Final Results

RNS Number : 9085V

Michelmersh Brick Holdings PLC

04 June 2008

 

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.

 

END

 

 

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