Mears Regulatory News (MER)

1 February 2022

Mears Group PLC

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

Pre-close trading update

Mears (LSE: MER), the UK Housing solutions provider, is today providing a pre-close trading update for its financial year ended 31 December 2021 ("FY2021").

Financial results

The year ended strongly, and the Group now expects to report revenues in excess of £870 million (FY2020: £806 million) and adjusted profit before tax1 of circa £25.5 million for the full financial year, ahead of market consensus2. This financial performance has been driven by sustained higher volumes of work across the Group. Despite the operational challenges posed by Omicron in December and January, there has been no material impact on activity levels or service quality.

Underlying cash generation and working capital management have been robust throughout the year with average daily net cash / (debt) for the full year at close to zero3, which represents a significant improvement over the prior year (FY2020: net debt £97.3 million) and a solid improvement on the first half (H1 2021: net debt £8.2 million). The Group expects to report a net cash position at 31 December 2021 of circa £54.0 million. In the two financial years to 31 December 2021 underlying cash conversion4 has been in excess of 100%.

Operational excellence underpins sustainable financial performance

In 2021, despite the challenges of the pandemic, customer service levels have remained high. Integral to this performance was the Mears (MCM) technology platform, which facilitated the transition to and from remote working, both for Mears employees and crucially its clients.

Mears' culture of investment, inclusion and development in the workforce ensured that the Group achieved good employee retention and only modest increases in costs during the year, despite labour markets tightening significantly across the sector.

Current trading and outlook

The Company entered the new financial year in a strong position, and trading to date is in line with the Board's expectations. The contract pipeline is active and growing. With a reputation for operational excellence, and local and central government determined to improve standards across the housing sector, Mears is benefitting from good momentum in order intake, which the board is confident will deliver further long-term opportunities for the Group. The Group will announce its preliminary results for the financial year ended 31 December 2021 on 31 March 2022.

David Miles, Chief Executive Officer of the Group, commented: 

"2021 has been a very strong year for the Group, characterised by high levels of operational delivery and customer service, a robust cash position and trading outperformance.

"We are trusted partners to our local and central government clients who increasingly recognise the need for a high quality, housing specialist to help them provide a broad range of housing solutions. With the fundamentals of our business in such good shape and the long-term challenges of affordable housing, public health and climate change high on the political agenda, we believe we are the housing partner of choice and look forward to 2022 and beyond with confidence."

1. Adjusted profit before tax stated on continuing activities before non-underlying items (being £1.6 million in H1 2021 relating to the repayment of furlough monies received) and before the amortisation of acquired intangibles.

2. Company compiled consensus as at 31 January 2022 is for FY2021 revenues of £848 million and adjusted profit before tax of £25.1 million. 

3. Average daily net cash / (debt) is stated on a pre-IFRS 16 basis. The Group does not recognise lease obligations as traditional debt instruments.

4. In order to provide a more meaningful metric, two financial years' cash conversion has been used in order to neutralise the working capital distortions caused by Covid-19. Underlying cash conversion is calculated as EBITDA to operating cash inflow. and excludes cash inflows from Development and discontinued activities.

Note: All full year 2021 figures remain subject to audit.

For further information, contact:

The person responsible for arranging the release of this announcement on behalf of Mears Group PLC is Ben Westran, Company Secretary.

About Mears

Mears currently employs around 6,000 people and provides services in every part 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 and to provide accommodation and support for the most vulnerable.

We focus on long-term outcomes for people rather than short-term solutions and invest in innovations that have a positive impact on people's quality of life and on their communities' social, economic and environmental wellbeing. Our innovative approaches and market leading positions are intended to create value for our customers and the people they serve while also driving sustainable financial returns for our providers of capital, especially our shareholders.