Mears Regulatory News (MER)

22 Jan 2009 15:44

Immediate Release: Thursday 22nd January 2009

Mears Group PLC

("Mears", "the Company" or "the Group")

Social Housing Division

Acquisition of 3C Asset Management Limited

(formerly Erinaceous Property Management Limited) ("3C")

Summary of Acquisition

3C operates social housing maintenance contracts with 16 customers predominantly in the South of England and it is anticipated that the acquisition will contribute additional social housing turnover of in excess of £20 million in 2009.

Mears is expected to generate significant cost and efficiency savings in addition to realising an improvement in working capital.

The principal benefits of the acquisition are anticipated to impact in 2010 and beyond and it is expected to be earnings enhancing for the year ending 31 December 2009 before restructuring costs.*

Mears is acquiring 3C for £1.0 million in goodwill and an amount equal to net assets on completion, anticipated to be around £5.0 million. Additional deferred consideration of up to a maximum of £6.50 million subject to performance criteria. Consideration being satisfied from the Company's existing debt facilities.

Mears is pleased to announce that it has acquired the entire share capital of 3C from Caley Ltd ("Caley"), whose shareholders were the lending banks to Erinaceous Group PLC, operating maintenance contracts with 16 customers predominantly in the South of England. 

The initial consideration for 3C is £1.0 million for goodwill together with a pound-for-pound payment for 3C's net assets. The valuation of net assets is subject to a post completion review and is anticipated to be around £5.0 million.  An additional deferred consideration is payable up to a maximum of £6.50 million, subject to the achievement of performance criteria linked to contract retention and profitability over the 24 month period to 31 December 2010. The consideration is being satisfied from the Company's existing debt facilities.

For the year ended 31 December 2007, the last available audited accounts for 3C, the business generated revenues of £40.7 million and a loss before tax of £6.3 million with gross assets of £21.1 million. Since then, the business has gone through a significant restructuring under its current owners Caley, whereby a number of loss making contracts have been exited and certain other non-core lines of business have been terminated through this process.

It is anticipated that the acquisition will contribute additional social housing turnover of in excess of £20.0 million in 2009. Mears is expected to generate significant cost and efficiency savings in addition to realising an improvement in working capital. The Company will focus on delivering quality service and maximising customer satisfaction which is typically key to enhancing profitability and ensuring contract longevity. The principal benefits of the acquisition are anticipated to impact in 2010 and beyond and it is expected to be earnings enhancing for the year ending 31 December 2009 before restructuring costs.*

Commenting, Bob Holt, Chief Executive of Mears, said:

"The acquisition of the 3C business will fit comfortably into our social housing services division and broadens its footprint in southern England. I am delighted to welcome a further 600 employees into the Group's social housing services division which is one of the growth engines of the Company alongside our domiciliary care division. We continue to seek businesses with the potential to meet the strategic objectives of the Group." 

* This statement should not be taken to mean that the earnings per share of Mears will necessarily match or exceed the historical reported earnings per share of Mears and no forecast is intended or implied.

About Mears http://www.mearsgroup.co.uk

Mears is a leading social housing repairs and maintenance service provider to Local Authorities and Registered Social Housing Landlords in the UK and has a growing presence in the domiciliary care market, providing personal care services to people in their own homes delivered as part of outsourcing arrangements with Local Authorities. 

Mears employs 7,500 people and provides maintenance and repairs services to 500,000 homes nationwide. Mears also provides over 85,000 hours of domiciliary care each week to over 13,000 people per year.