Last checked at 27 Oct 2009 07:00
27 October 2009
Mears Group PLC
("Mears" or "the Group")
Interim Management Statement ("IMS")
Continued Strong Trading Across All Divisions
Mears today releases its IMS for the period from 1 July 2009 to date.
Trading update
Mears has continued to experience strong trading across all divisions since announcing the interim results in August 2009. The forecast full year results are in line with management's expectations.
The Group has announced new contract awards in excess of £450m since the annual results were published on 10 March 2009 and we continue to build on this strong performance with an order book standing at over £1.7bn. The bid pipeline is strong and we are currently at advanced stages of negotiating further significant opportunities. We anticipate reporting a record year for growth in our order book.
The demand for our services has never been stronger. Our two growth markets Social Housing and Domiciliary Care, which account for approaching 90% of Group revenues, are defensive markets where spend is largely non discretionary and afford us substantial immunity from bad debts. Moreover as a result of our quality partnership relationships with first class public sector customers, we have not experienced any work delays from our public sector customers.
Social Housing
Our Social Housing division is well positioned in a consolidating market and the outlook remains excellent. The spend is largely non discretionary and with 70% of revenues generated with Housing Associations, Housing Trusts and Arms Length Management Organisations and with less than 15% of revenues relating to Decent Homes, we do not expect this division to be significantly impacted by any cuts in public sector expenditure.
Since 1 July 2009, the Social Housing division has mobilised the following new contract awards:
Moat Homes
Moat Homes manage a housing stock of 15,000 units predominantly based in the South East of England. This order relates to reactive and void maintenance works and has an annual contract value of £4m. This initial order is for a single year. The works mobilised in October 2009 and we are focussed on maximising customer satisfaction during this period.
Brighton & Hove City Council
A ten-year partnership to provide housing stock upgrades, responsive repairs and comprehensive maintenance services. The contract is valued at £200 million for the ten-year period and whilst it does not start until April 2010, a significant resource is being applied at this time.
Shoreline Housing Partnership
A six-year partnership with Shoreline Housing Partnership ("Shoreline") to provide responsive repairs and maintenance services. The contract is valued at £50 million for the six-year period and has a potential worth in excess of £80 million subject to an opportunity for a further four-year extension. This contract mobilised in July 2009.
Sedgefield Borough Homes
A 5-year partnership with Sedgefield Borough Homes carrying out Decent Homes services. The contract value to Mears is estimated to be £32 million. This contract mobilised in October 2009.
All costs relating to tender, contract set-up and the initial losses and inefficiencies that typically occur during the period of contract mobilisation are written off as they are incurred.
Our robust bid pipeline reflects our confidence in the demand drivers for repair and maintenance spending of our public sector partners. There is an increasing trend towards the larger, more complex strategic partnership contracts that will naturally reward stronger players who can deal with a greater level of complexity. The Group is ideally placed to be a major beneficiary of this trend. Our current bid pipeline stands at £3.5 billion which naturally reaches a seasonal peak at this time given the high level of April 2010 mobilisations that are now approaching a late point in the tender process.
Furthermore, we are equally focused on assisting social housing landlords develop their in-house capabilities where they have decided not to outsource. We are in strong position to take the lead with these opportunities where flexibility and innovation are required.
Domiciliary Care
Careforce, the Group's Domiciliary Care division, continues to build a presence across a growing geographical area. As we have seen, recent sector M&A activity has emphasised the strategic value placed upon the provision of domiciliary care services to Local Authorities and primary care trusts. The increasing trend of Local Authorities to procure services from fewer and larger care providers is entirely in line with our philosophy to work in partnership with our clients to provide improved outcome-based solutions for the long term. We are therefore well placed to take a leading position in the consolidation and evolution of the Domiciliary Care market where we continue to see a convergence between our Social Housing and Care businesses.
Government remains committed to prioritising the agenda of housing in an ageing society and ensuring that people stay comfortable and secure in their own homes as they grow older. The recent Green paper on the future of Social Care, combined with proposals from across the political parties during the Conference season, reflects the emphasis placed on Social Care as a key part of the political, economic and welfare agenda. The Green paper calls for a level of free care for all people, no matter what their financial circumstances. Consultation on the paper continues into November this year. Investment in Social Care is arguably the most effective way to prevent future spiralling NHS costs. So, despite the current concerns for the future of public expenditure, this is one area where there appears real commitment to protect and indeed increase expenditure going forward. Greater focus is also being placed on the financial benefits from service integration, which is leading to a number of councils starting to more actively work with us on housing and care integration opportunities.
There are increasing opportunities to combine our Care and Repair solutions and thereby add further value to our customers.
Mechanical and Electrical (M&E)
The M&E division has continued to make a significant contribution both in terms of turnover and operating profit. The niche offering of linked to the London 'exclusive and complex residential' housing market provides opportunities not offered by other providers.
Since 1 July 2009, the division has been awarded a contract with Bovis Lend Lease to provide M&E infrastructure and fit out works on the Athletes Village for the 2012 London Games. This contract award is valued at £9 million and comprises the first phase of the village of approximately 300 apartments. In addition to this award, further material orders have been received which further enhance the visibility of revenues for 2010. This remains a sound and well managed business.
Financial position
Mears continues to benefit from a strong balance sheet with low gearing. We have maintained our strong management of working capital and cash conversion continues to be inline with our expectations.
Our strong cash flow continues to give us significant financial flexibility to take advantage of any acquisition opportunities that may arise.
Operational Management
It has always been the key focus of this Group to continually seek to strengthen the senior management team to ensure that we have in place a structure that can plan for and manage future growth. We have led the social housing sector for the past ten years and it is a tremendous accolade to the strength of our social housing brand that the best operators in this sector have a desire to join the best provider of these services. I am delighted that since 1 July we have announced the significant appointments of two senior social housing operators.
Jane Nelson has been appointed Managing Director of a new social housing business stream which will focus on working with social housing landlords to deliver alternative partnership benefits whilst retaining an in-house capacity to deliver excellent repairs and maintenance services. Jane was most recently at Kier Group where she was Chairman and Managing Director of Kier Building Maintenance's Southern region.
Graham Eden has been appointed Managing Director of our social housing London region. Graham has worked in the sector for 29 years and was most recently Chief Operating Officer of Morrison Plc's Social Housing and Facilities Services business
Both Jane and Graham bring unparalleled experience of working at every level in the public sector. They are both very well known and highly respected figures in the industry and were our identified 'transfer targets' for some time.
Outlook
We have close to full visibility of consensus forecast revenues for the current year and in excess of 72% per cent of next year's forecast revenues. We have an experienced management team which has been extremely successful in building our record forward order book and we are well positioned in a very active contract bidding market. Additionally, our strengthened management structure will allow us to successfully deliver future growth. We remain confident in Mears' prospects for the future as we continue to grow the Group.
Enquiries:
| Mears Group PLC |
|
| Bob Holt, Chairman | Tel: +44(0)7778 798 816 |
| Andrew Smith, Finance Director | Tel: +44(0)7712 866 461 |
| Joint Broker - Investec, Keith Anderson/Daniel Adams | Tel: +44(0)20 7597 5970 |
| Joint Broker - Collins Stewart, Mark Dickenson/Piers Coombs | Tel: +44(0)20 7523 8350 |
| PR - Threadneedle Communications, Trevor Bass/Alex White | Tel: +44(0)20 7936 9666 |
| IR - Hansard Group, John Bick | Tel: +44(0)7872 061007 |
About Mears http://www.mearsgroup.co.uk
Mears Group is a leading social housing repairs and maintenance provider working in partnership with Local Authorities and Registered Social Housing Landlords and it has a growing presence in the domiciliary care market through its Careforce business, providing personal care to people in their own homes delivered through partnerships with Local Authorities. In addition, Mears subsidiary Haydon is a specialist, mechanical and engineering services business. The Group employs more than 8000 people to maintain, repair and upgrade hundreds of thousands of homes nationwide and provides in excess of 90,000 hours of domiciliary care to over 13,500 people each week.