Mears looks to second half with confidence

Mears Group, a social housing and care provider, posted a five per cent rise in revenue in the six months to the end of June, and said it was confident of delivering a strong performance in the second half. Year-on-year (y/y) revenue increased from £292.6m to £307.2m, helping to boost adjusted pre-tax profits by 30.2m to £14.3m. Diluted earnings per share were up 16% from 8.97p yo 10.42p. The Social Housing division reported 12% organic growth in its core maintenance revenues while its operating margin came in at 5.0% after expensing the costs of a record number of new contract mobilisations in the first half. Revenue in the Care division increased 8% from £51.7m to £56.1m, while the operating margin increased 8.1%. Looking forward, the order book remained stable at £2.7bn. The firm reported 99% visibility of consensus forecast revenue for 2012 and is approaching 85% for 2013. David Miles, Chief Executive of the firm, said: "The first half of 2012 has seen the most intense period of new contract mobilisation in our history with seven significant new contracts commencing in this period with an annual value of in excess of £50m. The quality of these mobilisations and the subsequent service delivery has exceeded our high expectations. "As anticipated, the large volume of new works has diluted the social housing operating margin in the short term as we expense the cost of this range of new work directly during the period and we will see the benefits of this significant growth as we progress through each contract. The pipeline is strong with our key target opportunities falling in the second half of the year with over £1.1bn of new contracts at PQQ or tender stage and we remain on target to tender £2.0bn of new contract opportunities in 2012." Net debt was reduced from £13.4m at December 2011 to £6.2m at the end of June. The dividend was increased 7% from 2.15p to 2.30p per share. The share price rose 1.82% to 265.50p by 12:30.NR Mears