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Final Results

21 Mar 2017 07:00

RNS Number : 0112A
Mears Group PLC
21 March 2017
 

 

 

For Immediate Release

21 March 2017

 

Mears Group PLC

('Mears' or the 'Group' or the 'Company')

 

Final Results

For the year to 31 December 2016

 

Mears Group PLC, the provider of services to the Housing and Care sectors in the UK, is pleased to announce its financial results for the year ended 31 December 2016 reflecting excellent progress in positioning both our core divisions for the future.

 

Financial Highlights

 

2016

2015

Change

Group revenue

£940.1m

£881.1m

+7%

Housing revenue

£787.5m

£735.1m

+7%

Care revenue

£152.6m

£146.0m

+5%

Profit for the year before tax*

£40.1m

£36.8m

+9%

Profit for the year before tax from continuing activities

£29.4m

£25.9m

+13%

Diluted EPS*

23.41p

20.10p

+16%

Normalised diluted EPS**

30.36p

27.94p

+9%

Dividend per share

11.70p

11.00p

+6%

 

* Continuing activities.

** Continuing activities, stated before amortisation of acquisition intangibles. The normalised diluted EPS amount is further adjusted to reflect a full tax charge.

 

· Group revenue of £940.1m (2015: £881.1m), reflecting strong organic growth in Housing following a record year for new contract bidding in 2015.

· Housing revenue of £787.5m (2015: £735.1m), reflecting strong organic growth underpinned by the growth in Housing Management.

· Housing operating margin of 5.6% (2015: 5.8%) reflects some dilution from the record number of new contract mobilisations.

· Service quality remains our key differentiator; the proportion of customers rating our service as 'excellent' was maintained at the record level of 91% (2015: 91%).

· Care revenue increased by 5% to £152.6m (2015: £146.0m), reflecting the full-year impact of the acquisition of Care at Home from Care UK.

· Rationalisation of our Care business - closure of circa 20% of Care branches and redirection of activities towards maintaining a portfolio of good quality contracts that can provide clear and sustainable margins with more sophisticated clients.

· Care operating results reflect the cost of care rationalisation. Excellent progress made in securing charge rate increases following the introduction of the National Living Wage.

· EBITDA cash conversion of 70% (2015: 99%) is below our historic norm. Average net debt of £85m (2015: £68m) and net debt at 31 December 2016 of £12.4m (2015: net cash of £0.8m), reflecting the working capital expansion required to fund organic growth, a changing sales mix and an outflow of £10m relating to deferred consideration payable in respect of the acquisition of Omega.

· Total dividend increased by 6% to 11.70p per share (2015: 11.00p), reflecting the Board's confidence in the underlying performance of the Group and the future.

· New contract wins of circa £500 million (2015: £1 billion); Housing awards of over £250m with a conversion rate of 39% (2015: £900m and 49%); and Care awards of over £200m with a conversion rate of 74% (2015: £80m and 63%).

· Order book at £3.1 billion (2015: £3.5 billion) and a solid pipeline of new opportunities.

· Visibility of 94% of consensus forecast revenue for 2017 and in excess of 82% for 2018 (2015: 96% and 82% respectively).

 

 

Commenting, David Miles, Chief Executive of Mears, said:

 

"I am pleased with our progress in 2016, particularly with the advancement made by our Housing division. We have positioned ourselves to provide a broader service offering in housing to a market where we are seeing an increasing blurring of the boundaries between social, affordable and private rented housing. We are well placed to benefit from a healthy and wider pipeline of opportunities.

 

"We firmly believe in our long-term Care strategy and that Mears is best placed to benefit from the inevitable market evolution. The reduction in revenues, following our exit from around 20% of our existing contracts, has allowed the business to focus on operational quality and switch focus to those strategically important clients that we believe have the potential to develop into partnerships and where we are able to deliver a high quality service at sustainable margins.

 

"Continued funding issues in the care market will create a catalyst for change. Whilst we do not see strong prospects for immediate fundamental change, we are clear in our view that, increasingly, commissioners will have to look to rebalance their contract estate, focusing on working with fewer, better run, service delivery partners. Our market-leading approach to service quality and innovation puts us in a strong position to meet this and, as the care market evolves, we expect to benefit disproportionately.

 

"Our dedication to providing our clients with first class service and value remains undiminished and is key to how we manage the business."

 

A presentation for analysts will be held at 9.30am today at the offices of Buchanan, 107 Cheapside, London EC2V 6DN.

 

For further information, contact:

 

Mears Group PLC

David Miles, Chief Executive

Tel: +44(0)7778 220 185

Andrew Smith, Finance Director

Tel: +44(0)7712 866 461

Alan Long, Executive Director

Tel: +44(0)7979 966 453

 

 

www.mearsgroup.co.uk

 

 

Buchanan

 

Richard Darby/Sophie Cowles Tel: +44(0)20 7466 5000

www.buchanan.uk.com

 

About Mears

 

Mears today employs over 15,000 people, providing services in every region of the UK. In partnership with our Housing clients, we maintain, repair and upgrade the homes of hundreds of thousands of people in communities from remote rural villages to large inner city estates. Mears has extended its activities to provide broader housing solutions to solve the challenge posed by the lack of affordable housing. Our Care teams provide support to around 20,000 people a year, enabling older and disabled people to continue living in their own homes.

 

We focus on long-term outcomes for people rather than short-term solutions, and invest in innovations that make a positive impact on people's quality of life and on their communities' social, economic and environmental wellbeing.

 

 

 

Chairman's statement

 

I am delighted to report a year of solid progress, particularly within our Housing division, where we have continued to extend our services from our traditional maintenance base to a broader affordable housing offering. The year was the busiest on record for new contract mobilisations, with nine new Housing contracts successfully mobilised.

 

A particular highlight for the year was Mears' success in securing and mobilising a new partnership with Milton Keynes Council, which represents one of the single largest contracts ever awarded to Mears. The contract initially saw the commencement of repairs and maintenance services to nearly 11,500 homes. The scope of works quickly expanded, with Mears engaged to develop 80 new homes. In addition, a number of temporary accommodation solutions are being developed through the joint venture partnership. We anticipate seeing further new client opportunities, similar to Milton Keynes, which bring together all elements of our Housing service offering.

 

Our Housing Management business continues to deliver strong growth. Since Mears extended its services to Housing Management, accelerated by the acquisition of Omega in 2014, the Group has successfully grown the business from around 2,000 homes under full management to a figure in excess of 9,000. This remains an exciting area for us given the urgency for our clients to find solutions to address the homelessness issue, and the pipeline remains buoyant. We are bringing a number of new innovative service models to this area which I look forward to reporting on in the future.

 

We firmly believe in our long-term Care strategy and that Mears is best placed to benefit from the inevitable market evolution. During the year we took the decision to exit from around 20% of our existing contracts where the pricing, longevity and certainty of spend did not allow us to deliver a high quality service at sustainable margins.

 

I am pleased to report a solid financial performance for the year to 31 December 2016. Group revenue amounted to £940.1m (2015: £881.1m), with this organic growth being driven by our Housing business. Group profit margins edged upwards to 4.26% (2015: 4.17%) with profit before tax and before acquired intangible amortisation increasing by 9% to £40.1m (2015: £36.8m). Normalised diluted earnings mirrored the increase in operating profits, increasing by 9% to 30.36p (2015: 27.94p). Our performance by operating division is discussed in greater detail in the Review of Operations.

 

The order book sits at £3.1 billion, edging back from the record high of £3.5 billion reported at the end of 2015. Importantly, revenue visibility for 2017 at the turn of the year stood at 93%, which is just below our key performance target of 95%. Revenue visibility for 2017 has subsequently increased to 94%. Revenue visibility for 2018 is 82%, in line with our expectations.

 

Cash generated from continuing operations as a proportion of EBITDA was 70% (2015: 99%) and there was net debt at the year end of £12.4m (2015: net funds of £0.8m). Average daily net debt for the year increased to £85.0m (2015: £68.0m) reflecting the working capital expansion required to fund the strong organic growth this year together with the £10m of deferred consideration payable in respect of the acquisition of Omega. We have a robust cash management culture and, whilst I have no concerns in respect of falling short of our cash target in 2016, we fully understand the importance placed by our investors on this metric.

 

Dividend

 

The Board remains confident in the future opportunities in our growth markets and consequently it expects to continue following a progressive dividend policy. The Board has recommended a final dividend of 8.40p per share which, when combined with the interim dividend, gives a total dividend for the year of 11.70p (2015: 11.00p), a 6% increase, reflecting the Board's confidence in the underlying performance of the Group. The dividend is payable, subject to shareholder approval, on 6 July 2017 to shareholders on the register on 16 June 2017. The Board regularly reviews the Group's dividend policy to maximise returns to shareholders whilst maintaining a prudent capital structure and retaining the ability to invest for growth.

 

Corporate governance and risk management

 

The Board continues to set itself high standards of corporate governance. Our Corporate Governance Report issued within our Annual Report details how we approach governance and the areas of focus for the Board in 2016 and into the future. In line with good practice, we have reviewed and updated the Group's risk register. The Senior Management Team plays a central role in reviewing and challenging the Group's risks. The Group risk team presented risk management training modules to all levels of management via the Group development programme, to reinforce our strong risk management ethos.

 

During 2016 the Group has continued to enhance its risk and control environment. A number of new assurance provider functions have been created, including an IT security governance team to provide extra focus on the increasing challenges of cyber-security.

 

 

Board evaluation and effectiveness

 

Performance evaluation of the Board, its Committees and individual Directors takes place on an annual basis. The Directors were asked for their views on a broad range of areas including Group strategy, independence, experience and effectiveness and the interaction between Board members. It is vital that as a Board we have the right mix of skills, experience and diversity, ensuring that Board members have sufficient knowledge of the Company whilst maintaining their independence and objectivity. I am fortunate as Chairman to be able to call upon a Board with a broad range of expertise and specialist knowledge.

 

During the year, a number of our Non-Executive Directors reached nine years' service on the Board, and as such are not offering themselves for re-election. I would like to thank David Hosein and Mike Rogers for their significant contribution to the Group.

 

It was also with deep regret that we announced the passing of Rory Macnamara, who had been a Director since June 2010 and chaired our Nomination Committee. Rory will be greatly missed by the Board for his strong technical contribution, and as a trusted colleague.

 

UK exit from the European Union

 

While uncertainty is never positive for business, Mears does not envisage any significant negative impact from an EU exit. It was disappointing that the Government's domestic policy agenda took a back seat through much of 2016 as the referendum took centre stage. It is pleasing now that since the turn of the year, significant momentum is building in respect of both Housing and Care policy.

 

Social value

 

At the heart of Mears lies a strong sense of responsibility towards improving people's lives. We aim to lead the way with social value in the markets where we operate, delivering lasting and meaningful outcomes. During the year, we conducted a review of our social value strategy, identifying our key priorities to ensure that we effectively engage with communities and deliver social value on the ground throughout the business, with an effective measurement of the social impact that is created.

 

We continued to secure Social Mobility Champion status from the Department for Business, Energy & Industrial Strategy. Social mobility is about creating opportunities for young people from disadvantaged backgrounds. At Mears, we aim to make sure jobs and opportunities are open to everyone.

 

Our people

 

I commend our employees for their commitment and energy throughout another significant period for the Group and I continue to be impressed by their quality, professionalism and loyalty. Mears has a diverse workforce of circa 15,000 staff including 400 apprentices; the vast majority of our employees live in the areas in which they work.

 

 

Review of operations

 

Housing

The Board is very pleased with the progress made by our Housing division, where we have positioned ourselves to provide a broader service offering to a market where we are seeing an increasing blurring of the boundaries around social, affordable and private rented housing. Whilst we have increased the depth and breadth of our capabilities, we place particular emphasis upon ensuring that our wide spectrum of core skills is delivered from the individual operating unit, which is important given the increasingly complex housing challenges being faced by our clients.

 

The Housing business has continued to deliver excellent financial performance with revenues of £787.5m (2015: £735.1m), an increase of 7% reflecting a particularly busy period of new contract mobilisations. Our operating margin of 5.6% (2015: 5.8%) reflects some dilution given this high number of new contract mobilisations. Typically, the Group anticipates a lower margin from a new contract during its mobilisation phase, being a time when the primary focus is in investing resources to establish excellent customer service. Having reported an operating margin of below 5.0% in the first half year, it is pleasing that operating margins normalised during the second half of the year.

 

The Housing division has secured new contracts of over £250m, with a contract win rate on competitively tendered works of 39% (by value) (2015: £900m and 49%). Following a significant period of new contract awards in 2015, in the past year we have focused our attention upon existing contract renewals, notably Sedgefield and Manchester, both of which I am pleased to confirm have chosen to continue their existing relationship with Mears. We were also successful in extending our relationship with Gateshead, although the maintenance will now follow an insourcing solution.

 

Whilst we focus upon a single Housing division, the following provides a breakdown of the revenue streams:

 

2016

2015

£m

£m

Maintenance

602.0

589.0

Regeneration

86.0

98.4

Housing Management

99.5

47.7

Total Housing revenues

787.5

735.1

 

Maintenance

 

The Housing division saw Maintenance revenues increase to £602.0m (2015: £589.0m). Organic growth of 2% underplays the level of activity in this area. Whilst our historic record of contract renewals is strong, we were disappointed to report, in early 2016, the loss of our flagship contract with Birmingham City Council following a competitive retender, a contract with annual revenues of some £28m. However, it was pleasing to report overall growth in 2016 despite the loss of such a significant contract. The majority of new contract awards commenced in April 2016 and as such only nine months' trading is reflected in the 2016 trading numbers. Notable contract activities include:

 

· Mears forming a new joint venture with Milton Keynes Council called YourMK, focusing upon the regeneration of key areas in Milton Keynes. The contract, which mobilised in April 2016, initially delivered repairs and maintenance services to nearly 11,500 homes but has since enjoyed a significant extension to the scope of works. This contract is valued at £250m.

· Mears' success in resecuring its Sedgefield contract, delivering responsive and planned maintenance to approximately 8,500 homes, which is valued at £110m over the ten-year contract term. This is a contract renewal, with the original contract having been awarded in 2008.

· Mears being re-awarded with a multi-service contract with Manchester City Council on its own behalf and on behalf of Northwards Housing. The contract is for day-to-day repairs and maintenance including void property and general building works to Northwards Housing managed stock and leasehold properties and to Manchester City Council managed hostels, shared houses and residential dwellings. The contract is valued at £31m over its initial four-year term with potential to increase to £78m, subject to extension, over its full ten-year term.

 

Regeneration

 

The Housing division saw capital work revenues reduce to £86.0m (2015: £98.4m). Whilst the level of spend on one-off refurbishment projects has reduced, we are seeing a high number of new development opportunities with existing customers. During the last twelve months, Mears has broadened its service capability to include the provision of new build services through our supply-chain partnerships, primarily targeting our existing Housing clients. Mears is not a property developer or general builder; rather, we will use our entire portfolio of services to provide a more integrated solution which enhances our focus on managing assets for the benefit of owners and client public sector bodies. We see this as a growth area for our Housing division; however, during this transitional period, the new development opportunities have not generated sufficient revenues to replace the reduction of refurbishment works. Notable contracts secured during the period include the following:

 

· Further to the long-term maintenance works that we are delivering for our Welwyn and Hatfield Council client, we have been engaged to develop 29 affordable rented homes on a brownfield site. The works are valued at £5.6m and the contract is due to complete at the end of 2017. Mears will take over the long-term maintenance of these new homes, giving a seamless solution to the housing requirements of Welwyn and Hatfield Council.

· Mears' success in securing the joint venture with Milton Keynes Council, which saw the commencement of repairs and maintenance services in April 2016, has already seen the scope of works expanding. Mears has been engaged to develop 80 new homes spread across seven infill sites around the city. These homes will be for affordable rent, once finished, with a contract value of approximately £11m. Site work commenced during the first quarter of 2017 and will complete in early 2018.

 

Housing Management

 

The Housing division saw Housing Management revenues more than double to £99.5m (2015: £47.7m). This business stream is seeing significant growth opportunities with an annual revenue run rate now at around £120m. Mears has quickly become the leading provider of housing management services to the public sector, delivering a range of innovative and unique solutions. The innovative nature of these propositions has meant that much of the work has been secured without the requirement for an extended, competitive tender process. We expect this to be a continuing trend.

 

· Mears mobilised a Key Worker Housing contract providing a full housing management service throughout the UK. This includes sourcing properties, managing the application and allocation process as well as the subsequent day-to-day administration. The contract, which fully mobilised in April 2016, is valued at over £160m over the initial three-year term.

· Mears has been engaged by the London Borough of Bromley ('Bromley') to arrange the purchase and refurbishment of 400 homes currently under private ownership. The key aim is to provide Bromley with an alternative, affordable housing supply to replace the significant bed and breakfast accommodation costs currently incurred by Bromley. Mears has engaged funding partners to finance the purchase of properties on behalf of the client. We will then carry out refurbishment works and act as managing agent for the portfolio. The contract will be operated by Bromley and Mears for up to 40 years and is valued at circa £50m. The operation mobilised in February 2016, and the purchase and refurbishment phase will continue over a period of 24 months. This is typical of a number of opportunities within the pipeline.

· Mears has entered into a contract with Safe Haven, a charity which acquires homes to use as temporary accommodation for the London Borough of Ealing. Safe Haven owns around 200 homes with a clear plan to increase this number to 400. Mears is engaged, over an initial 20-year term, to carry out all housing management services, including an initial refurbishment programme, so that the homes will now be a long-term affordable housing provision.

· Mears, through its Registered Provider of Social Housing, and HB Villages are working in partnership to create a new supply of purpose-built accommodation for the Care sector. The objective is for HB Villages to develop and fund the new housing with Mears providing long-term tenancy and asset management services to the residents. The first scheme in Northampton is for an 80-home extra care complex, with Mears providing both housing management and care services.

· Mears completed a transaction with Chapter 1 Housing Association for the management of 900 homes in the South and West of England. Following a strategic review by Chapter 1, this form of private sector leased property for homeless families was considered non-core and they searched for a partner that could ensure a continuity of a quality service. This arrangement also introduced Mears to a further twelve Local Authorities and Mears will look to extend its service offering to those new customer relationships.

 

Care

 

Revenues for the Care division were £152.6m (2015: £146.0m), reflecting the full-year impact of the Care at Home acquisition. The Care division reported a loss of £1.2m (2015: £1.6m), broadly in line with management expectations and reflecting the continued challenges of home care and the additional costs incurred in restructuring our Care activities.

 

The Group has made significant progress in rebalancing its portfolio of Care contracts to focus upon those which have a better mix of longevity, certainty of spend and price. The Group entered 2016 with the imminent introduction of the National Living Wage (NLW) hanging over the Care sector with an increase in the National Minimum Wage from £6.70 to £7.20 per hour from April 2016. In addition, the Scottish Living Wage (SLW) signposted an increase from £6.70 to an enhanced £8.25 per hour, which further impacted on around 25% of our Care operations. Whilst the majority of care providers were very supportive of the principle of paying carers a rate that is more reflective of the crucial role that they deliver, the additional pressure on clients' already overstretched budgets brought significant uncertainty as to how this additional cost would be funded. The Government has continued to provide some short-term relief, allowing Local Authorities to levy a new social care precept of up to 2% on Council tax, with the money raised to be spent exclusively on adult social care. In addition, the Spring Budget 2017 committed a further £1 billion of additional funding to 2017/18 that will go some way to preventing an immediate collapse, but does not represent a long-term solution.

 

During the second half of 2015, and running into 2016, we carried out a detailed review, on a contract-by-contract basis, of charge rates and care worker pay rates. The process placed particular focus upon managing the impact of the NLW and also identifying more effective solutions to the sourcing and retention of sufficient, good quality, care workers. Pleasingly a large number of care commissioners have shown a deeper understanding of the true underlying cost of delivering care. This has resulted in an increasing acceptance that the NLW only really represents a legal minimum, and that one cannot expect to recruit individuals to deliver home care, and to accept the responsibilities that go with this role, at this minimum rate. It remains a key part of our long-term strategy to see care workers properly recognised as the skilled workers they undoubtedly are.

 

In aggregate, Mears enjoyed an increase in charge rates of circa 7% within England and Wales and around 15% in Scotland, which is generally in line with the increase in our carer payroll cost and is better than the average increase given to providers across the sector. The outcome of our review has highlighted those care commissioners who we believe, in the medium term, have little desire to change their commissioning strategies and where there is little likelihood of contract pricing that will allow providers to deliver care responsibly. This outcome led us to carry out a substantial restructuring of our Care division, which has seen a reduction in our Care activities by some 20%, a significant proportion of which arose within the North of England, which has the lowest charge rates and more traditional procurement methods. The initial round of branch closures was substantially completed in 2016. Further refining has taken place since the end of the year, seeing Mears withdraw from Northern Ireland and a number of Midlands-based contracts.

 

A summary of the changing volumes and charge rates as a result of the refocusing of our Care activities is detailed below:

 

Hours

Annualised

Charge rate

per week

revenue £m

 per hour £

As at 1 January 2016

216,000

148.1

13.19

 

Contract closures*

(48,200)

Material new contract awards

9,100

Other net volume decrease

(15,500)

As at 31 December 2016

161,400

126.2

15.04

* Includes contracts under notice of termination as at balance sheet date.

 

Whilst we have experienced significant downsizing in certain geographic areas, we are experiencing a solid pipeline of good quality bidding opportunities. In addition there are growth opportunities with the majority of our remaining clients.

 

Whilst we have become increasingly selective in new contract bidding, it is pleasing that we have enjoyed a particularly buoyant period for winning new work, securing over £200m of contract wins at a win rate of 74% by value (2015: £80m and 63%). More importantly, the quality of the new orders secured is much improved, enjoying a significantly higher charge rate, which enables us to reflect this within our carer pay and conditions. The average contract lengths of these latest awards has increased to in excess of five years and the number of providers reduced significantly, which reflects the trends which we anticipated and should in the future result in a better quality of earnings from our Care activities. Notable wins include:

 

· a contract with Devon County Council for the provision of homecare services. The contract is for an initial five-year period with an option to extend for a further two years and is worth over £100m. Mears is acting as the lead provider partner in four geographic areas across the South of Devon and is responsible for organising and delivering personal care services in that area, predominantly coordinating and supporting the local SME providers. The contract commenced in July 2016;

· further contracts by Wiltshire Council, as lead provider within zones in the North and West regions of the county, to add to our existing work in the South and East. The new contract, which is valued at around £85m over its six-year term, means Mears is the prime provider for the significant majority of this work across the county, doubling its previous value of work. The new contract commenced in August 2016;

· the renewal of our existing Care contract with the London Borough of Richmond, a client with whom we have enjoyed a long-standing relationship. The new contract, which commenced in July 2016, is for six years and will see us doubling our sales volume; and

· being re-awarded its existing Care contract with Aberdeenshire Council, delivering a wide spectrum of homecare and supported living services to people with complex needs, including autism and mental health. The contract has increased our provision to 4,000 hours of support per week.

 

The main limitation to achieving growth in Care and to delivering a consistent, good quality service, remains the sourcing and retention of sufficient care workers of good quality. Whilst we have experienced some improvement in carer turnover during the year, with churn rates falling by 14%, this still remains at unsustainable levels. We remain committed to driving improvement to the conditions of care workers, including better financial rewards and incentives and a more formalised career pathway.

 

Our annual survey of staff also showed a significant increase in job satisfaction, reflecting the effort we have put into making Mears the place to work for care staff interested in developing a career in the sector.

 

We are pleased to see the various UK regulators implementing tougher standards around quality, which will play to our strengths. We are particularly pleased with our regulatory performance in our key Scottish market and, while we have seen some pressure points in England, our processes and controls continue to improve.

 

There has never been greater stakeholder pressure to increase funding into social care, including from organisations such as the NHS, which has really been feeling the impact of the underfunded social care system. Mears is playing its part in encouraging additional investment to be made and the additional funding secured from the Spring Budget 2017 and Council tax increases is positive. Mears is widely recognised now as the organisation in homecare that is doing the most to drive change, which we believe is a real positive for the long-term development of our business.

 

 

 

Financial review

 

This provides further key information in respect of the financial performance and financial position of the Group to the extent that this is not already covered within the Review of Operations.

 

Acquisitions

 

Having completed a number of significant acquisitions in recent years, notably the Care at Home division of Care UK in 2015 and the Omega Group in 2014, the past year was focused upon consolidation and organic growth with no new acquisitions completed in the period.

 

Contingent consideration of £10.0m was paid during the year relating to the previous acquisition of Omega. A further payment of £5.0m has been paid in the early part of 2017. The Directors believe it is highly probable that the full contingent consideration will be paid, with the final instalment of £5.0m therefore anticipated in January 2018.

 

The acquisition of Omega included an interest in 50% of the share capital of three jointly owned entities. During 2015, the Group increased its holding to 75% in the year for a cash consideration of £6.1m. Mears has agreed a forward purchase agreement to acquire the remaining 25% for consideration of £6.1m in January 2018.

 

Discontinued activities

 

In November 2013, the Group completed the disposal of the entire share capital of Haydon Mechanical and Electrical Limited ('Haydon UK'). As part of that disposal, the Group retained the beneficial interest in 49% of the share capital of an investment in a company registered in the United Arab Emirates, Haydon Mechanical and Electrical Company LLC ('Haydon LLC'). This beneficial interest was retained due to a number of performance guarantees in place at the time of the disposal which would unwind as the underlying contracts were completed. During the year, the Group reduced its interest to 1% of the share capital in return for a nominal consideration. At 31 December 2016, a balance of £3.3m was due from Haydon LLC to the Group. Upon the remaining guarantees being satisfied and the outstanding debtor settled, the Group is in the process of transferring the remaining share to the local management.

 

In the year, the Group made a full provision against all remaining amounts due from Haydon UK. This was balanced with an operating profit generated by Haydon LLC in the period leading up to its disposal. Accordingly, the net impact on the profit for the year was zero.

 

Amortisation of acquisition intangibles

 

A charge for amortisation of acquisition intangibles of £10.7m (2015: £10.8m) arose in the year. This charge relates to a number of acquisitions in both Housing and Care over recent years. The remaining unamortised value of £19.7m (2015: £26.8m), predominantly relating to order book and customer relationships, will be written off over their estimated lives.

 

Net finance charge

 

A net finance charge of £1.8m has been recognised in the year (2015: £1.9m). The finance cost in respect of bank borrowings was £2.8m (2015: £2.7m), reflecting a slightly higher average debt level.

 

The Group held two interest rate swaps covering 2016. The first fixed a rate of 1.92% on £27.5m of borrowings and expired in August 2016. The second, which ran throughout the year, fixed a rate of 1.85% on £30.0m of borrowings. The remaining debt bore a variable LIBOR rate. The Group pays a margin over and above LIBOR which is subject to a ratchet mechanism and which, during the year, was typically in the region of 1.5% above LIBOR.

 

The Group entered into further interest rate swaps impacting upon future periods. One swap, which commenced in January 2017, fixed the rate for a period of four years at 0.83% on £40.0m of borrowings.

 

The net finance costs also include a net credit generated from defined benefit pension accounting of £0.9m (2015: £0.7m).

 

Tax expense

2016

2015

£m

£m

Current tax recognised in income statement

4.7

5.1

Deferred tax recognised in income statement

(1.0)

(1.3)

Total tax expenses recognised in income statement*

3.7

3.8

Profit before tax and before amortisation of acquired intangibles

40.1

36.8

Profit before tax

29.4

25.9

Effective current tax rate

16.0%

19.7%

* Continuing activities.

 

The Group complies with all relevant tax laws and regulations regarding the payment of tax and the provision of information to tax authorities. Mears does not undertake any aggressive tax planning or schemes that utilise low tax regimes in other jurisdictions for the purposes of tax avoidance. Mears seeks to maintain an open and honest relationship with the tax authorities and benefits from an HMRC 'low risk' status.

 

The headline UK corporation tax rate for the year was 20.0% (2015: 20.3%). The total tax charge for the year on continuing operations was £3.7m (2015: £3.8m) resulting in an effective total tax rate of 11.6% (2015: 14.7%). The key reconciling items to the headline rate were the utilisation of brought forward losses relating to previous acquisitions, an annual corporation tax deduction in respect of share options and adjustments in respect of the prior year estimated tax charge.

 

Total tax includes deferred tax, which is an estimate of the tax due on any differences between the carrying value and the tax base of assets or liabilities. The current tax charge excludes deferred tax and is therefore affected by both permanent and temporary differences in the recognition of items for tax and accounting purposes.

 

The current tax charge for the year on continuing operations was £4.7m (2015: £5.1m), which represents an effective tax rate of 16.0% (2015: 19.7%). For both the years, the key reconciling items to the headline rate were permanent differences on the amortisation of acquisition intangibles and the utilisation of brought forward tax losses primarily associated with the Morrison business.

 

Earnings per share (EPS)

2016

2015

Change

p

p

%

Diluted earnings per share*

23.41

20.10

+16%

Normalised diluted earnings per share**

30.36

27.94

+9%

Dividend per share

11.70

11.00

+6%

* Continuing activities.

**Continuing activities before acquired intangible amortisation with an adjustment to reflect a full tax charge.

 

The normalised diluted EPS, which allows for the potential dilutive impact of outstanding share options, increased by 9% to 30.36p (2015: 27.94p). Normalised earnings are based upon continuing activities and exclude the amortisation of acquisition intangibles together with an adjustment to reflect a full tax charge of 18% (2015: 18%). We believe that this normalised diluted EPS measure better allows the assessment of operational performance, the analysis of trends over time, the comparison of different businesses and the projection of future performance.

 

Cash performance

2016

2015

£m

 £m

Operating profit*

41.9

38.7

Depreciation and amortisation

7.4

6.3

EBITDA

49.3

45.0

Cash inflow from operating activities

34.5

44.5

EBITDA to cash conversion

70%

99%

Net (debt)/cash at balance sheet date

(12.4)

0.8

Average net debt in year**

85.0

68.0

* Before amortisation of acquisition intangibles.

** Average debt represents a 366-day mean.

 

The efficiency with which the Group manages working capital remains a cornerstone of our business. The Group's conversion of EBITDA to cash in the year was below target at 70% (2015: 99%), reflecting the organic growth delivered in 2016 resulting in some working capital expansion and the increase in trade receivables reflects this. The Group saw a reduction in trade payables and its associated cash outflow, impacted by a changing sales mix. The Group continues to drive a cash culture internally, which is so important in a high volume, low value and public sector environment. A cash conversion target of in excess of 90% remains the key performance measure and one which historically the Group has an excellent track record of delivering.

 

Balance sheet

2016

2015

£m

£m

Goodwill and intangible assets

219.6

224.9

Property, plant and equipment

20.3

18.4

Inventories

11.2

9.0

Trade receivables

157.2

146.9

Trade payables

(186.6)

(188.5)

Net (debt)/cash

(12.4)

0.8

Deferred consideration

(16.5)

(20.9)

Cash flow hedge

0.4

(0.9)

Pension

8.5

4.0

Taxation

(3.0)

(2.1)

Net assets

198.7

191.6

 

Goodwill and intangible assets

 

The carrying value of identifiable acquisition intangibles at 31 December 2016 was £19.8m (2015: £26.8m), which predominantly relates to order book and customer relationships valued on acquisition. The carrying value will be amortised over its useful economic life, with over half of this value being expensed over the next two years. The net movement in the year comprised an increase of £3.7m relating to the finalisation of the fair value adjustments made in respect of the Care at Home acquisition completed in 2015 together with a reduction of £10.7m relating to amounts amortised and charged to the Income Statement during the year.

 

The carrying value of goodwill of £193.7m (2015: £193.1m) is not amortised but is reviewed for impairment on an annual basis or more frequently where there is an indication of impairment. The headroom between the goodwill carrying value of the Care division has been low for a number of years. The Board has carried out a detailed impairment review and was encouraged that the improved financial and non-finance performance, driven by the Care rationalisation, has resulted in a significant improvement in this headroom.

 

In addition, intangible assets includes the capitalisation of expenditure incurred in developing the in-house IT platform. Additions in the year amounted to £2.9m (2015: £3.0m) with a carrying value of £6.1m (2015: £5.1m), which is amortised over four years.

 

Tangible fixed assets

 

The Group capital expenditure of £7.4m (2015: £6.2m) relates to IT hardware, other office equipment and the refurbishment of new office premises. The level of capital expenditure in respect of property, plant and equipment in any single year has a close correlation to the number of new contracts mobilised in that period. As detailed within the Review of Operations, 2016 was a record year in respect of new contract mobilisations.

 

The majority of plant utilised by our operational teams is subject to short-term hire and motor vehicles are subject to operating leases and hence neither are included within capital expenditure or recognised as an asset within the balance sheet. Similarly, the Housing Management business has a large number of short-term property leases which are similarly not carried on the balance sheet. The new accounting standard IFRS 16 'Leases' requires lessees to recognise assets and liabilities for all leases, subject to materiality, and is effective for the Group's 2019 year end. A detailed analysis is being prepared during the course of 2017 to properly understand the impact of this new standard. The Directors' current expectation is that the accounting methodology will have a material impact upon the balance sheet but is not expected to have a material impact upon the profit before tax. The Group's bank facility agreement, and associated covenants, will not be impacted by these changes.

 

Working capital and net debt

 

Trade receivables and inventories increased to £168.4m (2015: £155.9m), which reflects the working capital expansion required to fund the organic growth delivered in the year. Trade payables reported a reduction to £186.6m (2015: £188.5m), reflecting a shift in the sales mix in favour of Housing Management, which carries a lower level of trade payables compared to the Housing maintenance activities.

 

Our net debt position at 31 December 2016 was £12.4m (2015: net cash of £0.8m). The Group seeks to minimise its trade receivables at both its June and December period ends, resulting in an atypical low net debt balance. A far more important metric is the Group's daily net debt balance, which provides a better indication of working capital management. The average net debt over the year was £85m, which represents an increase compared to the prior year, having funded both acquisitions and organic growth.

 

During the year, the Group completed an 'amend and extend' to its revolving capital facility which extended the expiry date from July 2018 to July 2020. The total commitment under the facility increased from £120m to £140m. The revised facility enjoys a reduction to the interest cost, with the margin payable over and above LIBOR, which is subject to a ratchet mechanism, reducing from a range of 150-250bps to 120-220bps. The Group continues to maintain a strong relationship with both of its bankers, Barclays and HSBC, and meets with them regularly.

 

Pensions

 

2016

Group

Other

 

schemes

schemes

Total

£m

£m

£m

Scheme assets

149.5

406.9

556.5

Scheme liabilities

(137.7)

(410.3)

(548.0)

Net asset/(liability)

11.8

(3.3)

8.5

Current service cost

2.1

4.4

6.5

 

 

2015

Group

Other

 

schemes

schemes

Total

£m

£m

£m

Scheme assets

116.5

332.7

449.2

Scheme liabilities

(111.3)

(333.8)

(445.1)

Net asset/(liability)

5.2

(1.1)

4.1

Current service cost

2.1

5.5

7.7

 

The Group participates in two principal Group pension schemes (2015: two) together with a further 33 (2015: 30) individual defined benefit schemes where the Group has received Admitted Body status in a Local Government Pension Scheme. At the point of tendering for new contract opportunities, the Group seeks to minimise its exposure to future changes in the required pension contribution rates and to future liabilities resulting from scheme deficits.

 

Whilst the aggregate of all the schemes reports a net asset position, the Group is mindful of managing its risks in this area. Under IAS 19, pension scheme liability values are driven by changes in the net discount rate, which is the yield on high quality corporate bonds less the long-term rate of expected price inflation. Following the result of the EU referendum, an increasingly volatile macro-economic environment has resulted in a downward move in the net discount rate. This has led to a significant increase in pension liabilities. Positively, the pension schemes are reporting strong increases in their scheme assets which have, in aggregate, exceeded the increase in the associated defined benefit obligation. Overall, the Group has reported an increase in its pension net asset from £4.1m to £8.5m.

 

However, one significant negative resulting from the changing assumptions is the charge to the income statement, being the current service cost. The pension charge to the income statement for 2017, which is fixed at the start of the year using the assumptions set at December 2016, is £9.0m, increasing from £6.5m. This element of pension accounting is a non-cash item. Typically cost recovery for pension costs within the underlying customer contracts is aligned to employers' contributions which are, in the short term at least, unchanged.

 

Guidance for 2017

 

The 93% visibility of consensus forecast revenues secured for 2017 at the turn of the year fell marginally short of the 95% target. Revenue visibility for 2017 has subsequently increased to 94%. The Group targets annual revenue growth in Housing of 5% to 10% per annum and our expectation for growth in 2017, given the small short-fall on the headline visibility measure, would be at the bottom end of that range.

 

Our Housing margin has historically been in the range of 5.6%-5.9%. The lower number of new contract mobilisations in 2017 will remove some of the margin dilution experienced in 2016. The shifting sales mix towards Housing Management services, which typically generate a higher operating margin, also provides an opportunity for margins to improve slightly. On the downside, the increase in pension service costs, following a reduction in the associated net discount rate, will reduce Housing profits by circa £2.5m.

 

In Care, the Group is focused on achieving good levels of service at sustainable margins and there is less ambition for achieving revenue growth. During 2016, the Group took the decision to exit from around 20% of its Care contracts and a number of these closures have continued into 2017. However, a number of key new contract wins have also delivered some strong organic growth. The Group has previously made commitments on its Care margins, with the expectation that over time a margin can be delivered in Care that is similar to those delivered in Housing. In 2017, we expect Care performance to be in line with that trajectory and return to profit.

 

We will continue to manage working capital to a high standard, targeting EBITDA to cash conversion in excess of 90%.

 

 

 

Consolidated income statement

For the year ended 31 December 2016

 

2016

2015

Note

£'000

£'000

Continuing operations

Sales revenue

1

940,100

881,139

Cost of sales

(695,206)

(649,007)

Gross profit

244,894

232,132

Other administrative expenses

(203,044)

(193,470)

Amortisation of acquisition intangibles

(10,690)

(10,837)

Total administrative costs

(213,734)

(204,307)

Operating profit before amortisation of acquisition intangibles

41,850

38,662

Operating profit

31,160

27,825

Finance income

2

1,152

1,171

Finance costs

2

(2,940)

(3,076)

Profit for the year before tax and the amortisation of acquisition intangibles

40,062

36,757

Profit for the year before tax

29,372

25,920

Tax expense

3

(3,676)

(3,832)

Profit for the year from continuing operations

25,696

22,088

Discontinued operations

Loss from discontinued operations

-

(7,964)

Tax income from discontinued operations

-

165

Loss for the year after tax from discontinued operations

-

(7,799)

Profit for the year from continuing and discontinued operations

25,696

14,289

 

Attributable to:

Owners of the Parent

21,526

12,874

Non-controlling interest

4,170

1,415

Profit for the year

25,696

14,289

 

Earnings per share - from continuing operations

Basic

5

23.54p

20.31p

Diluted

5

23.41p

20.10p

 

Earnings per share - from continuing and discontinued operations

Basic

5

21.03p

12.65p

Diluted

5

20.91p

12.52p

 

The accompanying accounting policies and notes form an integral part of the preliminary announcement.

 

 

 

Consolidated statement of comprehensive income

For the year ended 31 December 2016

 

2016

2015

£'000

£'000

Profit for the year

25,696

14,289

Other comprehensive income/(expense):

Which will be subsequently reclassified to the income statement:

Cash flow hedges:

- losses arising in the year

(884)

(72)

- reclassification to the income statement

643

559

Increase/(decrease) in deferred tax asset in respect of cash flow hedges

39

(97)

Which will not be subsequently reclassified to the income statement:

Actuarial gain/(loss) on defined benefit pension scheme

3,676

(3,371)

(Decrease)/increase in deferred tax asset in respect of defined benefit pension schemes

(804)

675

Other comprehensive income/(expense) for the year

2,670

(2,306)

Total comprehensive income for the year

28,366

11,983

 

Attributable to:

Owners of the Parent

24,196

10,568

Non-controlling interest

4,170

1,415

Total comprehensive income for the year

28,366

11,983

    

 

The accompanying accounting policies and notes form an integral part of the preliminary announcement.

 

 

 

Consolidated balance sheet

As at 31 December 2016

 

2016

2015

£'000

£'000

Assets

Non-current

Goodwill

193,712

193,058

Intangible assets

25,913

31,851

Property, plant and equipment

20,265

18,436

Pension and other employee benefits

15,992

8,272

Financial assets

677

-

Deferred tax asset

5,704

6,584

262,263

258,201

Current

Assets included in disposal group classified as held for sale

-

13,255

Inventories

11,234

9,021

Trade and other receivables

157,181

146,879

Financial assets

839

-

Cash at bank and in hand

52,904

68,612

222,158

237,767

Total assets

484,421

495,968

Equity

Equity attributable to the shareholders of Mears Group PLC

Called up share capital

1,026

1,019

Share premium account

58,320

58,124

Share-based payment reserve

1,975

1,651

Hedging reserve

(774)

(572)

Merger reserve

46,214

46,214

Retained earnings

92,555

86,438

Total equity attributable to the shareholders of Mears Group PLC

199,316

192,874

Non-controlling interest

(642)

(1,246)

Total equity

198,674

191,628

Liabilities

Non-current

Long-term borrowing and overdrafts

60,000

57,500

Pension and other employee benefits

7,498

4,224

Deferred tax liabilities

7,120

6,970

Financial liabilities

612

368

Other payables

15,950

15,396

91,180

84,458

Current

Liabilities included in disposal group classified as held for sale

-

13,255

Short-term borrowings and overdrafts

5,278

10,290

Trade and other payables

187,264

194,103

Financial liabilities

478

510

Current tax liabilities

1,547

1,724

Current liabilities

194,567

219,882

Total liabilities

285,747

304,340

Total equity and liabilities

484,421

495,968

    

 

The accompanying accounting policies and notes form an integral part of the preliminary announcement.

 

 

 

Consolidated cash flow statement

For the year ended 31 December 2016

 

2016

2015

Note

£'000

£'000

Operating activities

Result for the year before tax

29,372

25,920

Adjustments

6

20,438

19,887

Change in inventories

(2,213)

(553)

Change in trade and other receivables

(8,793)

6,668

Change in trade and other payables

(4,289)

(7,458)

Cash inflow from operating activities of continuing operations before taxation

34,515

44,464

Taxes paid

(4,877)

(5,888)

Net cash inflow from operating activities of continuing operations

29,638

38,576

Net cash outflow from operating activities of discontinued operations

(3,925)

(4,503)

Net cash inflow from operating activities

25,713

34,073

Investing activities

Additions to property, plant and equipment

(10,029)

(4,297)

Additions to other intangible assets

(2,904)

(2,978)

Proceeds from disposals of property, plant and equipment

2

86

Acquisition of subsidiary undertakings, net of cash

(10,019)

(17,590)

Loans made to other entities (non-controlled)

(211)

-

Interest received

35

158

Net cash outflow from investing activities

(23,126)

(24,621)

Financing activities

Proceeds from share issue

202

1,418

Discharge of finance lease liability

(661)

(545)

Interest paid

(2,822)

(2,764)

Dividends paid - Mears Group shareholders

(11,483)

(10,445)

Dividends paid - non-controlling interests

(1,019)

(128)

Net cash outflow from financing activities

(15,783)

(12,464)

Cash and cash equivalents, beginning of year

822

3,834

Net decrease in cash and cash equivalents

(13,196)

(3,012)

Cash and cash equivalents, end of year

(12,374)

822

 

Cash and cash equivalents comprises the following:

- cash at bank and in hand

52,904

68,612

- borrowings and overdrafts

(65,278)

(67,790)

Cash and cash equivalents

(12,374)

822

 

Cash conversion key performance indicator

Cash inflow from operating activities of continuing operations

34,515

44,464

EBITDA for continuing operations

49,260

44,940

Conversion

70.1%

98.9%

    

 

The accompanying accounting policies and notes form an integral part of the preliminary announcement.

 

 

 

Consolidated statement of changes in equity

For the year ended 31 December 2016

 

 

Attributable to equity shareholders of the Company

Total

Share

Share

Share-

Non-

based

premium

payment

Hedging

Merger

Retained

controlling

capital

account

reserve

reserve

reserve

earnings

interest

equity

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

At 1 January 2015

1,011

56,714

1,653

(962)

46,214

92,179

(2,347)

194,462

Net result for the year

-

-

-

-

-

12,874

1,415

14,289

Other comprehensive income/(expense)

-

-

-

390

-

(2,696)

-

(2,306)

Total comprehensive income for the year

-

-

-

390

-

10,178

1,415

11,983

Deferred tax on share-based payments

-

-

-

-

-

(552)

-

(552)

Issue of shares

8

1,410

-

-

-

-

-

1,418

Share option charges

-

-

771

-

-

-

-

771

Exercise of share options

-

-

(773)

-

-

773

-

-

On acquisition

-

-

-

-

-

-

282

282

Transactions with non-controlling interests

-

-

-

-

-

(5,695)

(468)

(6,163)

Dividends

-

-

-

-

-

(10,445)

(128)

(10,573)

At 1 January 2016

1,019

58,124

1,651

(572)

46,214

86,438

(1,246)

191,628

Net result for the year

-

-

-

-

-

21,526

4,170

25,696

Other comprehensive income

-

-

-

(202)

-

2,872

-

2,670

Total comprehensive income for the year

-

-

-

(202)

-

24,398

4,170

28,366

Deferred tax on share-based payments

-

-

-

-

-

(635)

-

(635)

Issue of shares

7

196

-

-

-

-

-

203

Share option charges

-

-

324

-

-

-

-

324

On disposal

-

-

-

-

-

-

(2,570)

(2,570)

Transactions with non-controlling interests

-

-

-

-

-

(6,163)

23

(6,140)

Dividends

-

-

-

-

-

(11,483)

(1,019)

(12,502)

At 31 December 2016

1,026

58,320

1,975

(774)

46,214

92,555

(642)

198,674

 

The accompanying accounting policies and notes form an integral part of the preliminary announcement.

 

 

 

Notes to the preliminary announcement

For the year ended 31 December 2016

 

1. Segment reporting

 

Segment information is presented in respect of the Group's operating segments. Segments are determined by reference to the internal reports reviewed by the Board.

 

The Group operated two operating segments during the year:

 

· Housing - services within this sector comprise a full housing management service predominantly to Local Authorities and other Registered Social Landlords; and

· Care - services within this sector comprise personal care services to people in their own homes.

 

All of the Group's activities are carried out within the United Kingdom and the Group's principal reporting to its chief operating decision maker is not segmented by geography.

 

The principal financial measures used by the chief operating decision maker and the Board to review the performance of the operating segments are that of revenue growth and operating margins in both the core divisions of Housing and Care. The operating result utilised within the key performance measures is stated before amortisation of acquisition intangibles, exceptional costs and costs relating to the long-term incentive plans.

Operating segments

2016

2015

Housing

Care

Total

Housing

Care

Total

£'000

£'000

£'000

£'000

£'000

£'000

Revenue

787,530

152,570

940,100

735,129

146,010

881,139

Operating result pre amortisation of acquisition intangibles and long-term incentive plans

44,057

(1,199)

42,858

42,413

(1,601)

40,812

Operating margin pre amortisation of acquisition intangibles and long-term incentive plans

5.60%

(0.79%)

4.56%

5.77%

(1.10%)

4.63%

Long-term incentive plans

(1,008)

-

(1,008)

(2,150)

-

(2,150)

Operating result pre amortisation of acquisition intangibles

43,049

(1,199)

41,850

40,263

(1,601)

38,662

Amortisation of acquisition intangibles

(10,690)

(10,837)

Finance costs, net

(1,788)

(1,905)

Tax expense

(3,676)

(3,832)

Profit for the year from continuing activities

25,696

22,088

 

All revenue and all non-current assets arise within the United Kingdom. All of the revenue reported is external to the Group. No revenue in respect of a single customer comprises more than 10% of the total revenue reported.

 

2. Finance income and finance costs

2016

2015

£'000

£'000

Interest charge on overdrafts and short-term loans

(2,134)

(2,136)

Interest charge on hedged items (effective hedges)

(643)

(559)

Other interest

(26)

(4)

Finance costs on bank loans, overdrafts and finance leases

(2,803)

(2,699)

Interest charge on defined benefit obligations

(137)

(252)

Unwinding of discounting

-

(125)

Total finance costs

(2,940)

(3,076)

Interest income resulting from short-term bank deposits

19

16

Interest income resulting from defined benefit asset

1,085

964

Unwinding of discounting

40

49

Other interest income

8

142

Finance income

1,152

1,171

Net finance charge

(1,788)

(1,905)

 

3. Tax expense

 

Tax recognised in the income statement

2016

2015

£'000

£'000

United Kingdom corporation tax

5,672

5,783

Adjustment in respect of previous periods

(972)

(642)

Total current tax recognised in income statement

4,700

5,141

Deferred taxation charge:

- on defined benefit pension obligations

146

133

- on share-based payments

(65)

(151)

- on accelerated capital allowances

194

(232)

- on amortisation of acquisition intangibles

(2,066)

(2,130)

- on short-term temporary timing differences

277

(276)

- on corporate tax losses

617

1,609

- impact of change in statutory tax rates

(19)

-

Adjustment in respect of previous periods

(108)

(262)

Total deferred taxation recognised in income statement

(1,024)

(1,309)

Total tax expense recognised in income statement on continuing operations

3,676

3,832

Total tax credit recognised in income statement on discontinued operations

-

(165)

Total tax expense recognised in income statement

3,676

3,667

 

The following tax has been charged to other comprehensive income or equity during the year:

 

2016

2015

£'000

£'000

Deferred tax recognised in other comprehensive income

- on defined benefit pension obligations

804

(675)

- on cash flow hedges

(39)

97

Total deferred tax recognised in other comprehensive income

765

(578)

Deferred tax recognised directly in equity

Deferred tax charge:

- on share-based payments

(635)

(552)

Total deferred tax recognised in equity

(635)

(552)

 

4. Dividends

 

The following dividends were paid on ordinary shares in the year:

 

2016

2015

£'000

£'000

Final 2015 dividend of 7.90p (2015: final 2014 dividend of 7.15p) per share

8,099

7,286

Interim 2016 dividend of 3.30p (2015: interim 2015 dividend of 3.10p) per share

3,384

3,159

11,483

10,445

 

The proposed final 2016 dividend of 8.40p per share has not been included within the consolidated financial statements as no obligation existed at 31 December 2016.

 

5. Earnings per share

 

 

Basic (continuing)

Basic (discontinued)

Basic (continuing and discontinued)

2016

2015

2016

2015

2016

2015

p

p

p

p

p

p

Earnings per share

23.54

20.31

(2.51)

(7.66)

21.03

12.65

Effect of amortisation of acquisition intangibles

10.44

10.65

-

-

10.44

10.65

Effect of full tax adjustment

(3.45)

(2.73)

-

-

(3.45)

(2.73)

Normalised earnings per share

30.53

28.23

(2.51)

(7.66)

28.02

20.57

 

 

Diluted

(continuing)

Diluted

(discontinued)

Diluted (continuing and discontinued)

2016

2015

2016

2015

2016

2015

p

p

p

p

p

p

Earnings per share

23.41

20.10

(2.50)

(7.58)

20.91

12.52

Effect of amortisation of acquisition intangibles

10.39

10.54

-

-

10.39

10.54

Effect of full tax adjustment

(3.44)

(2.70)

-

-

(3.44)

(2.70)

Normalised earnings per share

30.36

27.94

(2.50)

(7.58)

27.86

20.36

 

A normalised EPS is disclosed in order to show performance undistorted by amortisation of intangibles. The Group defines normalised earnings as excluding the amortisation of acquisition intangibles and exceptional costs and adjusted to reflect a full tax charge. The profit attributable to shareholders before and after adjustments for both basic and diluted EPS is:

 

 

Normalised (continuing)

Normalised (discontinued)

Normalised (continuing and discontinued)

2016

2015

2016

2015

2016

2015

£'000

£'000

£'000

£'000

£'000

£'000

Profit/(loss) attributable to shareholders:

24,096

20,673

(2,570)

(7,799)

21,526

12,874

- amortisation of acquisition intangibles

10,690

10,837

-

-

10,690

10,837

- full tax adjustment

(3,535)

(2,784)

-

-

(3,535)

(2,784)

Normalised earnings

31,251

28,726

(2,570)

(7,799)

28,681

20,927

 

The calculation of EPS is based on a weighted average of ordinary shares in issue during the year. The diluted EPS is based on a weighted average of ordinary shares calculated in accordance with IAS 33 'Earnings Per Share', which assumes that all dilutive options will be exercised. The additional normalised basic and diluted EPS use the same weighted average number of shares as the basic and diluted EPS.

 

2016

2015

Million

Million

Weighted average number of shares in issue:

102.35

101.77

- dilutive effect of share options

0.57

1.06

Weighted average number of shares for calculating diluted earnings per share

102.92

102.83

 

6. Notes to the Consolidated Cash Flow Statement

 

The following non-operating cash flow adjustments have been made to the result for the year before tax:

 

2016

2015

£'000

£'000

Depreciation

5,573

4,963

Loss on disposal of property, plant and equipment

48

45

Amortisation

12,527

12,151

Share-based payments

324

771

IAS 19 pension movement

(770)

(660)

Finance income

(67)

(158)

Finance cost

2,803

2,775

Total

20,438

19,887

 

7. Publication of non-statutory accounts

The financial information set out in the announcement does not constitute the Group's statutory accounts for the years ended 31 December 2016 or 2015. The financial information for the year ended 31 December 2015 is derived from the statutory accounts for that year which have been delivered to the Registrar of Companies. The auditor reported on those accounts; its report was unqualified and did not contain a statement under Section 498 of the Companies Act 2006. The statutory accounts for the year ended 31 December 2016 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.

The Listing Rules of the UK Listing Authority (LR 9.7A.1) require that preliminary unaudited statements of annual results must be agreed with the listed Company's auditor prior to publication, even though an audit opinion has not yet been issued. In addition, the Listing Rules require such statements to give details of the nature of any likely modification that may be contained in the Auditor's Report to be included with the Annual Report and Accounts. Mears Group PLC confirms that it has agreed this preliminary statement of annual results with Grant Thornton UK LLP and that the Board of Directors has not been made aware of any likely modification to the Auditor's Report required to be included with the Annual Report and Accounts for the year ended 31 December 2016.

This information is provided by RNS
The company news service from the London Stock Exchange
 
END
 
 
FR DGGDXUUDBGRG
Date   Source Headline
28th Mar 20247:00 amRNSTransaction in Own Shares
27th Mar 20247:00 amRNSTransaction in Own Shares
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