REG - Mears Grp PLC - Final Results
10/04/2025 07:00
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RNS Number : 3934E Mears Group PLC 10 April 2025
Mears Group PLC
("Mears" or "the Group" or "the Company")
Preliminary Results for the year ended 31 December 2024
Excellent performance with confident outlook
Mears Group PLC, the leading provider of services to the Housing sector in the
UK, announces its preliminary financial results for the year ended 31 December
2024 ("FY24").
Financial Highlights
FY 2024 FY 2023 Change
Revenue (£m) 1,132.5 1,089.3 +4%
Profit before tax (£m) 64.1 46.9 +37%
Basic EPS (p) 50.3 32.9 +53%
Diluted EPS (p) 48.9 31.9 +53%
Dividend per share (p) 16.0 13.0 +23%
Adjusted net cash (excluding lease obligations)(1) £m 91.4 109.1
Average daily adjusted net cash(1) (£m) 59.6 76.5
· Group revenues up 4% year-on-year to £1,132.5m (FY23:
£1,089.3m).
· Profit before tax increased by 37% to £64.1m (FY23: £46.9m).
o Adjusted operating margin strengthened further to 5.6%(2) (FY23: 4.7%)
reflecting strong commercial and operation performance.
· Excellent cash performance with average daily adjusted net cash
of £59.6m (FY23: £76.5m)(1) after £40m of share buybacks were completed in
FY24.
o Cash conversion at 101% of EBITDA (FY23: 123%, last 5-years: 115%).
o Adjusted net cash(1) at 31 December 2024 of £91.4m (FY23: £109.1m).
· The Board is recommending a final dividend of 11.25p, increasing
the full year dividend by 23% to 16.00p (FY23: 13.00p) reflecting continued
strong cash performance and the Board's confidence in the positive outlook.
Operational Highlights
· Award of a significant new contract with North Lanarkshire
Council ('NLC') in May 2024 reflected the strength of the Group's partnership
with NLC over many years.
· Secured a contract with Moat, a large Housing Association,
covering c.22,000 homes in the South East of England, stepping in at
short-notice as a replacement provider.
· The Group secured aggregate new contract awards of around £220m
during FY24 (excluding NLC), at a bid conversion rate of c.41% (by value).
· Order book has increased to £3.0bn (2023: £2.5bn).
· The Central Government Management-led activities reported growth,
driven by new works delivered for the Ministry of Defence to provide housing
and support to those travelling to the UK under the Afghan Relocation and
Assistance Policy.
· The Group was proud of the positive feedback received through the
Sunday Times Best Big Companies to Work For survey reflecting Mears'
commitment to improving conditions and career development for employees.
Strategic update
· During the year, the Board carried out a full strategic update,
and the key objectives identified within the new 5-year plan include:
o Strengthening Mears' position as the leading provider of services to the
Housing sector in the UK
o Delivering organic growth within our Local Government maintenance-led
activities, to deliver high quality, cash backed earnings.
o Becoming a leader in Compliance, focusing on building safety, compliance,
and quality standards, which have growing regulatory drivers.
o Developing Mears' operational and commercial expertise to deliver
standalone planned works, including decarbonisation and retrofit, to our
existing and new clients.
o Delivering additional services to our key Central Government clients,
whilst ensuring that the business is well-positioned for the next round of
procurement in 2027-2029.
Current trading and outlook
· Mears has made a strong start to 2025 and, at this relatively
early stage, is increasing its guidance and expects to be modestly ahead of
market expectations with expected revenue of no less than £1,050m(3) and
adjusted profit before tax of no less than £50m(3).
Lucas Critchley, Chief Executive Officer of the Group, commented:
"I am pleased to report on another strong year for the Group. The strategic
update completed during the period has provided fresh impetus, refining our
approach to maximise the addressable opportunity. A strong period of contract
retention has bolstered the order book and provides improved revenue
visibility over the medium term. An increased operational focus has delivered
improved service metrics and is also evident in the continued progress in
operating margin. The Group is recognised as a housing specialist with a track
record of delivering reliable and innovative solutions across our range of
services and will continue to develop its service offering to address new and
evolving challenges faced by our clients."
1. Adjusted net cash excludes IFRS 16 lease obligations of £297.5m
(2023: £254.4m) and includes treasury deposits of £nil (FY23: £7.1m) as
detailed in the Financial Review
2. Adjusted operating margin is stated before the impact of IFRS 16,
as detailed in the Financial Review
3. The Board consider the current consensus analyst forecasts for
FY24, prior to this announcement, to be revenues of £992m and adjusted profit
before tax of £47.3m. Adjusted profit before tax is reported before
non-underlying items.
For further information, contact:
Mears Group PLC Tel: +44(0)1452 634 600
Andrew Smith
Lucas Critchley
Deutsche Numis Tel: +44(0)207 260 1000
Julian Cater
Kevin Cruickshank
Panmure Liberum Tel: +44(0)207 886 2500
Tom Scrivens
James Sinclair-Ford
About Mears
Mears is a leading provider of services to the Housing sector, providing a
range of services to individuals within their homes. We manage and maintain
around 450,000 homes across the UK and work predominantly with Central
Government and Local Government, typically through long-term contracts. We
equally consider the residents of the homes that we manage and maintain to be
our customers, and we take pride in the high levels of customer satisfaction
that we achieve.
Mears currently employs over 5,000 people and provides services in every
region of the UK. In partnership with our Housing clients, we provide property
management and maintenance services. 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.
Chair's Statement
Introduction
I am delighted to report a period of strong operational and commercial
progress that underpins an outstanding set of financial results. Our strong
performance owes much to three factors in particular.
The first, and most important, is the quality of our staff. I have seen many
examples of dedication, empathy and a determination to deliver a good
experience for customers, not simply to execute a piece of work. The second is
the strength of our client relationships, fostered by our belief that
excellent customer service is the key to effective cooperative working between
client and provider. Finally, our information technology platform has been
integral to the delivery of our high quality, responsive service and will
remain critical as we seek to broaden our services in the future. I am proud
of the progress made by Mears in 2024.
We were pleased to have been recognised again in the top 10 of the Sunday
Times Best Big Companies survey, achieving our highest ever position of 7th.
Mears has a diverse workforce of over 5,000 staff. We have also seen
increasing representation of women and ethnic minorities across the Group as
our inclusive recruitment and employee development programmes progress.
Training and investment in our workforce remain a priority, with our Emerge
and Embed management development programmes creating our future leaders and
our apprenticeship programme was again significantly over-subscribed.
On behalf of the Board, I thank all the Group's employees for the significant
part they played during another successful year for the Group. I continue to
be hugely impressed by the commitment, hard work, professionalism and loyalty
of our employees.
Results
Group revenues increased by 4% to £1,133m. It is particularly pleasing that
the Group reported good progress across both strands of its housing business.
Securing the award of the new North Lanarkshire Council ('NLC') contract for a
minimum of eight years and with an expected annual revenue of £125m, was a
particular highlight. The Central Government management activities reported
growth, primarily driven by new works delivered for the Ministry of Defence to
provide housing and support to those travelling to the UK under the Afghan
Relocation and Assistance Policy. The Group is recognised by Central
Government as a Housing specialist, and we are increasingly seeing
opportunities to extend our service offering in this area which bodes well for
the future. As reported previously, the Group has experienced elevated
revenues within its Asylum services. The Group saw some revenue reduction in
this workstream during the second half and anticipates that these revenues
will continue to normalise, although the timing is uncertain.
Profit before tax increased by 37% to £64.1m (2023: £46.9m), predominantly
driven by an improving adjusted operating margin to 5.6% (2023: 4.7%).
Notwithstanding the Group's ambitions to deliver growth, a primary financial
target for the business over recent years has been to see the margin return to
above 5%, which is seen as the Group's historical norm. The operational and
commercial review process at a contract level has seen increased intensity,
driving improvement in a number of operational measures and also, pleasingly,
pushing up the operating margin.
The Group continued to deliver strong cash generation, with operating cash
conversion at 101% of EBITDA, reflecting the high quality of the Group's
earnings. Strong working capital management remains central to our business
model. The increase in profit, combined with the impact of a reducing share
count resulting from the buyback, delivered diluted earnings per share of
48.9p, an increase of 53% (2023: 31.9p).
Strategic update
During the year, the Board completed a strategic update which has
unequivocally focused the Group on being the leader in the UK in providing
quality housing services to the public sector. The review identified an
increasing addressable market in our core housing activity and showed the
Group is very well-placed to deliver against those opportunities. The drivers
of change going through the sector are arguably as great as at any point in
recent history. The housing market continues to present opportunities for
Mears to support clients both in its traditional areas and some emerging ones.
Our disciplined approach to M&A is well considered and driven by the
opportunities that are available to deliver good quality sustainable growth.
Whilst the Board will continue to consider acquisitions which increase
operational scale or augment the Group's service offering, we are also
fortunate to have other organic growth opportunities which will preserve the
current strong cash position and deliver a higher return on invested capital
and quality of earnings.
The Board recognises that to deliver the plan, it is essential to continue
investing in our people and systems. The Group has recruited a number of new
senior roles adding to our capability and bandwidth and the Board approved a
significant increase in IT headcount to deliver an ambitious programme of
developments to our in-house operating systems.
Dividend and capital allocation
Our capital allocation policy remains consistent and prioritises the
allocation of capital to support our organic growth strategy, augmented by
modest strategic bolt-on acquisitions to further enhance our service offering
and accelerate the delivery of our plan. Positively, the capital expenditure
and working capital requirements of the business model are low. The strong
ensuing cash generation underpins a progressive dividend, the market purchase
of shares to the Employee Benefit Trust, and the return of surplus funds to
shareholders. The Board recognises that our key stakeholders take comfort from
the Group's strong balance sheet and Mears maintaining a modest net cash
position.
Given the excellent trading performance of the Group, the continued strong
cash performance and the confident outlook, the Board is pleased to propose a
final dividend of 11.25p per share, bringing the total for the year to 16.00p,
an increase of 23% (2023: 13.00p). It is an added benefit of the Group's share
buyback activity that, whilst the Board has increased the dividend per share
by 52% over the last 2-years, the cash cost of the dividend has only reported
a modest increase of 17% over that time. The Board continues to believe that a
capital allocation policy combining a progressively growing dividend within a
cover range of 2.0-2.5x, with the return of any excess capital via on-market
buyback purchases of shares, remains appropriate. In the short-term, cognisant
of the current elevated level of earnings, the Board intends to allow dividend
cover to increase beyond the Board's stated range outlined above, allowing for
progressive dividend payments within the Board's targeted cover over the
medium term.
During FY24, the Board approved a return of surplus capital of £40m to
shareholders, that was implemented through a third and fourth buyback
programme of on-market purchases. This resulted in the purchase and
cancellation of 10.9m ordinary shares of 1p each at an average price of 366p.
Consistent with our capital allocation strategy, and reflecting the strength
of our balance sheet, the Board announced a fifth buyback in January 2025 and
this concluded on 28 March 2025 having completed the purchase of a further
4.3m shares, at an average price of 371p and a total consideration of £16.0m.
Over the last two years, buybacks have reduced the Group's ordinary share
count by 27.4m shares at an average price of 325p and a total cash cost of
£89m, representing a reduction of c.25% of the Group's issued share capital
over that time. Together with dividends paid during this period, returns to
shareholders have totalled £114m. In addition, during that same period, the
Employee Benefit Trust ('EBT') purchased a further 5.1m ordinary shares at an
average price of 330p and a total cash cost of £16.7m.
Corporate Governance and Board development
Following the significant changes to the Board in recent years, 2024 was a
period of stability and an opportunity to reset the way the Board operates and
interfaces with the business. I believe we have made strong progress on the
effectiveness of the Board, and it was encouraging that this was confirmed in
a review by an external facilitator.
An important focus for the Board during 2024 was to support Lucas Critchley in
his first year as Chief Executive Officer following a smooth and well managed
transition from his predecessor. The strategic review was well timed,
providing Lucas with an opportunity to evaluate the Group's performance and
incorporate refinements and modifications in setting the Group's strategic
priorities.
Following the changes to the Employee Director arrangements during 2023, I am
pleased to report continued progress in this area. This team, under the
guidance of Hema Nar, has firmly established its role and purpose within the
business and provides an invaluable link between the Board and the wider
workforce. The development of the roles of the Deputy Employee Director and
the Trade Representative have further enhanced the effectiveness of this team.
As required by Governance guidelines, Dame Julia Unwin's tenure on the Board
came to an end on 2 January 2025. Julia has been a key contributor to the
Board for the best part of a decade and brought a unique perspective to many
debates and discussions. The Board has benefited from Julia's extensive and
varied experience and her contribution will be missed. On behalf of the Board,
I would like to thank Julia for her many years of service and wish her well
for the future.
We plan to recruit an additional Non-Executive Director during 2025 to ensure
that we continue to maintain a strong independent Board with the required
skills and experience.
Chief Executive Officer's Business Review
Introduction
I am pleased to report on another strong year for the Group. The strategic
update completed during the period has provided fresh impetus, refining our
approach to maximise the addressable opportunity. A strong period of contract
retention has bolstered the order book and provides improved revenue
visibility over the medium term. An increased operational focus has delivered
improved service metrics and is also evident in the continued progress in
operating margin. The Group is recognised as a housing specialist with a track
record of delivering reliable and innovative solutions across our range of
services and will continue to develop its service offering to address new and
evolving challenges faced by our clients.
Operational Review
2024 2023 Change
£m £m
Revenue
Maintenance-led 555.8 543.3 +2%
Management-led 576.7 543.3 +6%
Development - 2.7
Total 1,132.5 1,089.3 +4%
Operating profit before tax measures:
Statutory operating profit 72.6 52.2 +39%
Statutory operating margin 6.4% 4.8%
Adjusted operating profit (pre-IFRS 16) (1) 63.6 51.4 +24%
Adjusted operating margin (pre-IFRS 16) 5.6% 4.7%
Profit before tax measure
Statutory profit before tax 64.1 46.9 +37%
1. Adjusted measures are defined in the Alternative Performance Measures
section of the Financial Review.
The Group delivered strong financial performance in the year; revenues
increased by 4% to £1.13bn. (2023: £1.09bn), operating profit increased by
39% to £72.6m (2023: £52.2m) and diluted EPS increased by 53% to 48.9p
(2023: 31.9p).
It is particularly pleasing to report further strengthening in operating
margins given the emphasis that the senior management team has placed on this
since the pandemic. The statutory operating margin increased to 6.4%
(2023:4.8%). The Group also reports an adjusted operating margin, stated
before the impact of IFRS 16, of 5.6% (2023: 4.7%) which is considered to be
more closely aligned with how contracts are priced at tender, and reflects how
operational performance is analysed. A key factor in the improved operating
margins is the reinvigorated commercial review process which undertakes a
detailed monthly review of operational performance, demanding strict adherence
to business systems and processes. Whilst the primary focus of these reviews
is not financial, the impact upon margin and working capital has been
particularly pleasing. The Executive team is also mindful that the elevated
Management-led revenues have delivered additional economies of scale and an
increased level of overhead recovery, which has been a further factor behind
an increasing operating margin across recent periods. The Executive team is
confident that, as the elevated management-led revenues normalise, and some of
this increased overhead recovery diminishes, that this will be mitigated by
efficiency improvements within the business.
Maintenance-led revenues delivered growth of 2% to £555.8m (2023: £543.3m).
A key highlight of the year was the successful mobilisation of the new North
Lanarkshire Council ('NLC') contract which is discussed in greater detail
below. The new NLC contract, which is significantly larger than the previous
contract, mobilised in July 2024 and all the workstreams are due to move
across over a two-year period. The gas compliance work was the first new
service to transfer across. Given the phasing of the transition, the new
contract only delivered a small increase in revenues in the period to £66m.
The year also saw increased decarbonisation revenues, as works linked to
supporting clients in securing grant funding through SHDF Wave 2 became active
projects on-site. Whilst the Executive team is pleased with the strong
underlying progress made within the Maintenance-led activities, this is masked
by the full year impact of some residual contract attrition from 2023. The
Group has seen 100% retention on contracts subject to re-bid during the period
which provides the business excellent revenue visibility for the coming year
and beyond.
Management-led activities saw revenues grow by 6% to £576.7m, primarily
driven by new works delivered for the Ministry of Defence to provide housing
and support to those travelling to the UK under the Afghan Relocation and
Assistance Policy. In addition, the Group secured an additional contract area
to deliver temporary accommodation for prison leavers on behalf of the
Ministry of Justice. The Group sees further opportunities to provide
additional services to both of these important clients. The Asylum
Accommodation and Support Contract ('AASC') contract delivered revenues at a
level consistent with the prior year. The run-rate reached a peak during the
first half of 2024, but this has reduced significantly during the course of
the second half and the annual run-rate upon exiting 2024 is c.£60m below its
peak level. The focus remains upon securing sufficient residential property to
remove the requirement for short-term contingent solutions. The Executive team
anticipates that AASC revenues will continue to normalise, although the timing
is uncertain.
Strategic update
During the year, the business carried out a full strategic update and it is
pleasing to see an immediate impact of this, even at an early stage. Our new
5-year plan (FY24-FY28) will strengthen Mears' position as the leading
provider of housing service in the UK. We remain committed to Mears delivering
these services in a way that enhances our reputation as a highly responsible
partner that our stakeholders can trust to do business the right way.
We continue to see significant opportunities within the affordable housing
sector. Whilst the Senior Executive team, supported by external industry
expertise, considered a number of adjacencies and new markets, it is really
pleasing to identify significant untapped opportunities in our existing
sector, with some expansion of capability to reflect current and emerging
opportunities.
We expect to deliver growth in our Local Government work (including Housing
Associations) in terms of both revenue and margin. Whilst we will continue to
be highly selective and disciplined in terms of what we tender for, the
strategic update highlighted that we were, at times, being too risk averse,
and that there were significant opportunities that we were not addressing. It
is worth remembering that at the time of the previous business planning
process, a key focus of the business was pruning the contract estate, removing
suboptimal arrangements and driving efficiencies at the contract level. The
Group delivered strongly against that plan. This strategic update showed that
we were only previously active in around one-third of the total market, and
regulatory drivers in the areas of Compliance and Retrofit are expected to
increase the market size further. In addition, over half of responsive repairs
and maintenance are delivered through Direct Labour Organisations ("DLO's")
with whom we had not previously identified a meaningful way to partner.
We intend to become leaders in Compliance and develop a full Asset Management
capability. The social housing sector, despite its vital role, faces a
multitude of challenges. A lack of affordable housing and declining government
funding have led to inconsistent asset investment and have contributed to a
deteriorating stock condition. Recent and proposed regulatory amendments
focusing on building safety, compliance, and quality standards, place greater
financial and reputational risk upon Registered Providers. The sector
traditionally has a fragmented approach to this area, which can lead to an
inconsistent service and customer experience, and also impedes data capture,
making it difficult to record, analyse, and use the data effectively. Mears
recognises these challenges and the limitations of the current approach. Our
proposed solution is to develop a fully integrated housing compliance and
asset management strategy and address these issues head-on. Mears has a clear
vision for this strategic plan, recognising the need to invest additional
resources in people and technology.
Over recent years, Mears has looked to create an end-to-end decarbonisation
service to support our clients with the huge challenge of improving social
housing stock. The Group has performed well in supporting clients secure
grants through the Social Housing Decarbonisation Fund ('SHDF'). The original
Government commitment was to provide £3.8bn of funding over a 10-year period,
to be released in 'waves' over that period. To date, funding of c.£2.25bn has
been awarded across the first three waves. Since the launch of SHDF in 2023,
the Group has secured grant funding for its clients of £85m, leveraging a
clear end to end capability developed post the acquisition of IRT. There are
additional opportunities under the ECO funding stream that we intend to
address going forward through the internal development of our Net Zero team.
Under the new plan, the Group intends to develop its operational and
commercial expertise to deliver standalone planned works, including retrofit,
to non-existing clients; both of these areas were excluded from the previous
plan.
Over the next five years, we intend to deliver additional services to our key
Central Government clients: the Home Office ('AASC'), Ministry of Defence
('RLAP') and Ministry of Justice ('CAS3'). Whilst the elevated revenues being
delivered on the AASC contract mean that we may see a reduction in revenue
over the course of the five-year plan, there are a number of significant new
bidding opportunities with each of those clients which would allow the Group
to broaden and extend its service offer. We place emphasis on ensuring we are
performing at a high level and understanding the developing needs and
requirements of Ministers and Central Government, working in partnership to
achieve agreed outcomes. We are ensuring that our positive contribution is
known and understood. The Mears team recognise that our existing work will,
over the course of this next strategic cycle, become the subject of a new
round of procurement. We believe that we are well-positioned to secure work
through the next iteration of those contracts.
Notwithstanding our stated desire to grow the business, Mears will remain
highly selective and disciplined in approaching new opportunities and
operating margin will remain paramount. Maintaining a sustainable operating
margin in the 5.0-6.0% range (on an adjusted pre-IFRS 16 basis) or 5.9%-6.9%
(on a post-IFRS 16 basis), remains central to the new plan.
Historically, our approach to change and project management has not been as
effective as we would have liked. Our new plan requires a more disciplined
approach to change management, without wishing to lose the flexibility and
ability to react that has played an important part in our success. During
2024, the Group formed a Group-wide Change Management Steering Group with a
newly appointed senior hire to lead on this area and who will put in place
clear change and project management procedures, with an emphasis given to IT
projects. Through 2025 onwards, we will look to cascade solid change
management procedures down to a local level, thereby increasing the overall
capability of the Group. Success will be measured by our ability to achieve
designated outcomes, on time and to budget.
Business Development
As we entered 2024, the Group faced the prospect of around one-third of the
Group's Maintenance-led contracts being subject to a rebid during a single
calendar year, as a number of long-term and flagship customer relationships
were approaching expiry. The Group has a strong record of retaining contracts,
but rebids naturally bring some risk and require a shift in focus from bidding
new works. It is therefore extremely significant that the Group was able to
celebrate new long-term contracts with our North Lanarkshire, Medway,
Folkestone, Thanet and Dover clients, whilst securing contract extensions in
the case of Rotherham, Islington and Thurrock. The quality of our service
delivery and client satisfaction is reflected in our ability to retain work on
rebid. To report 100% retention on such a high number of contracts that were
subject to re-bid in 2024 reflects exceptional performance and positions the
Group strongly for the year ahead. There remains a single material contract
still subject to rebid that could impact upon 2025, which is Milton Keynes.
The award of the new contract with North Lanarkshire Council ('NLC') was a key
highlight and an indication of both the strength of the Group's partnership
with NLC over many years, a shared commitment to deliver excellent services to
residents, and the quality of our service offering. The contract covers a wide
range of services including reactive and planned maintenance, compliance and
gas servicing for 37,000 homes and 1,200 Council buildings, with an annual
value of more than £125m over up to 12 years. The mobilisation phase of this
new contract has gone well.
Late in the year, the Group secured an emergency contract with Moat, covering
c.22,000 homes in the South East of England. This new contract is for a period
of 18 months, with an estimated contract value of £12m, under which Mears
will deliver responsive and voids maintenance services. The Mears relationship
with Moat dates back to 2009, and the Board was disappointed when the Group
was unsuccessful in the procurement process in 2022. It is a clear example
that maintaining a disciplined bidding approach does not disadvantage the
Group over the longer-term. The Group will invest in this contract to ensure
that Mears is well-positioned to secure works beyond the initial period.
The strong contract retention performance, combined with the new workstreams
secured through NLC and Moat which will come online during 2025 provides a
strong organic tailwind over the coming year.
The SHDF Wave 3 saw Mears submit applications on behalf of clients which has
secured £30m of grant funding, contributing to a total works value of over
£60m to be delivered over the course of 2026 and 2027. It is the grant funded
element that represents new value to the Group's order book. There will be
additional opportunities for the Group in the next Wave 4 of the SHDF funding
applications.
As reported previously, the Group used its Balance Sheet strength to fund
property acquisitions, providing an additional source of good quality
accommodation to support the urgent requirements of the Asylum Accommodation
contract. Leveraging the Group's strong balance sheet position in this way was
a short-term step and it was pleasing to complete the sale and leaseback of
the first tranche of properties, enabling those monies to be recycled to
acquire further properties. This approach has played a critical role in
delivering against the objectives of one of our key clients.
Property Compliance Services
Since launching the Integrated Property Compliance strategy, we have focused
on establishing an in-house capability to deliver core compliance activities,
securing essential third-party certification, and enhancing business
intelligence. We are on track to establish a high-quality, self-sufficient
Compliance function. Our initial service offer has focused on core compliance
workstreams, including gas servicing, electrical testing, fire safety, and
damp and mould compliance and asset condition surveys. This phased approach
ensures that the Group is laying a strong foundation for operational
efficiency and growth. Over time, the Group will broaden its service offer.
The development of Mears Contract Management, the proprietary IT front-line
system, is critical to success in this area. Phase One is now complete, having
focused on addressing the core compliance workstreams, establishing a robust
foundation for consistent delivery. Phase Two will look to broaden the
platform's capabilities to further enhance operational efficiency and
introduce advanced automation features ensuring streamlined workflows and
adherence to high service standards.
Outlook
Our focus in 2025 remains on strengthening Mears' position as the leading
provider of housing services. The demand for our services remains strong. We
continue to place emphasis on winning good quality contracts that can achieve
sustainable margins whilst at the same time providing a first-class service.
The Group has made a strong start to FY25. We anticipate delivering solid
growth in our Local Government maintenance work, following a strong period of
contract retention and further augmented by additional Compliance services and
through extending our focus to planned and retrofit activities. We remain
well-positioned to deliver additional services to our Central Government
clients whilst recognising that over the short term, we may see a reduction in
revenues in the management-led division reflecting some normalisation in AASC
revenues, although the reduction so far in 2025 has been slower than
previously expected.
We remain confident that the Group is well-positioned to maintain adjusted
pre-IFRS 16 operating margins within the range of 5-6% (post-IFRS 16 operating
margin 5.9%-6.9%) underpinned by a disciplined approach to new contract
bidding, and a strict approach to operational and commercial management.
We expect to continue to deliver strong underlying cash generation, reflecting
the quality of earnings and the low capital intensity nature of our operating
model.
Financial review
This section provides further key information in respect of the financial
performance and financial position of the Group to the extent not already
covered in detail within the Chief Executive Officer's Review.
Alternative performance measures (APMs)
The Strategic Report includes both statutory and adjusted performance
measures. APMs are considered useful to stakeholders in assessing the
underlying performance of the business, adjusting for items which could
distort the understanding of performance in the year and between periods, and
when comparing the financial outputs to those of our peers. The APMs have been
set considering the requirements and views of the Group's investors and debt
funders among other stakeholders. The APMs and KPIs are aligned to the Group's
strategy.
Reflecting the steady state of the business and the quality of the earnings,
the Group has used a pure unadjusted profit before tax and earnings per share
as its headline profit measures. The Group makes regular reference throughout
the Strategic Report to an adjusted operating profit, measured before the
impact of IFRS 16, and stated both in pounds (£) and as a percentage margin
(%). This adjusted measure is a key metric for the senior executive team when
assessing new contract opportunities and existing branch performance.
The Group also uses an adjusted net cash measure which excludes IFRS 16 lease
obligations from the statutory net debt measure. This is referenced in both a
spot measure (on 31 December) and in a 365-day average.
These APMs should not be considered as a substitute for or superior to
International Financial Reporting Standards (IFRS) measures, and the Board has
reported both statutory and alternative measures with equal prominence
throughout the Strategic Report and financial statements.
The method of calculation and a reconciliation between each APM and the
relevant statutory measure are detailed below, together with an explanation as
to why management considers the APM to be useful in helping users to have a
better understanding of the Group's underlying performance. This section of
the Strategic Report also provides additional analysis to give the user an
easier route to understand underlying performance and deriving their own
profit and EBITDA measures.
Note 2024 2023
£'000 £'000
Profit before tax Income Statement 64,141 46,918
IFRS 16 profit impact See below 3,744 9,093
Finance income (non-IFRS 16) Note 5 (4,275) (4,655)
Adjusted operating profit pre-IFRS 161 APM 63,610 51,356
Amortisation of software and acquisition intangibles Note 12 2,244 1,879
Depreciation and loss on disposal (non-IFRS 16)2 Note 13 7,574 7,385
EBITDA pre-IFRS 161 73,428 60,620
IFRS 16 profit impact See below (3,744) (9,093)
Finance costs (IFRS 16) Note 5 12,693 9,898
Depreciation, loss on disposal and impairment (IFRS 16)3 Note 14 62,733 56,951
EBITDA post-IFRS 161 Statutory 145,110 118,375
Amortisation of software and acquisition intangibles Note 12 (2,244) (1,879)
Depreciation, loss on disposal and impairment (IFRS 16)3 Note 14 (62,733) (56,951)
Depreciation and loss on disposal (non-IFRS 16)2 Note 13 (7,574) (7,385)
Operating profit post-IFRS 161 Income Statement 72,559 52,161
1 Operating profit and EBITDA measures include share of profits of
associates.
2 Includes loss on disposal of £508,000 (2023: £80,000) and loss on
sale and leaseback of £283,000 (2023: £nil).
3 Includes profit on disposal of £150,000 (2023: £180,000) and
impairment of £633,000 (2023: £6,223,000).
The Directors use the Operating profit pre-IFRS 16 measure to generate the
Group's headline operating margin. Whilst this generates a lower operating
margin, it reflects how the underlying contracts have been tendered, how the
senior executive team assess performance, and is also more aligned to the
underlying cash generation. In addition, this measure is also used for the
purposes of assessing the Group's compliance with its banking covenants which
utilise pre-IFRS 16 measures.
Note 2024 2023
£'000 £'000
Revenue Statutory 1,132,510 1,089,327
Adjusted operating profit pre IFRS 16 APM 63,610 51,356
Adjusted operating margin % APM 5.6% 4.7%
IFRS 16 profit impact
The profit impact in respect of IFRS 16, which was included within the APM
analysis above, is detailed below:
2024 2023
£'000 £'000
Charge to income statement on a post-IFRS 16 basis (74,793) (60,626)
Charge to income statement on a pre-IFRS 16 basis (71,682) (57,756)
Profit impact from the adoption of IFRS 16 and before impairment (3,111) (2,870)
Impairment of right of use assets (633) (6,223)
Profit impact from the adoption of IFRS 16 (3,744) (9,093)
Accounting standards require that, where a contract is identified as a lease
under the rules of IFRS 16, the Group recognises its right to use a leased
asset and a lease liability representing its obligation to make lease
payments. The depreciation cost of the leased asset is typically charged to
profit within cost of sales, whilst the interest cost of the newly recognised
lease liability is charged to finance costs. On the basis that depreciation is
required to be charged on a straight-line basis, whilst the interest element
is charged on an amortised cost basis, this results in a higher charge being
applied to the income statement in the early years of a lease, with this
impact reversing over the later years. Ultimately, IFRS 16 has no impact on
the lifetime profitability of the contracts and there are no cash flow
impacts, but the standard alters the phasing over time, front-loading the
cost.
Where leasing arrangements are over the long-term, the differential in the
charge applied to the income statement under IFRS 16 compared to the lease
payment can be significant, whilst the revenue recognition associated with
these leases remains at a consistent level, aligned to the respective lease
payment. It is for this reason that the Group has consistently utilised an APM
to report profits on a pre-IFRS 16 basis. In doing so, the mismatch between
the recognition of revenue and the associated cost is addressed. The table
below highlights the acceleration of the recognition of cost through the
adoption of IFRS 16. This position will ultimately reverse in time, although
the differential between right of use asset and the corresponding lease
obligation is likely to diverge further in the near term:
Note 2024 2023
£'000 £'000
Lease obligations at 31 December 19 297,502 254,440
Right of use asset at 31 December 14 272,171 233,649
Future lifetime profit impact at 31 December from the adoption of IFRS 16 25,331 20,791
compared to the future lease payment
Net cash/(debt)
The Group excludes the financial impact of IFRS 16 from its adjusted net cash
measure. This adjusted net cash measure has been introduced to align the net
borrowing definition to the Group's banking covenants, which are required to
be stated before the impact of IFRS 16.
The Group does not recognise lease obligations as traditional debt instruments
given a significant proportion of these leases have break provisions which
allow the Group to cancel the associated lease obligation with minimal
associated cost. A reconciliation between the net debt and the adjusted
measure is detailed below:
Note 2024 2023
£'000 £'000
Cash and cash equivalents Balance sheet 91,404 138,756
Short-term financial assets Balance sheet - 7,090
Overdrafts and other credit facilities Balance sheet (36,699)
Adjusted net cash APM 91,404 109,147
Lease liabilities (current) Note 19 (66,861) (54,492)
Lease liabilities (non-current) Note 19 (230,641) (199,948)
Net debt (including IFRS 16 lease obligations) (206,098) (145,293)
Statutory profit before tax
The Board believes that the statutory Profit before tax measure is a true
reflection of the underlying performance of the business, and no alternative
measure is considered necessary or appropriate. The Board recognises that any
reported profit will include singular components which, in isolation, may be
considered unusual, infrequent, non-recurring or non-underlying. Additional
detail is disclosed separately within the notes to the financial statements,
and these are signposted below to assist the user in accessing these and to
better understand the underlying performance in the period.
2024 2023
Note £'000 £'000
Impairment of right of use assets 14 (633) (6,223)
Amortisation of acquired intangibles 12 (245) (244)
Loss on sale and leaseback transaction 13 (283) -
Increase in fair value of other investments 15 785 -
Onerous contract provisions (provided in year less amounts released unused) 20 (759) (8,784)
Legal provisions (provided in year less amounts released unused) 20 (4,792) (3,020)
Settlements on exiting LGPS pension schemes 25 2,413 (58)
IFRS 16 and IAS 36: Impairment of Right of use asset
Under IAS 36, the Directors are required to consider for each asset or group
of assets with separately identifiable cash flows if there are indicators of
impairment at the year end. Where such indicators are present, a full
impairment review must be carried out, comparing the carrying value of the
assets to their value in use (or fair value less costs of disposal, if that is
higher). In particular, the Directors consider that for each Community Housing
scheme, the relevant group of right of use assets has identifiable cash
inflows and therefore they must assess whether there are any indicators of
impairment for each of these housing schemes. Certain Community Housing assets
were the subject of a significant impairment in FY23, which means that those
affected assets are more sensitive to further changes in the assumptions
underlying their value in use.
Property yields for residential properties similar to those used in the
Community Housing business have been broadly consistent during FY24, following
a sharper increase in FY23. This measure is closely correlated to discount
rates, and an increasing discount rate would result in a reduction in the
value in use. Property maintenance costs have also been broadly consistent
during FY24, having stabilised since the rising costs experienced in FY22 and
FY23. The increasing regulation attached to affordable housing brings some
additional cost pressure, especially in respect of fire risk. An increase in
the costs of maintaining these property schemes, to the extent that they
cannot be passed onto the customer or recovered through other mechanisms, will
reduce the value in use.
The reassessment of cash flows and other key assumptions resulted in an
additional impairment charge of £0.6m (2023: £6.2m) to align the carrying
value of the right of use assets to their value in use. This additional charge
applied to FY24 will be mirrored by a reduction in depreciation in future
periods and ultimately has no impact on the lifetime profitability of any of
the underlying contracts.
Sale and leaseback
The Group has utilised its balance sheet strength to fund property
acquisitions to support the requirement for additional properties within the
Asylum Accommodation and Support Contract ('AASC'). This approach has played a
critical role in enhancing the service offering and delivering against client
expectations. The Group purchased 221 properties in 2023 and in the early part
of 2024 across the North-East of England for a cash cost of £22.7m. In
December 2024, these properties were the subject of a sale and leaseback, by
which point the carrying value of the portfolio was £22.2m. The properties
will continue to be used to support the delivery of the AASC until the
contract expiry. This transaction saw the Group receive £16.3m in cash on
completion, with the balance taking the form of a £5.3m interest-bearing
loan, combined with a continuing 25% equity interest in this investment
vehicle. The transaction crystallised a small loss on disposal of £0.3m. The
Group remains committed to securing good quality accommodation across a wide
dispersal area and has continued to purchase additional properties through
FY24, which the Board anticipates will be the subject of a later sale and
leaseback.
Taxation
Mears does not engage in artificial tax planning arrangements but takes
advantage of available tax reliefs. The tax position in any transaction is
aligned with the commercial reality and any tax planning is consistent with
the spirit as well as the letter of tax law. During the period, HMRC completed
a Group-wide Business Risk Review which covered all lines of taxation and
awarded the Group a low-risk status in respect of the three review headings:
Systems and delivery, Governance, and Approach to tax compliance. Given the
Group's activities are largely involved in servicing public sector clients,
the risk of reputational damage flowing from a tax compliance failure is
higher than in other sectors. This leads the Group to take a risk averse
approach if there is an element of uncertainty regarding a particular
treatment.
The tax charge for the year was £17.2m (2023: £10.3m), at an effective tax
rate of 26.8% (2023: 21.9%). This is the first time that the effective tax
rate has been higher than the standard corporation tax rate of 25.0% (2023:
23.5%) and is predominantly caused by depreciation charges on assets that are
ineligible for corporation tax relief (£0.8m / 1.2%), expenses not deductible
for tax purposes (£0.2m / 0.3%) and adjustments in respect of prior periods
(£0.8m / 1.3%) combined with a number of favourable variances. The Group
expects the effective tax rate in future periods to be at a similar level to
the standard rate of corporation tax.
Mears is a significant contributor of revenues to the UK Exchequer, paying
£203.3m of taxes in the year (2023: £192.7m). This relates to taxes borne by
Mears (principally corporation tax and Employer's National Insurance) and
taxes collected by Mears (being VAT, Income tax under PAYE and Employee's
National Insurance). Further detail in respect of the taxes paid during 2024
are provided below:
Taxes Tax Total
borne collected £m
£m £m
Corporation Tax 17.4 - 17.4
VAT and Insurance Premium Tax1 1.1 117.7 118.7
Construction Industry Scheme - 6.0 6.0
Employment taxes 0.9 30.8 31.8
National Insurance 19.5 9.7 29.3
Total 39.0 164.3 203.3
1 VAT excludes the disallowance of input tax recovery on the Group's
exempt supplies.
Earnings per share ('EPS')
2024 2023
Basic earnings per share (p) 50.27 32.90
Diluted earnings per share (p) 48.86 31.94
Weighted average number of shares (for basic EPS) (m) 92.56 106.99
Weighted average number of shares (for diluted EPS) (m) 95.22 110.22
Diluted earnings per share increased by 53% to 48.9p (FY23: 31.9p). The 17.0p
improvement is driven by the increase in profit after tax in the year
(+13.2p), the reduction in the weighted average number of shares as a result
of the share buyback programme (+5.1p), a decrease in the non-controlling
interest as a result of the new North Lanarkshire contract now sitting within
a wholly owned subsidiary (1.1p) and an increase in the effective tax rate
(-2.4p).
The share buyback programmes have been significant in driving the increase in
earnings per share. Positively, the full impact on EPS flowing from the 2024
buybacks will not be fully realised until 2025, and the fifth programme which
was completed during the first quarter of 2025 will augment this further. The
latest estimate for the weighted average number of shares to calculate the
diluted EPS for FY25 is 85.8m shares which in isolation will drive a further
7% increase to this measure in that year.
Balance sheet
The Group reported a reduction in net assets from £200.5m to £187.5m. The
significant distribution to shareholders through both ordinary dividends and
share buybacks has reduced the net asset position in the year, but the strong
profit generation has ensured a robust position has been maintained. The key
movements are detailed below:
£m
Net assets at 1 January 2024 200.5
Profit after tax 46.9
Dividends (12.9)
Share buybacks including purchases by EBT (52.1)
Increase in pension net surplus 1.6
Other equity movements 3.5
Net assets at 31 December 2024 187.5
The key balance sheet categories are reported below together with a brief note
to provide further explanation:
Assets
2024 2023
£m £m
Goodwill 121.9 121.9
Intangible assets 6.2 7.0
Property, plant and equipment ('PPE') 38.8 38.5
Right of use assets 272.2 233.6
Investments 2.3 0.6
Loan notes 10.2 4.5
Pension assets 23.2 19.8
Total non-current assets 474.8 426.0
Inventories 1.2 1.5
Trade receivables 133.2 126.7
Corporation tax asset 0.7 -
Bank, cash and short-term financial assets 91.4 145.8
Total current assets 226.5 274.0
Total assets 701.3 700.0
· Goodwill was generated from previous acquisitions and is tested
annually for impairment.
· Intangible assets primarily relate to in-house developments to
the Group's key operational IT platforms and are amortised over their useful
economic life, typically 5 years. The net book value reduced in the year, with
amortisation of £1.9m exceeding the value of new additions of £1.4m. To
deliver the broader service offering set out in the new strategic plan, the
Board has approved a significant increase in IT development. Once the new
resource is in place, the board anticipates an annual development spend of
around £3m.
· PPE additions are typically low given the Mears operating model
carries a low capital intensity. Notwithstanding this, the Board has allocated
additional capital to support the urgent requirement for additional
residential housing to support the requirements of the Group's AASC contract.
During FY24, the Group made property additions of £26.4m to support the
requirements of the AASC. In the same period, the Group disposed of properties
with a base cost of £22.7m through a sale and leaseback transaction meaning
the net movement was only a modest increase to the carrying value of freehold
property. Excluding property additions, capital expenditure in the period was
just £3.5m.
· As detailed above, leasing properties has become an integral part
of the Group's service offering. The Group recognises its right to use a
leased asset in accordance with IFRS 16. The new leases taken on in the period
predominantly relate to the AASC contract, given the requirement to increase
the number of residential bedspaces available. The additions in the period
relate to both new leases, and also inflationary increases to lease payments
on existing properties.
· Loan notes of £4.7m were received on the disposal of Terraquest
in 2020 and include interest accruing annually at 10%. Aside from this
interest accrual, the loan note balance has increased by £5.3m in the period
as a result of a new loan note acquired as part of the sale and leaseback
transaction, where the Group also retained a 25% interest in the entity which
was the subject of the disposal.
· Investments have historically related almost entirely to our A2
Dominion partnership which is equity accounted. A small balance of £0.1m in
FY23 related to a minority interest stake retained following the disposal of
Terraquest in 2020. Accounting standards require this investment to be stated
at fair value. The Terraquest business has performed strongly for the new
buyer of this business, and the Directors increased the fair value of this
investment to £0.9m at the FY24 year end.
· Pension accounting is covered in detail below.
· Trade receivables includes trade debtors and contract assets. The
small increase is broadly in line with the growth in revenues.
· The net cash balance is detailed above, combining the bank, cash
and short-term financial assets. The cash balance in isolation is not
comparable to the prior year. The overdraft and other credit facilities of
£36.7m reported in the prior period was simply a timing difference which
inflated the cash balance at that point in time. The adjusted net cash net
balance of £91.4m is a reduction from the prior year (2023: £109.1m),
reflecting strong cash generation, reduced by property acquisitions on the
AASC contract and shareholder distributions.
Liabilities
2024 2023
£m £m
Overdraft and other credit facilities - (36.7)
Trade payables (192.3) (187.0)
Current lease liabilities (66.8) (54.5)
Corporation tax liability - (0.1)
Provisions (10.8) (8.4)
Total current liabilities (269.9) (286.6)
Pension liabilities - (0.2)
Deferred tax liability (3.5) (2.9)
Non-current lease liabilities (230.6) (199.9)
Non-current provisions (9.8) (9.8)
Total non-current liabilities (243.9) (212.8)
Total liabilities (513.8) (499.4)
Total net assets 187.5 200.5
· Working capital balances include trade creditors, contract
liabilities and accruals and the modest increase is broadly in line with the
growth in revenues.
· As detailed above, leasing properties has become an integral part
of the Group's service offering. Where a contract is identified as a lease
under the rules of IFRS 16, the Group recognises a lease liability
representing its obligation to make lease payments. Liabilities falling due
within 12 months are categorised as current, with the remainder non-current.
· All Group profits are chargeable to corporation tax at the
headline rate of 25.0% (2023: 23.5%). The Group is required to make quarterly
payments, meaning any creditor outstanding at the period end is typically low.
· A provision is a liability of uncertain timing or amount.
Provisions can be distinguished from other liabilities such as trade payables
and accruals because there is uncertainty about the timing or amount of the
future expenditure required in settlement. The opening provision of £18.2m
increased to £20.6m. Additional detail is provided within note 20 to the
financial statements which details amounts provided, utilised and released in
the year.
· A deferred tax liability of £3.5m (2023: £2.9m) is recognised
on temporary differences between the treatment of items for tax and accounting
purposes.
Defined benefit pension arrangements
The Group's defined benefit pension arrangement can be categorised three ways:
· Two principal Group pension schemes, where the Group is fully at
risk over the long term.
· Four schemes where the Group has received Admitted Body status in
a Local Government Pension Scheme ('LGPS'), but where the Group holds a
back-to-back indemnity under the associated customer contract, removing the
Group's exposure to changes in pension contributions and any future deficit
risk.
· Nine other schemes, the majority of which are LGPS, but where
there is no indemnity in place. However, the risk attached to these schemes
matches the time horizon of the underlying contract, which whilst not removing
risk, reduces the period over which deficits can arise. The Group is therefore
only carrying the pension risk over the medium term.
The Directors are comfortable with the position on both the guaranteed and
other schemes. The Group enjoys a significant surplus on many of these
schemes, but these are largely not recognised as assets as there is
uncertainty around the ability to recover a surplus.
The two principal Group schemes enjoy a strong financial position and have
done consistently over the last 10 years. Both schemes are relatively mature,
and most assets held are matched to the underlying obligations. It was
pleasing to reach a position where both Group schemes can be considered
largely self-sufficient. The Directors acknowledge the robust and disciplined
performance of the scheme managers and trustees who have managed this pension
risk so well over many years to reach the position reported today.
2024 2024 2024 2024
Group Indemnified No indemnity Total
£'000 £'000 £'000 £'000
Total scheme assets 118,879 55,861 59,570 234,310
Total obligations (97,210) (37,029) (39,676) (173,915)
Funded status 21,669 18,832 19,894 60,395
Surpluses not recognised as assets 0 (17,888) (19,262) (37,150)
Pension surplus 21,669 944 632 23,245
Cash flow and working capital management
The Group reported an adjusted net cash position at the year-end of £91.4m
(2023: £109.1m). Whilst it is pleasing to report a strong cash position
within the year-end balance sheet, of much greater significance is the
performance over the 365-day period. Positively, the strong year end
performance was also mirrored in the average daily adjusted net cash for the
year at £59.6m (2023: £76.5m).
2024 2023
£'000 £'000
Average daily adjusted net cash 59,626 76,515
Adjusted net cash at 31 December 91,404 109,147
Mears fosters a strong "cash culture", whereby the Group's front-line
operations understand that invoicing and cash collection are intrinsically
linked, and that a works order is not complete until the monies are banked.
This culture has underpinned strong cash performance over many years. A key
performance measure for the Group is the percentage of EBITDA that is
converted into operating cash flow. The ability of the Group to bank its
profits over multiple periods provides a strong indication of the quality of
the earnings.
2024 2023
£'000 £'000
Profit before tax 64,141 46,918
Net finance costs 8,418 5,242
Depreciation and amortisation 9,818 9,264
Right of use asset depreciation and impairment 62,733 56,951
EBITDA 145,110 118,375
Other adjustments 278 (204)
Change in inventories 290 5,416
Change in operating receivables (7,021) 1,290
Change in operating payables and provisions 7,551 20,346
Operating cash flow 146,208 145,224
Operating cash to EBITDA conversion 101% 123%
The Group has consistently delivered operating cash flows in excess of EBITDA
over the last 5-years reporting the conversion of 115% of EBITDA into
operating cash flows over that period as detailed below. Whilst the surplus
cash generated in excess of the reported EBITDA reflects the high quality of
earnings, combined with strong working capital management, the Group has
enjoyed a timing benefit in respect of certain contractual mechanisms linked
to payments on account and gainshares which are reflected in an elevated
Contract Liabilities balance. The Board anticipates some unwind in Contract
liabilities during 2025, whilst anticipating continued strong cash generation.
5-year total 2024 2023 2022 2021 2020
£'000 £'000 £'000 £'000 £'000 £'000
EBITDA 496,736 144,110 118,375 94,868 83,448 55,935
Operating cash flow 570,347 146,208 145,224 115,330 60,362 103,223
EBITDA to operating cash conversion 115% 101% 123% 122% 72%1 185%1
1 Cash performance in 2020 and 2021 should be combined to reflect
abnormal cash flows through the pandemic.
Over the last two completed financial years, the Group has purchased c.£30m
in properties to provide additional support to the AASC contract, purchased
its own shares at a cost of c.£90m, and paid out c.£25m in ordinary
dividends, whilst registering only a small reduction in the adjusted net cash
balance over that period.
Shareholder distributions
During FY24, the Board approved a return of surplus capital of £40m to
shareholders, that was implemented through a third and fourth buyback
programme of on-market purchases, resulting in the purchase and cancellation
of 10.9m ordinary shares of 1p each at an average price of 366p before
transaction costs. In addition, the Employee Benefit Trust ('EBT') purchased a
further 3.2m ordinary shares at an average price of 367p and a total cash cost
of £11.7m.
2024 2023
Shares £'000 Shares £'000
(m) (m)
On-market purchases 10.9 40,317 12.2 33,164
EBT purchase 3.2 11,733 1.7 5,122
Total 14.1 52,050 13.9 38,286
The Board has proposed a final dividend of 11.25p per share, bringing the
total for the year to 16.00p, an increase of 23% (2023: 13.00p). It is an
added benefit of the buyback, together with the shares acquired through the
EBT, that whilst the Board has increased the dividend by 52% over the last two
years, the cash cost of the dividend has only reported a modest increase by
17% over that time. A full year dividend of 16.00p is expected to come at a
cash cost of £13.5m, dependent upon the completion of the fifth buyback
programme, which is ongoing.
Banking and financial covenants
The Group has a simple approach to its debt funding arrangements, holding a
single revolving credit facility (RCF) which provides a total commitment of
£70m but allows the Group to draw down monies as required, mirroring an
overdraft facility. The Group also has a traditional overdraft which is carved
out from this facility to provide additional flexibility. The Board is
grateful for the tremendous support that has been provided to the Group by its
banking partners over several decades.
The financial covenants included within the RCF, which are tested twice-yearly
on 30 June and 31 December, are detailed below. Given the Group traded on a
net cash basis throughout 2024, and enjoyed an associated finance credit,
there is significant headroom. Nevertheless, the Directors have completed a
Viability Review and stress tested the Group's resilience across several
downside scenarios.
Covenant Formulae Covenant ratio
Leverage Consolidated net borrowing divided by adjusted consolidated EBITDA* 3.00x
Interest cover Adjusted consolidated EBITDA* divided by consolidated net finance charges** 3.50x
* Adjusted EBITDA on a rolling 12-month basis, pre IFRS 16, and stated
before non-underlying items and share-based payments.
** Net finance charges are stated on a pre-IFRS 16 basis and comprise
all commission, fees, and other finance charges payable in respect of
financial indebtedness. This excludes income/costs relating to Group pension
arrangements.
A margin ratchet ranging from 1.75-2.75% is applied to drawdowns under the
RCF, determined by the Group's leverage ratio at each quarter end. This margin
is payable in addition to the Sterling Overnight Index Average (SONIA). Given
the strong liquidity and cash performance, the Board's expectation would be
for the margin payable during 2025 to be at the bottom end of the range.
Consolidated statement of profit or loss
For the year ended 31 December 2024
Note 2024 2023
£'000 £'000
Sales revenue 2 1,132,510 1,089,327
Cost of sales (879,257) (870,557)
Gross profit 253,253 218,770
Administrative expenses (181,708) (167,096)
Operating profit 4 71,545 51,674
Share of profits of associates 15 1,014 486
Finance income 5 5,367 5,939
Finance costs 5 (13,785) (11,181)
Profit for the year before tax 64,141 46,918
Tax expense 8 (17,205) (10,258)
Profit for the year 46,936 36,660
Attributable to:
Owners of Mears Group PLC 46,526 35,204
Non-controlling interest 410 1,456
Profit for the year 46,936 36,660
Earnings per share
Basic 10 50.27p 32.90p
Diluted 10 48.86p 31.94p
All activities were in respect of continuing operations.
Consolidated statement of comprehensive income
For the year ended 31 December 2024
Note 2024 2023
£'000 £'000
Profit for the year 46,936 36,660
Other comprehensive income that will not be subsequently reclassified to the
Consolidated Statement of Profit or Loss:
Actuarial gain/(loss) on defined benefit pension schemes 25 2,665 (5,521)
Pension guarantee asset movements in respect of actuarial gain 25 (516) (408)
Deferred tax (charge)/credit in respect of defined benefit pension schemes 22 (537) 1,482
Other comprehensive income for the year 1,612 (4,447)
Total comprehensive income for the year 48,548 32,213
Attributable to:
Owners of Mears Group PLC 48,138 30,757
Non-controlling interest 410 1,456
Total comprehensive income for the year 48,548 32,213
All comprehensive income for the year attributable to owners of Mears Group
PLC arises from continuing operations.
Consolidated balance sheet
As at 31 December 2024
Note 2024 2023
£'000 £'000
Assets
Non-current
Goodwill 11 121,868 121,868
Intangible assets 12 6,244 7,046
Property, plant and equipment 13 38,836 38,533
Right of use assets 14 272,171 233,649
Investments 15 2,274 622
Loan notes and other non-current receivables 21 10,195 4,458
Pension and other employee benefits 25 23,245 19,835
474,833 426,011
Current
Inventories 16 1,173 1,463
Trade and other receivables 17 133,205 126,690
Current tax assets 730 -
Short-term financial assets 21 - 7,090
Cash and cash equivalents 21 91,404 138,756
226,512 273,999
Total assets 701,345 700,010
Equity
Equity attributable to the shareholders of Mears Group PLC
Called up share capital 23 908 1,016
Share premium account 23 2,581 2,332
Share-based payment reserve 3,604 1,883
Treasury shares 23 (14,985) (5,122)
Merger reserve 7,971 7,971
Retained earnings 184,028 189,428
Total equity attributable to the shareholders of Mears Group PLC 184,107 197,508
Non-controlling interest 3,358 2,948
Total equity 187,465 200,456
Liabilities
Non-current
Pension and other employee benefits 25 - 172
Deferred tax liabilities 22 3,518 2,905
Lease liabilities 19 230,641 199,948
Non-current provisions 20 9,765 9,785
243,924 212,810
Current
Overdraft and other short-term borrowings 21 - 36,699
Trade and other payables 18 192,278 187,035
Lease liabilities 19 66,861 54,492
Provisions 20 10,817 8,406
Current tax liabilities - 112
Current liabilities 269,956 286,744
Total liabilities 513,880 499,554
Total equity and liabilities 701,345 700,010
Consolidated cash flow statement
For the year ended 31 December 2024
Note 2024 2023
£'000 £'000
Operating activities
Profit for the year before tax 64,141 46,918
Adjustments 24 81,247 71,253
Change in inventories 290 5,416
Change in trade and other receivables (7,021) 1,290
Change in trade, other payables and provisions 7,551 20,346
Cash inflow from operating activities before taxation 146,208 145,223
Taxes paid (17,407) (9,330)
Net cash inflow from operating activities 128,801 135,893
Investing activities
Additions to property, plant and equipment (29,816) (24,347)
Additions to other intangible assets (1,442) (1,499)
Proceeds from disposals of property, plant and equipment 141 17
Proceeds from sale and leaseback of residential property 13 16,285 -
Distributions from associates 15 147 1,135
Movement in short-term cash deposits held for investment purposes 21 7,090 (5,127)
Interest received 4,036 4,167
Net cash outflow from investing activities (3,559) (25,654)
Financing activities
Proceeds from share issue 251 2,557
Proceeds on distribution of shares from treasury 6 -
Purchase of own shares 23 (52,050) (37,887)
Net cash (outflow)/inflow relating to other credit facilities 24 (11,244) 11,244
Discharge of lease liabilities (57,907) (48,149)
Interest paid (13,262) (11,081)
Dividends paid - Mears Group PLC shareholders 9 (12,933) (11,760)
Net cash outflow from financing activities (147,139) (95,076)
Cash and cash equivalents, beginning of year 24 113,301 98,138
Net (decrease)/increase in cash and cash equivalents (21,897) 15,163
Cash and cash equivalents, end of year 24 91,404 113,301
Consolidated statement of changes in equity
For the year ended 31 December 2024
Attributable to equity shareholders of the Company Non- Total
controlling equity
interest £'000
£'000
Share Share Share- Treasury Merger Retained
capital premium based reserve reserve earnings
£'000 account payment £'000 £'000 £'000
£'000 reserve
£'000
At 1 January 2023 1,110 82,351 1,801 - 7,971 119,100 1,492 213,825
Net profit for the year - - - - - 35,204 1,456 36,660
Other comprehensive income - - - - - (4,447) - (4,447)
Total comprehensive income for the year - - - - - 30,757 1,456 32,213
Tax credit on share-based payments - - - - - 867 - 867
Issue of shares 27 2,530 - - - - - 2,557
Purchase of treasury shares - - - (5,122) - - - (5,122)
Cancellation of shares (121) - - - - (33,043) - (33,164)
Capital reduction - (82,549) - - - 82,549 - -
Share options - value of employee services - - 1,040 - - - - 1,040
Share options - exercised or lapsed - - (958) - - 958 - -
Dividends - - - - - (11,760) - (11,760)
At 1 January 2024 1,016 2,332 1,883 (5,122) 7,971 189,428 2,948 200,456
Net profit for the year - - - - - 46,526 410 46,936
Other comprehensive income - - - - - 1,612 - 1,612
Total comprehensive income for the year - - - - - 48,138 410 48,548
Tax credit on share-based payments - - - - - 565 - 565
Issue of shares 2 249 - - - - - 251
Purchase of treasury shares - - - (11,733) - - - (11,733)
Cancellation of shares (110) - - - - (40,207) - (40,317)
Share options - value of employee services - - 2,622 - - - - 2,622
Share options - exercised or lapsed - - (901) 1,870 - (963) - 6
Dividends - - - - - (12,933) - (12,933)
At 31 December 2024 908 2,581 3,604 (14,985) 7,971 184,028 3,358 187,465
Notes to the preliminary announcement
For the year ended 31 December 2024
1. Accounting policies
Accounting policies are detailed in their respective notes, where relevant.
Policies that are not specific to a particular note are detailed below.
Basis of preparation
The financial information in this announcement does not constitute the Group's
or the Company's statutory accounts as defined in section 434 of the Companies
Act 2006 for the years ended 31 December 2024 or 2023 but is derived from
those accounts. Statutory accounts for 2023 have been delivered to the
registrar of companies, and those for 2024 will be delivered in due course.
The auditor has reported on those accounts; their reports were (i)
unqualified, (ii) did not include a reference to any matters to which the
auditor drew attention by way of emphasis without qualifying their report and
(iii) did not contain a statement under section 498 (2) or (3) of the
Companies Act 2006.
The preliminary announcement has been prepared in accordance with United
Kingdom adopted International Accounting Standards, United Kingdom adopted
International Financial Reporting Standards (IFRS) and the requirements of the
Companies Act 2006. While the financial information included in this
announcement has been computed in accordance with IFRS, this announcement does
not itself contain sufficient information to comply with IFRS.
Going concern
The Directors do not consider going concern to be a critical accounting
judgement. In reaching this determination, the Directors have taken account of
the Group's trading for 2024 and the budget for 2025.
The Group reported a net cash position of £91.4m on 31 December 2024, but the
Directors believe that the average daily net cash, after adjusting for the
full year impact of the share buybacks and AASC property acquisitions, which
averaged £59.3m during 2024, provides a better indication of the underlying
position and is a better indicator of the Group's liquidity. The Group has
modelled its cash flow outlook for the period to 30 June 2026 and the base
forecast indicates significant liquidity headroom will be maintained above the
Group's borrowing facilities and that financial covenants will be met
throughout the period, including the covenant tests on 30 June 2025, 31
December 2025 and 30 June 2026.
The Board approved a budget for 2025 which was considered to reflect strong
performance, albeit both operating margin and profit were modelled at a lower
level than 2024. The 2025 budget is considered to be the base case projection
for assessing Going Concern and is based on the following assumptions:
· Forecast built up on a contract-by-contract basis for the next 12
months and rolled forward. The forecast for 2025 is based upon revenues
generated from existing customer relationships, and a business that is
generating contract margins that are broadly in line with recent run rates.
· The forecast assumes no new work is secured. The base case
assumes that contracts are resecured on retender but reflects some revenue
reduction from existing clients when it is currently anticipated that there
may be no further opportunity upon expiry of the current contract.
· The model also reflects the normalisation of the Asylum (AASC)
contract, with revenues reducing to a level reflecting the preferred delivery
through dispersed accommodation and the closure of short-term contingent
accommodation, such as hotels.
· The model assumes a partial unwind in the negative working
capital position held in the management-led activities; the base case assumes
a reduction in contract liabilities of £35m, matched by a cash outflow.
· The model assumes small scale property purchases to augment the
delivery of the AASC contract but no further sale and leaseback of previously
acquired properties.
· Future dividends continue in line with current policy.
· No further buybacks have been assumed beyond the current
shareholder authority.
In making their going concern assessment, the Directors are required to
consider whether there is a reasonable expectation that the Group and Company
have adequate resources to continue in operational existence for at least 12
months following the signing of the Annual Report and Accounts for the year
ended 31 December 2024. The Directors have adopted a going concern period for
this purpose up to 30 June 2026. This assessment considers whether the Group
will be able to maintain adequate liquidity headroom above the level of its
borrowing facilities and to operate within the financial covenants applicable
to those facilities, which will be measured on 30 June 2025, 31 December 2025
and 30 June 2026. On 31 December 2024, the Group held £70m of undrawn
committed borrowing facilities, maturing in December 2026.
The Group has carried out stress tests against the base case to determine the
performance levels that would result in a breach of covenants or a reduction
of headroom against its borrowing facilities to £nil. The Directors carried
out reverse stress testing, increasing the severity of the assumptions to
measure the trigger points at which the going concern of the Group could be
impacted. A reverse stress test was conducted to identify the magnitude of
trading profit decline required before the Group breaches its debt covenants.
All stress test scenarios would require a very severe deterioration compared
to the base case forecasts.
After making these assessments, the Directors consider any scenario or
combination of scenarios which could cause the business to be no longer a
going concern to be remote. The Directors have a reasonable expectation that
the Company and its subsidiaries have adequate resources to continue in
operational existence until 30 June 2026. Accordingly, they continue to adopt
the going concern basis in preparing the Annual Report and Accounts.
Fair value
The Group measures certain assets and liabilities at fair value on a recurring
basis, including certain investments and assets in the Group's defined
benefit pension schemes.
Details of the particular valuation techniques used by the Group are provided
in the relevant notes for each type of asset or liability measured at fair
value.
Use of judgements and estimates
The preparation of financial statements requires management to make estimates
and judgements that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenditure during the
reported period. The estimates and associated judgements are based on
historical experience and various other factors that are believed to be
reasonable under the circumstances, the results of which form the basis of
making judgements about carrying values of assets and liabilities that are not
readily apparent from other sources.
The estimates and underlying judgements are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the period in which the
estimate is revised if the revision affects only that period, or in the period
of the revision and future periods if the revision affects both current and
future periods.
In the preparation of this preliminary announcement, key estimates and
judgements have been made by management concerning the following:
· • provisions necessary for certain liabilities,
including discount rates used in estimating such provisions (note 20);
· • estimates used in forecasts used to assess future
profitability and cash flows (note 20);
· • judgements involved in the recognition of right
of use assets for lease accounting (note 14);
· • the timing of revenue recognition (note 2);
· • the recoverability of contract assets (note 17);
and
· • actuarial estimates in respect of defined benefit
pension schemes (note 25).
Actual amounts could differ from those estimates. Further details of key
estimates and judgements are provided in the appropriate notes.
2. Revenue
Accounting policy
Revenue is recognised in accordance with IFRS 15 'Revenue from Contracts with
Customers'. IFRS 15 provides a single, principles-based, five-step model to be
applied to all sales contracts. It is based on the transfer of control of
goods and services to customers. The detail below sets out the principal types
of contracts and how the revenue is recognised in accordance with IFRS 15.
Repair and maintenance contracts
For contracts in this category, the customer raises orders on demand, for
example to carry out responsive repairs. Revenue is derived from a mixture of
lump-sum periodic payments and task-based payments depending on the terms of
the individual contract.
Where a lump-sum payment is in place it may cover the administrative element
of the contract or may cover the majority of the tasks undertaken within that
contract with exclusions to this being charged in addition to the lump-sum
charge. For the works covered by the lump-sum payment, the performance
obligation is being available to deliver the goods and services in the scope
of the contract, not the performance of the individual works orders
themselves. Revenue is recognised on a straight-line basis as performance
obligations are being met over time.
For works orders not covered by a lump-sum payment, each works order
represents a distinct performance obligation and, as the customer controls the
asset being enhanced through the works, the performance obligation is
satisfied over time. Each works order can be broken down into one or more
distinct tasks which are either complete or not complete. The stage of
completion of the works order is assessed by looking at which tasks are
complete. The transaction price for partly completed works orders is
recognised as cost plus expected margin. The transaction price for completed
works orders is the invoice value, which is typically determined by a pricing
schedule referred to as a Schedule of Rates that provides a transaction price
for each particular task.
Contracting projects
For contracting projects, the contract states the scope and specification of
the construction works to be carried out, for a fixed price. Mears
is continuously satisfying this single performance obligation as cost is
incurred, determining progress against the performance obligation on either an
input or an output basis. The customer controls the site or output as the work
is being performed on it and, therefore, revenue is recognised over time where
there is an enforceable right to payment for works completed to date and the
work completed does not create an asset with an alternative use to the Group.
An assessment is made of costs incurred to date and the costs required to
complete the project. If a project is not deemed to be profitable, the
unavoidable costs of fulfilling the contract are provided for immediately.
Property income
Where the Group is acting as principal, lessor operating lease revenue is
recognised in revenue on a straight-line basis over the tenancy.
Where the Group is solely providing a management service in respect of
tenanted properties, Mears recognises revenue as an agent (the net management
fee) on a straight-line basis.
Where the Group is providing an accommodation and support service, revenue is
recognised at a point in time for each night that the accommodation is
occupied.
Some contracts may include an element of variable revenue based on certain
KPIs. This is recognised on the same basis as above.
Where the Group enters into arrangements with customers for the provision of
housing, an assessment is made as to whether this income is recognised under
IFRS 15 or IFRS 16. The contract between the Group and the customer is deemed
to contain a lease where the contract conveys the right to control an
identified asset for a period of time in exchange for consideration. In this
instance, the rental income is recognised on a straight-line basis over the
life of the lease. All such sub-leased residential property leases are
classified as operating leases. Revenue in respect of sub-leased residential
property is disclosed separately.
Care services
The standalone selling prices for providing care are overtly stated in the
contract, and the method of application of the rate of charge is on a unit of
time basis, usually expressed as a rate per visit. Revenue will be recognised
in respect of this single performance obligation, by reference to the
chargeable rate and time for completed care visits in the period.
From time to time, care contracts with customers include a fixed fee per
period for performing a consistent scope of care services. For these contract
types, the revenue recognition is consistent with lump-sum payments included
in repair and maintenance contracts, as described above.
Other
From time to time, the Group receives revenue that does not fall within any of
the categories above but is not individually significant enough to require a
specific policy. In these cases, the revenue is considered separately and
recognised in accordance with IFRS 15.
Gainshare
Across all revenue types, some contracts include an element of gainshare. The
details vary by contract, but gainshare is typically a reduction in the
revenue that would otherwise be due from the customer based on a share of
profits generated above a contractual target. Gainshare is typically agreed on
an annual basis following the end of each contract year and where the profit
share has not been agreed at a period end, management's best estimate of any
profit share due to the customer is recognised as a reduction to revenue and
included within contract liabilities.
Critical judgements in applying the Group's accounting policies
Revenue recognition
The estimation techniques used for revenue and profit recognition in respect
of contracting and variable consideration contracts require judgements to be
made about the stage of completion of certain contracts and the recoverability
of contract assets. Each contract is treated on its merits and subject to a
regular review of the revenue and costs to complete that contract.
The Group's revenue disaggregated by nature is as follows:
2024 2023
£'000 £'000
Revenue from contracts with customers
Repairs and maintenance 455,058 453,981
Contracting 77,956 70,980
Property income 551,198 516,769
Care services 22,164 20,058
Other 635 1,005
1,107,011 1,062,793
Lease income 25,499 26,534
1,132,510 1,089,327
3. Segment reporting
Accounting policy
Segment information is presented in respect of the Group's operating segments
based on the format that the Group reports to its chief operating decision
maker for the purpose of allocating resources and assessing performance.
The Group considers that the chief operating decision maker comprises the
Executive Directors of the business.
The Executive Directors manage the Group as a single Housing business, but
information provided to the Board and historically to stakeholders has
included a split between Maintenance and Management. Therefore, management has
concluded that providing segmental information along the same lines would be
helpful to the users of these financial statements.
2024 2023
Maintenance Management Total Maintenance Management Development Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Revenue 555,813 576,697 1,132,510 543,279 543,345 2,703 1,089,327
Cost of sales (420,722) (458,535) (879,257) (423,592) (443,631) (3,334) (870,557)
Gross profit/(loss) 135,091 118,162 253,253 119,687 99,714 (631) 218,770
Administrative costs (109,191) (72,517) (181,708) (102,275) (64,419) (157) (166,851)
Share of profits of associates 1,014 - 1,014 486 - - 486
Net finance income/(costs) 4,673 (13,091) (8,418) 4,407 (9,584) (66) (5,243)
Profit/(loss) before tax 31,587 32,554 64,141 22,061 25,711 (854) 46,918
Tax expense (17,205) (10,258)
Profit for the year 46,936 36,660
All revenue and all non-current assets arise within the United Kingdom. All of
the revenue reported is external to the Group. The Group's largest single
customer relationship is in respect of the Asylum Accommodation and Support
Contract (AASC) with the Home Office, included within the Management segment.
At the time that this contract was won, the Group expected to report annual
revenues of around £150m for 2024, which would, under normal conditions,
amount to around 15% of Group revenues. The AASC has continued to experience
elevated volumes and as a result, this customer relationship accounted for
over 40% of Group revenues in 2024. In the longer term, this contract is
expected to reduce back to a normal level. No other customer comprises more
than 10% of reported revenue.
For the purposes of the disaggregation of revenue in note 2, all property
income and lease income is included within the Management segment. All other
revenue is included within the Maintenance segment.
4. Operating costs
Operating costs, relating to continuing activities, include the following:
Note 2024 2023
£'000 £'000
Share-based payments 7 2,622 1,040
Depreciation of property, plant and equipment 13 6,783 7,305
Depreciation of right of use assets 14 62,249 50,908
Impairment of right of use assets 14 633 6,223
Amortisation of acquisition intangibles 12 245 244
Amortisation of other intangibles 12 1,999 1,635
Loss on sale and leaseback 283 -
Loss on disposal of property, plant and equipment 508 54
Loss on disposal of intangibles - 26
Profit on disposal of right of use assets (150) (180)
5. Finance income and finance costs
2024 2023
£'000 £'000
Interest charge on overdrafts and loans (957) (638)
Interest on lease obligations (12,698) (9,899)
Finance costs on bank loans, overdrafts and leases (13,655) (10,537)
Other interest (93) (642)
Interest charge on defined benefit pension obligation (37) (2)
Total finance costs (13,785) (11,181)
Interest income resulting from short-term deposits 3,791 4,360
Interest income resulting from defined benefit pension asset 926 1,164
Other interest income 650 415
Total finance income 5,367 5,939
Net finance charge (8,418) (5,242)
6. Employees
Staff costs during the year were as follows:
2024 2023
£'000 £'000
Wages and salaries 189,290 176,226
Social security costs 20,513 18,666
Other pension costs 4,882 6,963
214,685 201,855
The average number of employees of the Group during the year was:
2024 2023
Site workers 2,552 2,443
Carers 632 559
Office and management 2,287 2,134
5,471 5,136
7. Share-based employee remuneration
Accounting policy
All share-based payment arrangements are recognised in this preliminary
announcement in accordance with IFRS 2.
The Group operates equity-settled share-based remuneration plans for its
employees. All employee services received in exchange for the grant of any
share-based remuneration are measured at their fair values. These are
indirectly determined by reference to the fair value (excluding the effect of
non-market-based vesting conditions) of the share options awarded. Their value
is determined at the date of grant and is not subsequently remeasured unless
the conditions on which the award was granted are modified. The fair value at
the date of the grant is calculated using the Monte Carlo option pricing model
and the cost is recognised on a straight-line basis over the vesting period.
Adjustments are made to reflect expected and actual forfeitures during the
vesting period. For Save As You Earn (SAYE) plans, employees are required to
contribute towards the plan. This non-vesting condition is taken into account
in calculating the fair value of the option at the grant date.
All share-based remuneration is ultimately recognised as an expense in the
Consolidated Statement of Profit or Loss. For equity-settled share-based
payments there is a corresponding credit to the share-based payment reserve.
Upon exercise of share options, the proceeds received net of any directly
attributable transaction costs up to the nominal value of the shares issued
are allocated to share capital, with any excess being recorded as share
premium.
As at 31 December 2024 the Group maintained four (2023: four) active
share-based payment schemes for employee remuneration.
Details of the share options outstanding and movement during the year are as
follows:
2024 2023
Number Weighted Number Weighted
'000 average '000 average
exercise price exercise price
p p
Outstanding at 1 January 2,553 48 4,552 99
Granted 2,628 206 1,132 1
Forfeited (130) 250 (418) 177
Exercised (698) 37 (2,713) 94
Outstanding at 31 December 4,353 139 2,553 48
There were 2.63m options granted during the year and 0.13m options that were
forfeited during the year. The market price at 31 December 2024 was 362p and
the range during 2024 was 310p to 394p.
8. Tax expense
Accounting policy
Current tax assets and/or liabilities comprise those obligations to, or claims
from, fiscal authorities that are unpaid at the balance sheet date. They are
calculated according to the tax rates and tax laws applicable to the
accounting periods to which they relate, based on the taxable profit for the
year.
Where an item of income or expense is recognised in the Consolidated Statement
of Profit or Loss, any related tax generated is recognised as a component of
tax expense in the Consolidated Statement of Profit or Loss. Where an item is
recognised directly to equity or presented within the Consolidated Statement
of Comprehensive Income, any related tax generated is treated similarly.
Deferred taxation is the tax expected to be repayable or recoverable on
differences between the carrying amounts of assets and liabilities in the
financial statements and corresponding tax bases used in the computation of
taxable profit and is accounted for using the balance sheet liability method.
Tax recognised in the Consolidated Statement of Profit or Loss:
2024 2023
£'000 £'000
United Kingdom corporation tax 16,567 10,854
Adjustment in respect of previous periods 406 39
Total current tax charge recognised in Consolidated Statement of Profit or 16,973 10,893
Loss
Deferred taxation charge:
- on defined benefit pension obligations 358 480
- on share-based payments (466) (119)
- on capital allowances 209 (483)
- on amortisation of acquisition intangibles (75) (75)
- on short-term temporary timing differences (49) -
- on corporate tax losses (274) -
- other timing differences 122 57
Adjustment in respect of previous periods 407 (495)
Total deferred taxation recognised in Consolidated Statement of Profit or Loss 232 (635)
Total tax charge recognised in Consolidated Statement of Profit or Loss 17,205 10,258
The charge for the year can be reconciled to the profit for the year as
follows:
2024 2023
£'000 £'000
Profit for the year before tax 64,141 46,918
Profit for the year multiplied by standard rate of corporation tax in the 16,035 11,039
United Kingdom for the year of 25.0% (2023: 23.5%)
Effect of:
- expenses not deductible for tax purposes 222 131
- income not subject to tax (395) (352)
- previously unrecognised losses (274) -
- permanent tax differences in respect of assets 803 (43)
- tax impact of employee share schemes - (61)
- adjustment in respect of prior periods 814 (456)
Actual tax charge 17,205 10,258
9. Dividends
Accounting policy
Dividend distributions payable to equity shareholders are included in "Current
financial liabilities" when the dividends are approved in a general meeting
prior to the balance sheet date.
The following dividends were paid on ordinary shares in the year:
2024 2023
£'000 £'000
Final 2023 dividend of 9.30p (2023: final 2022 dividend of 7.25p) per share 8,660 7,932
Interim 2024 dividend of 4.75p (2023: interim 2023 dividend of 3.70p) per 4,273 3,828
share
12,933 11,760
The Directors recommend a final dividend of 11.25p per share. This has not
been recognised within this preliminary announcement as no obligation existed
at 31 December 2024.
10. Earnings per share
2024 2023
p p
Earnings per share 50.27 32.90
Diluted earnings per share 48.86 31.94
For the purpose of calculating earnings per share (EPS), earnings have been
calculated as follows:
2024 2023
£'000 £'000
Profit for the year 46,936 36,660
Attributable to non-controlling interests (410) (1,456)
Earnings 46,526 35,204
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. IAS 33 defines
dilutive options as those whose exercise would decrease earnings per share or
increase loss per share from continuing operations.
2024 2023
Millions Millions
Weighted average number of shares in issue: 92.56 106.99
Dilutive effect of share options 2.66 3.23
Weighted average number of shares for calculating diluted earnings per share 95.22 110.22
The opening number of shares in issue for 2025 is shown below:
2025
Millions
Opening number of shares in issue 90.76
Treasury shares to exclude (4.46)
Opening number of shares in issue for calculating basic earnings per share 86.30
11. Goodwill
Accounting policy
Goodwill arises on the acquisition of subsidiaries and represents any excess
of the cost of the acquired entity over the Group's interest in the fair value
of the entity's identifiable assets and liabilities acquired and is
capitalised as a separate item. Goodwill is recognised as an intangible
asset.
Under the business combinations exemption of IFRS 1, goodwill previously
written off directly to reserves under UK Generally Accepted Accounting
Practice (GAAP) is not recycled to the Consolidated Statement of Profit or
Loss on calculating a gain or loss on disposal.
Impairment
For the purposes of assessing impairment, assets are grouped at the lowest
levels for which there are separately identifiable cash flows: Cash-Generating
Units (CGUs). Goodwill is allocated to those groups of CGUs that are expected
to benefit from synergies of the related business combination and represent
the lowest level within the Group at which goodwill is monitored for internal
management purposes.
Goodwill or groups of CGUs that include goodwill and those intangible assets
not yet available for use are tested for impairment at least annually. All
other individual assets or CGUs are tested for impairment whenever events or
changes in circumstances indicate that the carrying amount may not be
recoverable.
An impairment loss is recognised in the Consolidated Statement of Profit or
Loss for the amount by which the asset's or CGU's carrying amount exceeds its
recoverable amount. The recoverable amount is the higher of fair value,
reflecting market conditions less costs to sell, and value in use based on an
internal discounted cash flow evaluation. Impairment losses recognised for
groups of CGUs, to which goodwill has been allocated, are credited initially
to the carrying amount of goodwill. Any remaining impairment loss is charged
pro-rata to the other assets in the group of CGUs. With the exception of
goodwill, all assets are subsequently reassessed for indications that an
impairment loss previously recognised may no longer exist.
Goodwill Purchased Total
arising on goodwill £'000
consolidation £'000
£'000
Gross carrying amount
At 1 January 2023, 1 January 2024 and 31 December 2024 117,826 4,042 121,868
Accumulated impairment losses
At 1 January 2023, 1 January 2024 and 31 December 2024 - - -
Carrying amount
At 31 December 2024 117,826 4,042 121,868
At 31 December 2023 117,826 4,042 121,868
The carrying value of goodwill is allocated to the following groups of CGUs:
Goodwill arising Purchased Total
on consolidation goodwill
2024 2023 2024 2023 2024 2023
£'000 £'000 £'000 £'000 £'000 £'000
Maintenance (excluding Housing with Care) 65,290 65,290 4,042 4,042 69,332 69,332
Management 33,447 33,447 - - 33,447 33,447
Housing with Care 19,089 19,089 - - 19,089 19,089
117,826 117,826 4,042 4,042 121,868 121,868
The Group's cash inflows are largely independent at the individual branch
level and each branch is, therefore, considered a CGU. However, the goodwill
of the Group contributes to the cash inflows of multiple CGUs. It is,
therefore, allocated to groups of CGUs and monitored for internal management
purposes primarily at the operating segment level. The goodwill of Housing
with Care is separately monitored and, therefore, allocated to a separate
group of CGUs to which it relates.
12. Other intangible assets
Accounting policy
In accordance with IFRS 3 (Revised) 'Business Combinations', an intangible
asset acquired in a business combination is deemed to have a cost to the Group
of its fair value at the acquisition date. The fair value of the intangible
asset reflects market expectations about the probability that the future
economic benefits embodied in the asset will flow to the Group. Where an
intangible asset might be separable, but only together with a related tangible
or intangible asset, the group of assets is recognised as a single asset
separately from goodwill where the individual fair values of the assets in
the group are not reliably measurable. Intangible assets are amortised over
the useful economic lives of those assets.
Development costs incurred on software development are capitalised when all
the following conditions are satisfied:
· • Completion of the software module is technically
feasible so that it will be available for use.
· • The Group intends to complete the development of
the module and use it.
· • The software will be used in generating probable
future economic benefits.
· • There are adequate technical, financial and other
resources to complete the development and to use the software.
· • The expenditure attributable to the software
during its development can be measured reliably.
Development costs not meeting the criteria for capitalisation are expensed as
incurred. Careful judgement by management is applied when deciding whether the
recognition requirements for development costs have been met. This is
necessary as the economic success of any development is uncertain and may be
subject to future technical problems at the time of recognition. Judgements
are based on the information available at each balance sheet date. In
addition, all internal activities related to the research and development of
new software are continually monitored by management.
The cost of an internally generated intangible asset comprises all directly
attributable costs necessary to create, produce and prepare the asset to be
capable of operating in the manner intended by management. Directly
attributable costs include employee costs incurred on software development.
Amortisation commences upon completion of the asset and is shown within other
administrative expenses. Until the asset is available for use on completion
of the project, the assets are subject to impairment testing only. Development
expenditure is amortised over the period expected to benefit.
The identifiable intangible assets and associated periods of amortisation are
as follows:
Acquisition intangibles - over the period expected to benefit
Development expenditure - over the useful life of the resulting software,
typically five to ten years
Software
- 20% p.a., straight line
The useful economic lives of intangible assets are reviewed annually and
amended if appropriate.
Acquisition intangibles Development Software Total intangibles
£'000 expenditure £'000 £'000
£'000
Gross carrying amount
At 1 January 2023 4,890 23,349 6,276 34,515
Additions - 1,041 458 1,499
Disposals - (5,996) (4,012) (10,008)
At 1 January 2024 4,890 18,394 2,722 26,006
Additions - 1,204 238 1,442
Disposals - (1,443) (344) (1,787)
At 31 December 2024 4,890 18,155 2,616 25,661
Amortisation
At 1 January 2023 2,486 19,030 5,547 27,063
Provided in the year 244 1,415 220 1,879
Eliminated on disposal - (5,996) (3,986) (9,982)
At 1 January 2024 2,730 14,449 1,781 18,960
Provided in the year 245 1,478 521 2,244
Eliminated on disposal - (1,443) (344) (1,787)
At 31 December 2024 2,975 14,484 1,958 19,417
Carrying amount
At 31 December 2024 1,915 3,671 658 6,244
At 31 December 2023 2,160 3,945 941 7,046
Acquisition intangibles relate entirely to customer relationships recognised
at fair value on historical acquisitions.
Development expenditure is an internally developed intangible asset and
relates to the development of the Group's Housing job management system and
decarbonisation assessment software.
Development expenditure is amortised over its useful economic life of either
five or ten years, depending on the resulting software.
All amortisation is included within other administrative expenses.
13. Property, plant and equipment
Accounting policy
Items of property, plant and equipment are stated at historical cost, net of
depreciation. Historical cost includes expenditure that is directly
attributable to the acquisition of the items. Subsequent costs are included in
the asset's carrying amount or recognised as a separate asset,
as appropriate, only when it is probable that future economic benefits
associated with the item will flow into the Group and the cost of the item
can be measured reliably. All other repairs and maintenance are charged to the
Consolidated Statement of Profit or Loss during the financial period in which
they are incurred.
Freehold land is not depreciated. Depreciation on other assets is calculated
to write down the cost less estimated residual value over their estimated
useful economic lives. The rates generally applicable are:
Freehold buildings - 2% p.a., straight line
Leasehold improvements - over the period of the lease or expected useful
life of the improvements if shorter, straight line
Plant and machinery - 20% p.a., straight line
Equipment - 20% p.a.,
straight line
Fixtures and fittings - 50% p.a., straight line
Motor vehicles - 20% p.a.,
straight line
Residual values are reviewed annually and updated if appropriate. The carrying
value is reviewed for impairment in the period if events or changes in
circumstances indicate the carrying value may not be recoverable. An asset's
carrying value is written down immediately to its recoverable amount if the
asset's carrying amount is greater than its estimated recoverable amount.
Gains and losses on disposals are determined by comparing the proceeds with
the carrying amount and are recognised within "Administrative expenses" in the
Consolidated Statement of Profit or Loss.
Identifying whether there are indicators of impairment in respect of property,
plant and equipment involves some judgement and a good understanding of the
drivers of value behind the asset. At each reporting period an assessment is
performed in order to determine whether there are any such indicators, which
involves considering the performance at both a contract and business level,
and any significant changes to the markets in which we operate. This is not
considered to be a critical judgement or an area of significant uncertainty.
In order to manage a significant number of short-life assets, which can be
individually difficult to track, the Group's policy is to eliminate low cost
assets once they are fully depreciated.
Freehold Leasehold Plant and Fixtures, Motor Total
property improvements machinery fittings and vehicles £'000
£'000 £'000 £'000 equipment £'000
£'000
Gross carrying amount
At 1 January 2023 2,662 28,901 392 14,880 515 47,350
Additions 22,126 682 - 2,893 44 25,745
Disposals - (2,839) (209) (2,375) - (5,423)
At 1 January 2024 24,788 26,744 183 15,398 559 67,672
Additions 26,413 703 15 2,680 78 29,889
Disposals (115) (24) - (1,587) (20) (1,746)
Eliminated on expiry of useful life - (16,437) (94) (6,573) (437) (23,541)
Disposals on sale and leaseback (22,725) - - - - (22,725)
At 31 December 2024 28,361 10,986 104 9,918 180 49,549
Depreciation
At 1 January 2023 115 16,041 304 10,212 490 27,162
Provided in the year 220 5,172 40 1,850 23 7,305
Eliminated on disposals - (2,839) (200) (2,289) - (5,328)
At 1 January 2024 335 18,374 144 9,773 513 29,139
Provided in the year 789 3,788 24 2,158 24 6,783
Eliminated on disposal (4) (10) - (1,069) (14) (1,097)
Eliminated on expiry of useful life - (16,437) (94) (6,573) (437) (23,541)
Disposal on sale and leaseback (571) - - - - (571)
At 31 December 2024 549 5,715 74 4,289 86 10,713
Carrying amount
At 31 December 2024 27,812 5,271 30 5,629 94 38,836
At 31 December 2023 24,453 8,370 39 5,625 46 38,533
Sale and leaseback
On 13 December 2024 the Group entered into a sale and leaseback arrangement in
respect of 221 residential properties with a carrying value of £22.2m that
had previously been acquired on the open market. The transaction was effected
through the sale of the subsidiary entity that owns the properties and at the
same time, a long-term lease was put in place allowing the Group to continue
to use them.
The Group received cash of £16.3m, as well as a loan note from the buyer for
£5.3m as detailed in note 21. Additionally, the Group retained a 25% holding
in the disposed entity.
14. Right of use assets
Accounting policy
Where an asset is subject to a lease, the Group recognises a right of use
asset and a lease liability on the balance sheet. The right of use asset is
measured at cost, which matches the initial measurement of the lease liability
and any costs expected at the end of the lease, and then depreciated on a
straight-line basis over the lease term.
The lease liability is measured at the present value of the future lease
payments discounted using the Group's incremental borrowing rate. Lease
payments include fixed payments, variable payments based on an index and
payments arising from options reasonably certain to be exercised.
The Group has elected to account for short-term leases and leases of low value
assets using the practical expedients. Instead of recognising a right of use
asset and a lease liability, the payments in relation to these are recognised
as an expense in profit or loss on a straight-line basis over the lease term.
Critical judgements in applying the Group's accounting policies
The Group holds a considerable number of leases across its portfolio of
residential properties, offices and vehicles. Whilst the Group endeavours to
standardise the form of leases, operational demands dictate that many leases
have specific wording to address particular operational needs and also to
manage the associated operational and financial risks. As such, each lease
requires individual assessment and the Group is required to make key
judgements which include:
· • the identification of a lease;
· • assessing the right to direct the use of the
underlying asset;
· • determining the lease term; and
· • an assessment as to the level of future lease
payments, including fixed and variable payments.
The most typical challenges encountered and which form the key judgements are:
· • where the lease contains a one-way no-fault break
in Mears' favour, the Group measures the obligation based on the Group's best
estimate of its future intentions;
· • where Mears does not in practice have the right
to control the use of the asset and the key decision making rights are
retained by the supplier;
· • where a wider agreement for a supply of services
includes a lease component which meets the definition of a lease under IFRS
16; and
· • the assessment of the fixed lease payments where
the lease obligation to the landlord is based on a pass-through arrangement in
which Mears only makes lease payments to the owner to the extent that the
property is occupied and to the extent that rents are received from the
tenant.
Investment property
Included within right of use assets are certain properties classified as
investment properties in accordance with IAS 40. These properties are leased
primarily in order to earn rentals from sub-leasing. The Group has chosen to
apply the cost model to all investment property and, therefore, measurement
is in line with IFRS 16 as described above.
Investment Assets that are used directly Total
property within the business £'000
Residential Residential Offices Motor
property property £'000 vehicles
£'000 £'000 £'000
Gross carrying amount
At 1 January 2023 143,746 135,986 10,507 37,557 327,796
Additions* 8,816 59,148 869 10,073 78,906
Disposals (998) (4,877) (992) (2,956) (9,823)
At 1 January 2024 151,564 190,257 10,384 44,674 396,879
Additions* 12,683 70,557 1,811 10,695 95,746
Sale and leaseback - 11,257 - - 11,257
Disposals (1,369) (37,759) (1,885) (11,606) (52,619)
At 31 December 2024 162,878 234,312 10,310 43,763 451,263
Depreciation
At 1 January 2023 32,345 60,312 5,669 16,038 114,364
Provided in the year 8,747 32,183 1,710 8,268 50,908
Impairments 6,223 - - - 6,223
Eliminated on disposals (930) (3,960) (992) (2,383) (8,265)
At 1 January 2024 46,385 88,535 6,387 21,923 163,230
Provided in the year 8,967 42,604 1,673 9,005 62,249
Impairments 633 - - - 633
Eliminated on disposals (1,298) (32,782) (1,885) (11,055) (47,020)
At 31 December 2024 54,687 98,357 6,175 19,873 179,092
Carrying amount
At 31 December 2024 108,191 135,955 4,135 23,890 272,171
At 31 December 2023 105,179 101,722 3,997 22,751 233,649
* Additions includes both new underlying assets and remeasurement of
the right of use asset for changes in the lease terms.
During the year, the Group entered into a sale and leaseback arrangement in
respect of 221 residential properties. The transaction was effected via the
disposal of Mears Property Company Limited, the subsidiary entity that had
previously purchased the properties on the open market. Further details of
this transaction can be found in note 13.
Investment property included above represents properties held by the Group
primarily to earn rentals, rather than for use in the Group's other
activities. The amount included in lease income in note 2 in respect of these
properties is £25.5m (2023: £26.5m). Direct operating expenses of £22.2m
(2023: £24.0m), excluding impairments, arose from investment property that
generated rental income during the year. The carrying value of the right of
use asset in respect of investment property is considered to be approximately
equal to its fair value.
Impairment
The Group recognised an impairment loss of £6.2m in 2023 in respect of
certain right of use assets classified as investment property. These property
portfolios are held to collect rent income, either directly from tenants or
from Local Authorities. While trading in respect of these properties remained
broadly in line with expectations during 2024, the Group's impairment
assessments at 31 December 2024 resulted in an additional impairment of £0.6m
across the portfolio.
In carrying out impairment assessments, management prepared detailed cash flow
forecasts for the lives of the underlying leases on these properties and
discounted them using an appropriate rate, in order to estimate the value in
use. The range of discount rates used in these calculations was from 6.70% to
7.25%.
The impact of the impairments on the Consolidated Statement of Profit or Loss
has been recognised within cost of sales.
15. Investments
Accounting policy
Investments include those over which the Group has significant influence but
which it does not control. These are categorised as associates. It is
presumed that the Group has significant influence where it has between 20% and
50% of the voting rights in the investee unless indicated otherwise. The Group
also holds investments in joint ventures where the Group and other parties
have joint control over their activities.
The basis by which associates and joint ventures are consolidated in this
preliminary announcement is through the equity method.
In addition to associates and joint ventures, the Group holds investments in
entities over which it does not exert significant influence. These are
accounted for at fair value through profit or loss.
Associates Other Total
£'000 investments £'000
£'000
At 1 January 2023 1,206 65 1,271
Share of profit 486 - 486
Distributions received (1,135) - (1,135)
At 1 January 2024 557 65 622
Share of profit 1,014 - 1,014
Increase in fair value - 785 785
Distributions received (147) - (147)
At 31 December 2024 1,424 850 2,274
Other investments represents the Group's 6.16% holding in Mason Topco Limited,
which is mandatorily held at fair value through profit or loss. During the
year, management reassessed the fair value of this holding, increasing it by
£0.8m (2023: £nil). This increase in fair value was recognised in
administrative expenses in the Consolidated Statement of Profit or Loss.
Mason Topco Limited is an unquoted holding company that owns Terraquest
Solutions Limited, following the disposal of that business by the Group in
2020. The fair value was assessed based on the latest available financial
information in respect of the business, as well as several assumptions,
including an estimate of the price/earnings (P/E) ratio that might be
achieved, based on the original transaction (7.7x) and reflecting a suitable
discount for lack of control and marketability (58%).
If the P/E ratio had been higher or lower by 1.0x or the discount for lack of
control and marketability had been 20 percentage points lower or higher, the
fair value would have been £0.4m higher or lower, respectively.
16. Inventories
Accounting policy
Inventories are stated at the lower of cost and net realisable value. Cost is
the actual purchase price of materials.
2024 2023
£'000 £'000
Materials and consumables 1,173 1,463
17. Trade and other receivables
Accounting policy
Trade receivables represent amounts due from customers in respect of invoices
raised. They are initially measured at their transaction price and
subsequently remeasured at amortised cost less loss allowance.
Retention assets represent amounts held by customers for a period following
payment of invoices, to cover any potential defects in the work. Retention
assets are included in trade receivables and are, therefore, initially
measured at their transaction price.
Contract assets represent revenue recognised in excess of the total of
payments on account and amounts invoiced.
Critical judgements and key sources of estimation uncertainty
The estimation techniques used for revenue in respect of contracting require
judgements to be made about the stage of completion of certain contracts and
the recovery of contract assets. Each contract is treated on its merits and
subject to a regular review of the revenue and costs to complete that
contract. Contract assets represent revenue recognised in excess of the total
of payments on account and amounts invoiced.
However, due to the estimation uncertainty across numerous contracts each with
different characteristics, it is not practical to provide a quantitative
analysis of the aggregated judgements that are applied, and management does
not believe that disclosing a potential range of outcomes on a consolidated
basis would provide meaningful information to a reader of the financial
statements.
2024 2023
£'000 £'000
Current assets
Trade receivables 20,940 23,230
Contract assets 84,335 79,703
Contract fulfilment costs 148 768
Prepayments and accrued income 24,468 18,929
Other debtors 3,314 4,060
Total trade and other receivables 133,205 126,690
Included in trade receivables is £2.7m (2023: £3.4m) in respect of retention
payments due in more than one year.
The ageing analysis of trade receivables is as follows:
2024 2023
Gross Expected Carrying Gross Expected Carrying
amount due credit loss value amount due credit loss value
£'000 £'000 £'000 £'000 £'000 £'000
Not past due 18,378 (181) 18,197 20,110 (158) 19,952
Less than three months past due 3,032 (637) 2,395 2,168 (627) 1,541
More than three months past due 1,979 (1,631) 348 2,674 (937) 1,737
Total trade receivables 23,389 (2,449) 20,940 24,952 (1,722) 23,230
Expected credit losses relate to individual tenant customers and are
calculated based on the Group's historical experience of default by applying a
percentage based on the age of the customer's balance. Any remaining
uncollected debt is written off once the tenant has left the property and a
significant period of time has elapsed, at which point the likelihood of
recovery is negligible.
18. Trade and other payables
2024 2023
£'000 £'000
Trade payables 51,723 58,651
Accruals 48,355 50,032
Social security and other taxes 27,734 22,203
Contract liabilities 61,976 50,606
Other creditors 2,490 5,543
192,278 187,035
Due to the short duration of trade payables, management considers the carrying
amounts recognised in the Consolidated Balance Sheet to be a reasonable
approximation of their fair value.
The movement in contract liabilities during the year is shown below:
2024 2023
£'000 £'000
At 1 January 50,606 36,351
Revenue recognised in respect of contract liabilities (13,936) (12,015)
Payments received in advance of performance obligations being completed 18,554 16,834
Paid in respect of gainshare agreements (4,473) (5,505)
Movements in estimated gainshare amounts due 11,225 14,941
At 31 December 61,976 50,606
19. Lease liabilities
Lease liabilities are separately presented on the face of the Consolidated
Balance Sheet as shown below:
2024 2023
£'000 £'000
Current 66,861 54,492
Non-current 230,641 199,948
297,502 254,440
20. Provisions
Critical judgements and key sources of estimation uncertainty
By definition, provisions require estimates to be made of future outcomes and
the eventual outflow may differ significantly from the amount recognised at
the end of the year. Management has estimated provisions based on all relevant
information available to it. For individually material provisions further
information has been provided on the maximum likely outflow, in addition to
the best estimate.
The carrying value of each class of provisions is shown below:
2024 2023
Current Non-current Total Current Non-current Total
£'000 £'000 £'000 £'000 £'000 £'000
Onerous contract provisions 794 7,408 8,202 1,898 6,886 8,784
Property provisions 849 993 1,842 520 761 1,281
Insurance provisions 2,774 1,364 4,138 2,623 1,388 4,011
Legal and other provisions 6,400 - 6,400 3,365 750 4,115
Total provisions 10,817 9,765 20,582 8,406 9,785 18,191
A summary of the movement in provisions during the year is shown below:
Onerous Property Insurance Legal Total
contract provisions provisions and other £'000
provisions £'000 £'000 provisions
£'000 £'000
At 1 January 2024 8,784 1,281 4,011 4,115 18,191
Provided during the year 2,800 605 2,320 4,960 10,685
Utilised during the year (2,355) - (2,193) (2,507) (7,055)
Unused amounts reversed (1,027) (44) - (168) (1,239)
At 31 December 2024 8,202 1,842 4,138 6,400 20,582
Onerous contract provisions
The Group has identified a small number of contracts, with remaining terms
ranging from 2 years to 32 years, under which the unavoidable costs of meeting
the obligations under the contract exceed the economic benefit expected to be
received under it. These unavoidable costs are the lower of the cost of
fulfilling the contract and any compensation or penalties of exiting from
the contract.
The largest single component within onerous contract provisions is £6.8m
relating to a single Community Housing contract which is reported within the
Management segment. The remaining balance of £1.4m relates to the Maintenance
segment.
In identifying the excess of costs over expected economic benefits, the Group
has prepared cash flow forecasts for the lifetime of each contract, based on
management's best estimates. For contracts where the time value of money is
material, these cash flow forecasts have then been discounted using an
appropriate discount rate.
Recognising that by their nature there is variability in future-looking cash
flow forecasts, an appropriate risk factor has been applied when selecting the
discount rates, resulting in rates that are lower than the risk-free rate. The
range of discount rates used is between 1.45% and 1.64%, depending on the
relative uncertainty of the cash flows.
If the discount rates used were 0.5 percentage points higher in each case, the
onerous contract provision would have been £0.5m lower.
The provisions recognised are also sensitive to the underlying cash flow
forecasts. If the anticipated annual net cash outflow, ranging from £0.3m to
£1.0m across the different contracts and forecast years, was 10% lower, the
onerous contract provision would have been £0.8m lower.
Property provisions
Property provisions represent the expected costs of reinstating several office
properties to their original condition upon termination of the lease.
Insurance provisions
The Group self-insures certain fleet and liability risks. Provisions for
claims are recognised in respect of both claims received but not concluded,
which are expected to be settled within one year, and claims incurred but not
received, which are treated as non-current. The value of these provisions is
estimated based on past experience of claims.
Legal and other provisions
Legal and other provisions primarily relate to previously completed customer
contracts where management is aware of probable liabilities and future losses
associated with work defects. This also includes other supply chain claims.
The closing provision includes one customer-related defects claim which is the
subject of active litigation, against which management has provided £4.7m
(2023: £1.6m) against a total claim value of £8.9m. Management has engaged a
technical expert to provide an assessment of the alternative repair options
together with the expected cost of a replacement system, net of a reduction to
reflect betterment. The Directors believe that this provision represents the
best estimate of the likely outcome. The increase in the provision during the
period reflects the Directors' latest assessment that the most likely
resolution will require a full reinstatement as opposed to an alternative
partial "patch" repair.
A separate supply chain claim relating to the value of works delivered
is the subject of litigation, against which management has provided £0.9m
(2023: £0.5m) against a claim value of £5.1m, much of which is considered
to be without merit and liability denied.
The remaining claims account for a provision of £0.8m, but the range of
possible outcomes is narrow and any risk to the downside is not material.
21. Financial instruments
Accounting policy
The Group uses a limited number of financial instruments comprising cash and
liquid resources, borrowings and various items such as trade receivables and
trade payables that arise directly from its operations. The main purpose of
these financial instruments is to finance the Group's operations. The Group
seeks to finance its operations through a combination of retained earnings and
borrowings and investing surplus cash on deposit. The Group uses financial
instruments to manage the interest rate risks arising from its operations and
sources of finance but has no interest in the trade of financial instruments.
Financial assets and liabilities are recognised in the Consolidated Balance
Sheet when the Group becomes party to the contractual provisions of the
instrument. The principal financial assets and liabilities of the Group are as
follows:
Financial assets
Investments in unlisted equities that do not convey control or significant
influence over the underlying entity are recognised at fair value. They are
subsequently remeasured at fair value with any changes being recognised in the
Consolidated Statement of Profit or Loss.
Loan notes and other non-current debtors are held by the Group in order to
collect the associated cash flows and not for trading. They are, therefore,
initially recognised at fair value and subsequently measured at amortised
cost, less any provision for impairment.
Financial assets generated from goods or services transferred to customers are
presented as either trade receivables or contract assets. All of the Group's
trade receivables are short term in nature, with payments typically due within
60 days of the works being performed. The Group's contracts with its
customers, therefore, contain no significant financing component.
Mears recognises a loss allowance for expected credit losses on financial
assets subsequently measured at amortised cost using the "simplified
approach". Individually significant balances are reviewed separately for
impairment based on the credit terms agreed with the customer. Other balances
are grouped into credit risk categories and reviewed in aggregate.
Trade receivables and cash at bank and in hand are non-derivative financial
assets with fixed or determinable payments that are not quoted in an active
market. Trade receivables are initially recorded at fair value net of
transaction costs, being invoiced value less any provisional estimate for
impairment should this be necessary due to a loss event. Trade receivables are
subsequently remeasured at invoiced value, less an updated provision for
impairment. Any change in their value through impairment or reversal
of impairment is recognised in the Consolidated Statement of Profit or Loss.
Cash and cash equivalents include cash at bank and in hand and bank deposits
available at short notice that are subject to an insignificant risk of changes
in value. Bank overdrafts are presented as current liabilities in the
Consolidated Balance Sheet but are included within cash and cash equivalents
within the Consolidated Cash Flow Statement, as they are used as part of the
Group's cash management process and regularly repaid. The Group also considers
its revolving credit facility to be an integral part of its cash management,
although this facility has not been utilised during 2023 or 2024.
Following initial recognition, financial assets are subsequently remeasured at
amortised cost using the effective interest rate method.
Financial liabilities
The Group's financial liabilities are trade payables, lease liabilities,
deferred and contingent consideration and other creditors. They are included
in the Consolidated Balance Sheet line items "Trade and other payables",
"Lease liabilities" and "Other non-current liabilities".
Bank and other borrowings are initially recognised at fair value net of
transaction costs. Gains and losses arising on the repurchase, settlement or
cancellation of liabilities are recognised respectively in "Finance income"
and "Finance costs". Borrowing costs are recognised as an expense in the
period in which they are incurred with the exception of those which are
directly attributable to the construction of a qualifying asset, which are
capitalised as part of that asset.
Trade payables on normal terms are not interest bearing and are stated at
their fair value on initial recognition and subsequently at amortised cost.
Categories of financial instruments
2024 2023
£'000 £'000
Non-current assets
Fair value (level 3)
Investments - other investments 850 65
Amortised cost
Loan notes and other non-current receivables 10,195 4,458
Current assets
Amortised cost
Trade receivables 20,940 23,230
Other debtors 3,314 4,060
Short-term financial assets - 7,090
Cash and cash equivalents 91,404 138,756
115,658 173,136
Non-current liabilities
Amortised cost
Lease liabilities (230,641) (199,948)
Current liabilities
Fair value (level 3)
Contingent consideration - (581)
Amortised cost
Overdrafts and other short-term borrowings - (36,699)
Trade payables (51,723) (58,651)
Lease liabilities (66,861) (54,492)
Other creditors (2,490) (4,710)
Deferred consideration - (252)
(121,074) (154,804)
(225,012) (177,674)
Borrowing facilities
The Group's borrowing facilities are drawn on as required to manage its cash
needs. Banking facilities are reviewed regularly and extended and replaced in
advance of their expiry.
The Group had a revolving credit facility of £70.0m with Barclays Bank PLC,
HSBC Bank PLC and Citi. In order to assist with short-term day-to-day treasury
requirements, this facility includes an overdraft carve out with Barclays Bank
PLC of £10m.
The Group pays a margin over and above SONIA on bank borrowings when it uses
its facility. The margin is based on the ratio of Group consolidated net
borrowings to Group consolidated adjusted EBITDA and could have varied between
1.75% and 2.75% during the year.
Overdrafts and other short-term borrowings
At 31 December 2024, the Group had overdrafts of £nil (2023: £25.5m) and
other credit facilities of £nil (2023: £11.2m). Overdrafts were utilised
alongside highly liquid cash equivalents, such as money market facilities, for
the purposes of cash management during the year. For the purpose of the
Consolidated Cash Flow Statement overdraft facilities have been included
within cash and cash equivalents.
Other credit facilities are short-term borrowings due within no more than 60
days and are also used as part of the Group's cash management process.
Interest rate risk management
The Group finances its operations through a mixture of retained profits and
bank borrowings from major banking institutions at floating rates of interest
based on SONIA.
The Group's policy is to accept a degree of interest rate risk, provided the
effects of the various potential changes in rates remain within
certain prescribed parameters.
At 31 December 2024, the Group had minimal exposure to interest rate risk
relating to borrowing costs.
Liquidity risk management
The Group seeks to manage liquidity risk by ensuring sufficient liquidity is
available to meet foreseeable needs and to invest cash assets safely and
profitably.
Management monitors rolling forecasts of the Group's liquidity reserve
(comprising undrawn borrowing facilities and cash and cash equivalents) on the
basis of expected cash flows. This is carried out centrally for the Group as a
whole in accordance with internal practice and limits.
The quantum of committed borrowing facilities of the Group is regularly
reviewed and is designed to exceed forecast peak gross debt levels. For
short-term working capital purposes, the Group utilises bank overdrafts as
required. These facilities are regularly reviewed and are renegotiated ahead
of their expiry date.
Credit risk management
The Group's credit risk is primarily attributable to its trade receivables,
contract assets and work in progress.
Trade receivables are normally due within 30 to 60 days. Trade and other
receivables included in the Consolidated Balance Sheet are stated net of an
expected credit loss provision which has been estimated by management
following a review of individual receivable accounts. There is no Group-wide
rate of provision and provision made for debts that are overdue is based on
prior default experience and known factors at the balance sheet date.
Receivables are written off against the expected credit loss provision when
management considers that the debt is no longer recoverable.
Loan notes receivable
Loan notes with a carrying value of £4.7m (2023: £4.2m) included within
non-current assets were received as part of the disposal of the Terraquest
Group. They are repayable in December 2028 and accrue interest at 10% per
annum.
During the year, the Group entered into a sale and leaseback transaction as
detailed in note 13. As part of this transaction, the Group received loan
notes with a carrying value of £5.3m, which are also included within
non-current assets. Interest is payable monthly at 5% per annum on the balance
outstanding and the loan notes are repayable in 2039 or on the event of a
further sale of the properties by the buyer.
Capital management
The Group's objectives when managing capital are:
· to safeguard the Group's ability to continue as a going concern,
so that it can continue to provide returns for shareholders and benefits
for other stakeholders;
· to provide an adequate return to shareholders by pricing products
and services commensurately with the level of risk; and
· to maintain an optimal capital structure to reduce the cost of
capital.
The Group sets the amount of capital in proportion to risk. The Group manages
the capital structure and makes adjustments to it in light of changes in
economic conditions and the risk characteristics of the underlying assets. In
order to maintain or adjust the capital structure, the Group may adjust the
amount of dividends paid to shareholders, return capital to shareholders,
issue new shares or sell assets to reduce debt.
22. Deferred taxation
Deferred tax is calculated on temporary differences under the liability
method.
Deferred tax relates to the following:
Consolidated Consolidated Statement Other movements
Balance Sheet of Profit or Loss
At At 2024 2023 2024 2023
31 December 31 December £'000 £'000 £'000 £'000
2024 2023
£'000 £'000
Pension schemes (5,655) (4,799) (319) (481) (537) 1,482
Share-based payments 1,320 698 466 118 156 (124)
Tax losses 274 - 274 - - -
Acquisition intangibles (479) (540) 61 61 - -
Capital allowances 423 1,295 (872) 978 - -
Leases 513 569 (56) (56) - -
Fair value of software development (114) (128) 14 15 - -
Other timing differences 200 - 200 - - -
(3,518) (2,905) (232) 635 (381) 1,358
Other movements are recognised in the Consolidated Statement of Comprehensive
Income in respect of pension schemes and in the Consolidated Statement of
Changes in Equity in respect of share-based payments.
23. Share capital and reserves
Classes of reserves
Share capital represents the nominal value of shares that have been issued.
Mears Group PLC does not have a limited amount of authorised shares.
Share premium represents the difference between the nominal value of shares
issued and the total consideration received.
Treasury shares are equity instruments of the Group that have been reacquired.
They are recognised at cost and deducted from equity as a separate reserve.
The share-based payment reserve represents employee remuneration which is
credited to the share-based payment reserve until the related share options
are exercised or otherwise extinguished. Upon exercise or derecognition of the
option, the share-based payment reserve is transferred to retained earnings.
Share capital
2024 2023
£'000 £'000
Allotted, called up and fully paid
At 1 January: 101,551,082 (2023: 111,000,889) ordinary shares of 1p each 1,016 1,110
Issue of 153,880 (2023: 2,713,031) shares on exercise of share options 2 27
Cancellation of 10,940,518 (2023: 12,162,838) shares following share buybacks (110) (121)
At 31 December: 90,764,444 (2023: 101,551,082) ordinary shares of 1p each 908 1,016
During the year 153,880 (2023: 2,713,031) ordinary 1p shares were issued in
respect of share options exercised. In addition, 10,940,518 (2023: 12,162,838)
shares were repurchased by the Group and cancelled at a cost of £40.3m (2023:
£33.2m).
Treasury shares
Thousands £'000
At 1 January 2024 1,891 5,122
Acquired during the year 3,169 11,733
Distributed to satisfy the exercise of share options during the year (599) (1,870)
At 31 December 2024 4,461 14,985
24. Notes to the Consolidated Cash Flow Statement
The following non-operating cash flow adjustments have been made to the profit
for the year before tax:
2024 2023
£'000 £'000
Depreciation 69,032 58,213
Impairment of right of use assets 633 6,223
Loss/(profit) on disposal of assets 358 (101)
Loss on sale and leaseback transaction 283 -
Amortisation 2,244 1,879
Share-based payments 2,622 1,040
IAS 19 pension movement (544) (758)
Movement in fair value of investments (785) -
Share of profits of associates (1,014) (486)
Finance income (5,367) (5,939)
Finance cost 13,785 11,182
Total 81,247 71,253
For the purpose of the Consolidated Cash Flow Statement, cash and cash
equivalents comprise the following at 31 December:
2024 2023
£'000 £'000
Bank and cash 85,404 2,755
Readily available deposits 6,000 136,000
91,404 138,755
Bank overdrafts - (25,454)
Cash and cash equivalents 91,404 113,301
25. Pensions
Accounting policy
The Group operates both defined benefit and defined contribution pension
schemes as follows:
Defined contribution pensions
A defined contribution plan is a pension plan under which the Group pays fixed
contributions to an independent entity. The Group has no legal obligations to
pay further contributions after payment of the fixed contribution.
The assets of the schemes are held separately from those of the Group in an
independently administered fund.
Defined benefit pensions
The Group contributes to defined benefit schemes which require contributions
to be made to separately administered funds.
A defined benefit plan is a pension plan that defines an amount of pension
benefit that an employee will receive on retirement, usually dependent on one
or more factors such as age, years of service and salary. The legal
obligations for any benefits from this kind of pension plan remain with the
Group, even if plan assets for funding the defined benefit plan have been set
aside.
Defined benefit assets
Assets for Group schemes are based on the latest asset information provided by
the scheme administrators.
Scheme assets for other schemes have been estimated by rolling forward the
published asset position from the previous year using market index returns
over the period. This is considered to provide a good estimate of the fair
value of the scheme assets and the values will be updated to actuals each
time a triennial valuation takes place.
Defined benefit liabilities
A number of key estimates have been made, which are given below, and which are
largely dependent on factors outside the control of the Group:
· • inflation rates;
· • mortality;
· • discount rate; and
· • salary and pension increases.
Details of the particular estimates used are included in this note.
Sensitivity analysis for these key estimates is included below.
Key sources of estimation uncertainty
The net position on defined benefit pension schemes is a key source of
estimation uncertainty. Given the importance of this area and to ensure
appropriate estimates are made based on the most relevant information
available, management has continued to engage with third party advisers in
assessing each of the underlying assumptions. The discount rate is derived
from the return on corporate bond yields, and whilst this is largely
observable, any change in discount rates in the future could have a material
impact on the carrying value of the defined benefit obligation. Similarly,
inflation rates and mortality assumptions impact the defined benefit
obligation as they are used to model future salary increases and the duration
of pension payments. Whilst current assumptions use projected future inflation
rates and the most up to date information available on expected mortality, if
these estimates change, the defined benefit obligation could also change
materially in future periods.
Defined contribution schemes
The Group operates a defined contribution Group personal pension scheme for
the benefit of certain employees. The Group contributes to personal pension
schemes of certain Directors and senior employees. The Group operates a
stakeholder pension plan available to all employees. During the year, the
Group contributed £4.8m (2023: £4.5m) to these schemes.
Defined benefit schemes
The Group participated in 15 (2023: 16) principal defined benefit schemes on
behalf of a number of employees which require contributions to be made to
separately administered funds.
The disclosures in respect of the two (2023: two) Group defined benefit
schemes and the 13 (2023: 14) other defined benefit schemes in this note have
been aggregated. Details of movements in pension guarantee assets are
presented in a separate table.
The costs and liabilities of the schemes are based on actuarial valuations.
The latest full actuarial valuations for the schemes were updated to 31
December 2024 by qualified independent actuaries using the projected unit
funding method.
The principal actuarial assumptions at the balance sheet date are as follows:
2024 2023
Rate of increase of salaries 3.05% 2.80%
Rate of increase for pensions in payment - based on CPI with a cap of 5% 2.60% 2.40%
Rate of increase for pensions in payment - based on RPI with a cap of 5% 2.85% 2.70%
Rate of increase for pensions in payment - based on CPI with a cap of 3% 2.10% 2.00%
Rate of increase for pensions in payment - based on RPI with a cap of 3% 2.25% 2.15%
Discount rate 5.50% 4.50%
Retail prices inflation 3.05% 2.80%
Consumer prices inflation 2.65% 2.40%
Life expectancy for a 65-year-old male* 21.2 years 21.0 years
Life expectancy for a 65-year-old female* 23.6 years 23.6 years
* This assumption is set on a scheme-by-scheme basis, taking into
account the demographics of the relevant members. The figures disclosed are an
average across all schemes.
The amounts recognised in the Consolidated Balance Sheet are:
2024 2023
Group Other Total Group Other Total
schemes schemes £'000 schemes schemes £'000
£'000 £'000 £'000 £'000
Quoted assets
Equities 1,781 54,765 56,546 1,473 45,399 46,872
Bonds 59,865 20,894 80,759 94,184 17,576 111,760
Pooled investment vehicles
Property funds 1,905 - 1,905 - 520 520
Multi-asset funds 48,145 3,617 51,762 20,381 470 20,851
Alternative asset funds 2,095 3,781 5,876 2,724 - 2,724
Return seeking funds 1,548 1,307 2,855 1,923 784 2,707
Other assets
Equities - 7,053 7,053 - 14,507 14,507
Bonds - 4,529 4,529 - 4,121 4,121
Property - 14,920 14,920 2,008 9,137 11,145
Derivatives 707 60 767 2,790 - 2,790
Cash and other 6,212 4,505 10,717 6,040 19,049 25,089
Investment liabilities
Derivatives (3,379) - (3,379) (2,029) - (2,029)
Group's estimated asset share 118,879 115,431 234,310 129,494 111,563 241,057
Present value of funded scheme liabilities (97,210) (76,705) (173,915) (109,659) (83,342) (193,001)
Pension surplus/deficit 21,669 38,726 60,395 19,835 28,221 48,056
Scheme surpluses not recognised as assets - (37,150) (37,150) - (28,393) (28,393)
Pension asset/(liability) recognised 21,669 1,576 23,245 19,835 (172) 19,663
Pension guarantee assets - - - - - -
The amounts recognised in the Consolidated Statement of Profit or Loss are as
follows:
2024 2023
Group Other Total Group Other Total
schemes schemes £'000 schemes schemes £'000
£'000 £'000 £'000 £'000
Current service cost 809 1,490 2,299 843 1,595 2,438
Past service cost - 224 224 - - -
Settlement and curtailment - (2,413) (2,413) - 58 58
Administration costs 489 - 489 347 - 347
Total operating charge 1,298 (699) 599 1,190 1,653 2,843
Net interest (926) (1,261) (2,187) (1,162) (1,528) (2,690)
Effects of limitation of recognisable surplus related to net interest - 1,298 1,298 - 1,528 1,528
Total charged to the profit for the year 372 (662) (290) 28 1,653 1,681
Actuarial gains and losses recognised in other comprehensive income (OCI) are
as follows:
2024 2023
Group Other Total Group Other Total
schemes schemes £'000 schemes schemes £'000
£'000 £'000 £'000 £'000
Return on plan assets (below)/above that recorded in net interest (12,755) (377) (13,132) (1,877) 7,741 5,864
Actuarial gain arising from changes in demographic assumptions 1,337 178 1,515 1,840 202 2,042
Actuarial gain/(loss) arising from changes in financial assumptions 10,739 10,029 20,768 (2,058) (579) (2,637)
Actuarial gain/(loss) arising from liability experience 984 (11) 973 (3,671) (11,547) (15,218)
Effects of limitation of recognisable surplus related to OCI movements - (7,459) (7,459) - 4,428 4,428
Total gains/(losses) recognised in OCI 305 2,360 2,665 (5,766) 245 (5,521)
Changes in the present value of the defined benefit obligations are as
follows:
2024 2023
Group Other Total Group Other Total
schemes schemes £'000 schemes schemes £'000
£'000 £'000 £'000 £'000
Present value of obligations at 1 January 109,659 83,342 193,001 104,351 98,412 202,763
Current service cost 809 1,490 2,299 843 1,595 2,438
Past service cost - 224 224 - - -
Interest on obligations 4,821 3,740 8,561 4,855 3,205 8,060
Plan participants' contributions 191 410 601 201 455 656
Benefits paid (5,210) (2,305) (7,515) (4,480) (1,505) (5,985)
Contract transfer - - - - (30,284) (30,284)
Settlements - - - - (460) (460)
Actuarial gain arising from changes in demographic assumptions (1,337) (178) (1,515) (1,840) (202) (2,042)
Actuarial (gain)/loss arising from changes in financial assumptions (10,739) (10,029) (20,768) 2,058 579 2,637
Actuarial (gain)/loss arising from liability experience (984) 11 (973) 3,671 11,547 15,218
Present value of obligations at 31 December 97,210 76,705 173,915 109,659 83,342 193,001
Changes in the fair value of the plan assets are as follows:
2024 2023
Group Other Total Group Other Total
schemes schemes £'000 schemes schemes £'000
£'000 £'000 £'000 £'000
Fair value of plan assets at 1 January 129,494 111,563 241,057 128,023 133,689 261,712
Expected return on plan assets 5,747 5,001 10,748 6,017 4,733 10,750
Employer's contributions 1,901 1,139 3,040 1,957 1,236 3,193
Share of surplus received - (2,413) (2,413) - - -
Plan participants' contributions 191 410 601 201 455 656
Benefits paid (5,210) (2,305) (7,515) (4,480) (1,505) (5,985)
Scheme administration costs (489) - (489) (347) - (347)
Contract transfer - - - - (33,782) (33,782)
Settlements - 2,413 2,413 - (1,004) (1,004)
Return on plan assets (below)/above that recorded in net interest (12,755) (377) (13,132) (1,877) 7,741 5,864
Fair value of plan assets at 31 December 118,879 115,431 234,310 129,494 111,563 241,057
Changes in the fair value of guarantee assets are as follows:
2024 2023
£'000 £'000
Fair value of guarantee assets at 1 January - 3,136
Transferred out on scheme exit - (3,136)
Recognised in the Consolidated Statement of Profit or Loss
Guarantee asset movement in respect of service cost 516 408
Recognised in other comprehensive income
Guarantee asset movement in respect of actuarial losses (516) (408)
Fair value of guarantee assets at 31 December - -
The Group's defined benefit obligation is sensitive to changes in certain key
assumptions. The sensitivity analysis below, prepared using the same methods
and assumptions used above, shows how a reasonably possible increase or
decrease in a particular assumption, in isolation, results in an increase or
decrease in the present value of the defined benefit obligation as at 31
December 2024. This analysis excludes the impact on pension schemes with a
guarantee in place as there would be no net impact on the balance sheet for
these schemes.
£'000 £'000
Rate of inflation - decrease/increase by 0.1% (1,069) (1,766)
Rate of increase in salaries - decrease/increase by 0.1% (291) (380)
Discount rate - decrease/increase by 0.1% 1,361 2,110
Life expectancy - decrease/increase by 1 year (2,916) (5,480)
26. Capital commitments
The Group had no capital commitments at 31 December 2024 or at 31 December
2023.
27. Contingent liabilities
The Group had no contingent liabilities at 31 December 2024 or at 31 December
2023.
28. Related party transactions
Identity of related parties
The Group has a related party relationship with its pension schemes, its
subsidiaries and its Directors.
Subsidiaries
The Group has a central treasury arrangement in which all subsidiaries
participate. Management does not consider it meaningful to set out details of
transfers made in respect of this treasury arrangement between companies, nor
does it consider it meaningful to set out details of interest or dividend
payments made within the Group.
Transactions with key management personnel
The Group has identified key management personnel as the Directors of Mears
Group PLC.
Key management personnel held the following percentage of voting shares in
Mears Group PLC:
2024 2023
% %
Directors 0.5 0.3
Key management personnel's compensation is as follows:
2024 2023
£'000 £'000
Salaries including social security costs 1,910 1,783
Contributions to defined contribution pension schemes 19 56
Share-based payments 1,477 694
3,406 2,533
Dividends totalling £0.06m (2023: £0.04m) were paid to Directors during the
year.
Transactions with other related parties
During the year the Group provided maintenance services to Pyramid Plus South
LLP, an entity in which the Group is a 30% member, totalling £16.4m (2023:
£12.1m). Pyramid Plus South LLP also made recharges of certain staff costs to
the Group totalling £0.7m (2023: £0.2m). At 31 December 2024, £0.2m (2023:
£1.4m) was due to the Group in respect of these transactions. Pyramid Plus
also owed the Group £1.0m (2023: £0.1m) in respect of agreed distributions.
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