Mears Regulatory News (MER)

28 Apr 2009 07:00



Embargoed Release: 07:00hrs Tuesday 28 April 2009

Mears Group PLC

("Mears" or "the Group")

Interim Management Statement

Mears today releases its Interim Management Statement ("IMS") for the period from 1 January 2009 to date.

Continued strong trading across all the Group's divisions;

Over £100 million of new contracts since announcing preliminary results;

Cash conversion is strong with continued improvement; and

Integration of the 3C acquisition is on track.

Trading update

Mears has continued to experience strong trading across all divisions since announcing its preliminary results on 10 March 2009 for the year to 31 December 2008 and the aggregate order intake since Mears announced its preliminary results is in excess of £100 million.

It is particularly pleasing that the Group's cash conversion is strong following the effects of substantial revenue growth experienced in 2008 and the initial cash investment in mobilising a number of larger contracts. The rate of cash conversion for H1 2009 is expected to continue the improvement experienced between H1 and H2 in 2008 and is in line to achieve management targets for the full year.

Update on 3C Asset Management Limited ('3C')

The integration of 3C, acquired in January, into the Mears Social Housing division has proceeded well. As announced at the time of the acquisition, the business had generated material losses in the previous 3 years trading and Mears expected to make improvements to generate significant cost and efficiency savings. The Group has focussed on delivering quality of service and maximising customer satisfaction, which is typically key to ensuring contract longevity and long term profitability. The level of contract retention since completing the acquisition has exceeded the Group's initial targets and is a credit to the operational team. 

Since being acquired by Mears, the Group has been awarded a two-year contract extension with Accord Housing Association and Ashram Housing Association as well as incorporating a third and new revenue stream with Caldmore Housing Association. All three Housing Associations are members of the Accord Housing Group and will deliver forecast revenues of £7m over the two-year term commencing in April 2009.

In line with the Board's expectations and after charging restructuring costs, 3C is expected to record a loss in H1 2009, but is anticipated to be profit generating in H2 2009 with the overall performance for the year anticipated to be around breakeven.

Social Housing

Mears' Social Housing division is well positioned in this growing market where the demand for long-term, broadly-based service provision remains strong and plays to Mears' strengths as a market leader. The bid pipeline remains strong and Mears continues to be seen as a preferred supplier of services to a number of large buyers of its full range of services.

The demand for Mears' services has never been stronger and the recent £50 million contract award from Shoreline Housing Partnership to provide responsive repairs and maintenance services was, as predicted, a continuation of the trend of gaining new work from existing customers.

In addition, the increase in customers and the continued consolidation amongst Registered Social Landlords offers new opportunities and the Group is in discussions with customers in respect to further significant awards in this sector.

Domiciliary Care

Careforce continues to build a presence across a growing geographical area and is well placed to take a leading position in the evolution of the Domiciliary Care market.

Although it is only five weeks since our last announcement, Mears is pleased to confirm that it has been successful in being awarded further contracts which give the Board the confidence in looking forward to growth in 2009 in excess of previous years. 

The Government remains committed to prioritising the agenda of housing in an ageing society to ensure that as people grow older they stay comfortable and secure in their own homes. Mears continues to see a convergence between its Social Housing and Care divisions, with increasing opportunities to combine the Group's Care and Social Housing offerings and thereby add further value for customers.

Mechanical and Electrical (M&E)

The M&E division is on track in the current year despite the economic climate. The niche offering of environmental solutions linked to the London 'exclusive and complex residential' housing market provides opportunities not offered to other providers. This continues to be a sound and well managed business.

Financial position

Mears continues to benefit from a strong balance sheet. The Group's strong cash flow continues to give it significant financial flexibility to take advantage of any acquisition opportunities that may arise.

Outlook

Mears has secured revenues for the current year in excess of 92 per cent of consensus forecast revenue and the management team has been extremely successful in building the Group's forward order book which continues to grow and currently stands at in excess of £1.6 billion.

Importantly, Mears' two growth markets, Social Housing and Domiciliary Care, which account for over 80 per cent of Group revenues, are defensive sectors where spend is predominantly non-discretionary and cash generation is robust. Given the Group's public sector client base, Mears is substantially immune to bad debts and our customer work patterns and payment terms have remained on schedule. 

Mears is well positioned to benefit from an active contract bidding market and remains confident in the prospects for the future growth of the Group. 

Commenting, Bob Holt, Chairman of Mears Group, said:

"Mears is performing strongly, has excellent visibility in the order book for the current year and next and the management team have a growing bid pipeline where we believe we will benefit from the continued evolution in both the Social Housing and Domiciliary Care markets."

-Ends-

About Mears  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 in excess of 8,000 people and provides maintenance and repairs services to 500,000 homes nationwide. Mears also provides over 85,000 hours of domiciliary care to 13,000 service users each week