The Investment Column: Baggeridge

BAGGERIDGE BRICK yesterday delivered a creditable 10 per cent growth in profits. The year started with its own broker predicting a profit tumble, but the company was saved by the recovery in the housing market, which started in the spring. However, brick suppliers have not enjoyed the same boom as housebuilders, who have sat back and enjoyed profits growth on the back of house price inflation.

Volumes of housing starts in the year to the end of September were 179,500, down from 182,000 the previous year. And it is increased housing volume, not rising house prices, that help brick suppliers. In the last year, brick dispatches in the industry were down 2.5 per cent to 2.96bn. Brick prices rose slightly.

For the year ended 30 September, Baggeridge's pre-tax profits were pounds 5.8m, up from pounds 5.3m, on turnover of pounds 44.0m (pounds 39.4m).

The Government has recognised that a big increase is required in the number of houses built. The hold-up is land shortages, with development beset by planning delays and the protection of greenfield and greenbelt sites. Housebuilding will have to increase, which is good news for brick- makers, but it will take some time.

For the year to September 2000, Dresdner Kleinwort Benson, the house broker, is now forecasting pre-tax profit of pounds 6.3m or 10.7p per share. With the shares up 3p to 106.5p yesterday they trade on a forward multiple of 10. For one of the smaller companies in the sector, that looks well up with events. Hold.