REG - Mears Grp PLC - Trading Update

MearsAnnouncement

09/01/2025 07:00

For best results when printing this announcement, please click on link below:
https://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20250109:nRSI6269Sa&default-theme=true

RNS Number : 6269S  Mears Group PLC  09 January 2025

Mears Group PLC

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

 

Business Update

Continued strong progress

 

Mears (LSE: MER), the UK Housing solutions provider, today provides an update
on trading for the financial year ending 31 December 2024 ('FY24').

Trading update

The Group's trading update on 1 November 2024 highlighted that trading had
remained strong in the period since its Interim Results. In particular,
operating margins in the core housing activities continued to strengthen, and
volumes in management-led activities had reduced at a slower rate than
previously anticipated. Since that time, these trends have continued, and the
Board now expects results to be marginally ahead of current market
expectations for FY24 and is increasingly confident of delivering against
market expectations for FY25(1).

The mobilisation of the new contract with North Lanarkshire Council ('NLC')
has proceeded well. The new contract is significantly larger than the previous
contract and includes all maintenance and compliance services, as well as a
programme of planned investment works, to approximately 37,000 homes and 1,200
Council buildings. The new workstreams will move across over a two-year
period, with gas compliance being the first new service to transition. New
mobilisations often require some initial investment, resulting in some margin
dilution; it is pleasing that the new NLC contract is performing strongly at
this relatively early stage.

Contract momentum

2024 was a busy period of contract re-bidding. Pleasingly, the Group has seen
100% retention on contracts subject to re-bid during FY24, and only a single
material contract remains subject to a re-bid which could impact upon FY25.
Contract retentions have included those with Thanet District Council (£9m per
annum for 10 years), Folkestone and Hythe Council (£4m per annum for 10
years) and Dover District Council (£4.5m per annum for 5 years). It is
noteworthy also, that Thanet District Council and Dover District Council are
two of the Group's longest standing client relationships, having delivered
services in those areas since the inception of the Group in 1996.

The Group is delighted to announce the award of a new contract with Moat Homes
('Moat'). This new contract, which has been awarded under emergency
procurement provisions, is for a period of 18 months, with an estimated
contract value of £12m. The new contract will commence in February 2025 and
will see Mears delivering responsive and voids maintenance to c.20,000 homes
in the South-East of England. The Mears relationship with Moat dates back to
2009, and the Board was disappointed when the Group was unsuccessful through a
procurement process in 2022. The Group takes comfort from this opportunity
returning so quickly and it is a clear example that maintaining a disciplined
bidding approach does not disadvantage the Group over the longer-term.

Property sale and leaseback

As reported previously, the Group has utilised its balance sheet strength to
fund property acquisitions to support the requirement for additional
properties within the Asylum Accommodation contract. This approach has played
a critical role in enhancing the service offer and delivering against client
expectations. The Group purchased properties in FY23 for a cash cost of circa
£21.6m, and the Group is pleased to confirm that these properties have now
been sold and leased back. This transaction, relating to 221 residential
properties across the North-East of England, has seen the Group receive
£16.3m in cash on completion, with the balance taking the form of an
interest-bearing loan, combined with a continuing 25% equity interest in this
investment vehicle. 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 expects to be the subject
of a later sale and leaseback during FY25.

Capital allocation

The Group's fourth buyback programme concluded on 18 November 2024. Over the
last 2-years, buybacks have reduced the Group's ordinary share count by 23.1m
shares at an average price of 317p and a total cash cost of £73.2m,
representing a reduction of c.21% of the Group's issued share capital at the
start of the buyback. 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.

 

Lucas Critchley, Chief Executive Officer, said:

"The Group continues to deliver against its clearly defined strategy, and it
is particularly pleasing to see how our enhanced operational and commercial
focus is driving improvements to the underlying business, as evidenced in
service quality, compliance, and stronger operating margins. The robust period
of contract retention evidences the strength of our market position. The
progress made across all parts of the Group through 2024, as reflected
throughout this statement, is expected to continue into 2025. The Group
remains well-positioned to benefit from continued opportunities in its core
markets."

 

Note:

(1) The Board consider the current consensus analyst forecasts for FY24, prior
to this announcement, to be revenues of £1,126m and adjusted profit before
tax of £60.9m. Adjusted profit before tax is reported before non-underlying
items. On a similar basis, the Board considers market expectations for FY25 to
be revenues and adjusted profit before tax of £982m and £44.7m respectively.

Certain information contained in this announcement would have constituted
inside information (as defined by Article 7 of Regulation (EU) No 596/2014)
("MAR") prior to its release as part of this announcement and is disclosed in
accordance with the Company's obligations under Article 17 of those
Regulations.

 

 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)20 3100 2000
 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.

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
 or visit
www.rns.com (http://www.rns.com/)
.

RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
.   END  TSTZZGGMDRGGKZM