacity and output. But but it's not an easy thing to do and it's not easy to do overnight. It it takes time.

32:49 That's great. Thank you very much indeed. If I may turn to a question from Paul. Thank you, Paul. Paul asks, how do you plan to reduce c o two production from your current activities? A number of ways. What we're happy to share our sustainability roadmap with with everybody. It's on our website. So we have many initiatives. For example, we look at solar energy. We have our solar panels at, for example, our Florin plant whereby we we harvest energy for the sun. And then in the evenings when we're not utilizing that energy, we sell that back into the national grid. We're looking at an initiative to blend hydrogen and gas.

33:38 So we've got multiple things on the drawing board at the moment right down to very simplistic stuff such as electric forklifts within the fleet as an example. So anywhere we can make some incremental improvements in terms of reduction of energy consumption, we will try and do that, you know, simple things such as new inverters or motors, for example, can, you know, LED lighting. Just just a process analysis as you go through your production facility and look to make those incremental gains where you can. Now in some cases, they may be a gain of just one or 2%, but those one or two percents all add up. And at the same time, you know, Ryan and I have discussed with with our colleague, Peter, you know, where we can deploy capital and CapEx to mitigate our use of energy consumption. So we have some projects on the drawing board as well that are gonna improve that position.

34:40 Thank you, Frank. Of course, mean, supply chain has been a a question for a lot of companies that they've had to consider and address. And and Matthew asks, what are the impacts that you're seeing from issues around supply chain and how you're looking to mitigate it? It's slightly different for us because I think if you look at each of our plants, they're sat on their mineral reserve. So most of what we need to make bricks comes from our own sites. Where we've seen increases in cost is obviously energy as we've discussed and how we've dealt with that mitigated energy risk. Some haulage, we've seen increases in bought in materials, but I think, you know, that goes through a sort of a process of daily management to ensure that, you know, we remain competitive in that respect and we keep a real firm grasp on our sort of unit manufacturing costs.

35:33 That's great. Thank you very much indeed. If I may turn to William. William says a margin of 40.7% on sales is very healthy. Is it sustainable? And does MICHELMERSH keep an eye on the opposition plans for instance, Ipstock futures? Absolutely. Yes. Margin is very important to us. Ryan, do you wanna pick up on margin a little bit? And, also, we keep an eye on everything that sector is doing. We know everything that's going on. So, yes, it's a very small room. Ryan, do you wanna just touch on margin? Absolutely. Yeah. Thank you, Frank. Yeah. I I mean, the short answer is yes. The the gross margin, we we sort of say north of 40% is is really what we look to deliver.

36:23 And, yes, it is sustainable. All the points that Frank mentioned earlier around really, looking at our sort of pricing position, that sort of really premium centric focus with our portfolio. You know, it's it was on the first slide of the presentation. We are very much, margin focused, not market share focused. Yeah. Going back to previous question around sort of input costs, it is very much based around energy consumption, wages being the two, principal input costs together with ongoing sort of operational, maintenance expenditure. Whenever we set our pricing, which we try to do in strong collaboration with our customers, usually annually, sometimes semiannually, and that very much is in regard to looking to protect and offset what we see as input cost pressures.

37:21 So, yes, the answer is we do see north of 40% as a very sensible way to view our gross margins. That's great. Thanks, Ryan. Turning I I guess I should have asked this question a bit earlier, but I've just seen it from from John's comment. Are you looking at using graphene to reduce environmental footprint of your bricks? We try to avoid having conversations on the input materials in terms of what we put into BRICK and what have you at this point in time when we're looking at development and what have you. So Perfect. I'll pass on that for the moment. No problem at all. Turning to m and a, really. In regards to m and a, are you looking at bolt ons, or would you look at larger, I guess, more transformational opportunities?

38:07 Look at both, to be honest. If you look at our history, we've done very well with transformational deals such as cotton, which doubled our EBITDA and significantly improved our production output capability, and that was the last reasonably decent sized asset in The UK. And then we look at smaller deals such as Florham, which have complemented the the business really well and and work with our core competence and our and our core strategy. But we we look at an awful lot of things. Being honest with you, we do turn quite a few away. We're quite risk averse, but they have to fit with our core competence and our ability, and we have to know that we can make that work within the organization.

38:56 Now, yes, we would like to acquire more manufacturing, manufacturing, said brick centric production facilities and grow our output as I alluded to earlier, but at the same time, you know, we we do look at things which are in an associated space that we understand and and and fit with our customer base and our distribution. So, yes, we we look at a myriad of things. So we're not closed minded to potential slightly left field opportunities. That's great. Thank you very much indeed. Just a couple of questions around pricing. And I know we have kind of touched on it, but could you just give us, I guess, a view on your approach to pricing? And could you disclose what price increase you'll be putting through in July?

39:47 And then just one further to that is, you know, in terms of pricing for your key customers, are they negotiated annually or or typically throughout the year? We talk to our customer base throughout the year. And by customer base, we mean both our end users, architects but predominantly our volume house builders, and our distribution, which are our builders, merchants, and distributors. What we try and do is I want there to be a perception of value and a perception of quality and value for money when the end user looks back at the finished elevations of their brickwork and what they thought. And in terms of our pricing increases, we generally go once a year. However, we will move the prices of some products within a pricing channel at at any point within a year depending on demand and and some input costs. Now if we take this year as an example, we had a price increase on the January 1, which was nine and a half percent.

40:51 We spoke to our distribution and said, look, you know, there are some headwinds around voyage and some energy, and we are looking for a price increase at the midpoint of this year. And we do that in consultation with both distribution and end users because we don't want there to be any surprises. So we are having another nine and a half percent increase at the midpoint of this year, which will then be fixed to the end of twenty twenty two. And then we will review the 2023 pricing as we get into the the q three and four of this year. But we try and give a long term view and price position so that there aren't too many surprises. And it's important to do that to keep our customer base on-site because don't forget, many of them are in the middle of long phased sites or housing developments, and they need some forward foresight on pricing stability for the product as it's come to site. So we try not to to hit them with too many surprises. So it's very it's in essence, we're trying to do it very collaboratively if we like.

42:03 Thanks, Frank. A couple more, if I may. The first one around your your current sites. Can you give an average life of your current sites? And are there other plenty of other sites available in The UK, and and do you see competition for those increasing? There aren't many other sites in The UK. And as I've said, it's very complex to get a mineral minerals extraction license. So, no, there's not that many other potential new opportunities. Life cycle varies from site to site depending on a number of things. For example, you know, the more products you make, the quicker you deplete your mineral. But, yeah, we've got significantly five over 500 acres within the group, but we have significant mineral reserves at all our larger key sites.

42:53 Our MICHELMERSH plant is an example, we just signed an option agreement there for another fifteen years. As Brian said earlier, we put the road in at Telford that underpins the Blockley site, you know, that's giving an enormous amount of mineral reserves there. We've got many many years at some carbon and fresh wood Lane. So, yeah, they they are all within different stages in terms of life expectancy, but, know, as for example, we come to the end of a minerals application, we would start the process for the next phase of mineral applications. We try and make those as long as we possibly can, you know, ordinarily eighteen to twenty years and beyond. That's great. Thank you. And then maybe finally, if I could. Do you think the government's planning ambitions will significantly change the number of new homes built over The UK over the next decade?

43:49 Tough one, Matt, to be honest with you. I would like to think that we get to 300,000 new homes. Is it achievable? In reality, probably not, being candid. But to give you some context, I mean, if we increase from where we are now, we were seeing a number of factors at play here, and this is happening in some parts of Europe as well. Aging population, more single occupancy, you know, more housing formations. We're actually in The UK, anecdotally, we're probably selling more social housing into the private sector than we're building. So there's this wall of pressure around homes and the requirement of new homes. And this is obviously fueling the house prices that you see in the newspapers every day.

44:35 Do I think we can get to $2.50, $6,070,000? Unlikely. Will we be extremely busy at 200 plus? Yes. Absolutely. Are we still going to be pretty busy at, say, one eighty, one ninety new housing completions? Yes. We are as a sector. Because don't forget we've got that structure under supply, which is being underpinned by the products which are coming from the Benelux regions. That's great. Well, look, Frank, Ryan, thank you very much. And thank you to to all the investors that have taken time to submit in questions this afternoon. Frank, Ryan, I know investor feedback is important to you, and I will shortly redirect investors to provide you with their thoughts and expectations. But before doing so, Frank, I wondered if I may just ask you for a few closing comments. And then as I say, I'll redirect investors to provide you with their feedback.

45:27 No, I'd just like to say on behalf of Ranmar, thank you for your time. Thank you for listening, and we would look forward to updating you at the interims in September. Thank you. That's great, Frank. Ryan, thank you once again for your time this afternoon. Could I please ask investors not to close this session as we'll now automatically redirect you for the opportunity to provide your feedback in order that the management team can better understand your views and expectations. This will only take a few moments to complete, but I'm sure will be greatly valued by the company. On behalf of the management team of MICHELMERSH BRICK HOLDINGS PLC, we'd like to thank you for attending today's presentation, and may I wish you all a very pleasant afternoon.