REG - Mears Grp PLC - Preliminary Results
Yesterday 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:20260326:nRSZ1648Ya&default-theme=true
RNS Number : 1648Y Mears Group PLC 26 March 2026
Mears Group PLC
('Mears' or 'the Group' or 'the Company')
Preliminary Results for the year ended 31 December 2025
Strong financial, operational and strategic progress
New contract awards valued at over £300m
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
2025 ('FY25').
Financial Highlights
FY 2025 FY 2024 Change
Total Revenue (£m) 1,135.5 1,132.5 +0%
Revenue - Maintenance-led (£m) 620.4 555.8 +12%
Revenue - Management-led (£m) 515.0 576.7 -11%
Statutory operating profit (£m) 75.0 72.6 +3%
Statutory operating margin % 6.6% 6.4%
Adjusted operating profit (pre-IFRS 16) (£m)(1) 64.8 63.6 +2%
Adjusted operating margin %(1) 5.7% 5.6%
Profit before tax (£m) 63.5 64.1 -1%
Basic EPS (p) 55.70 50.27 +11%
Diluted EPS (p) 53.86 48.86 +10%
Dividend per share (p) 17.50 16.00 +9%
Average daily adjusted net cash(2) (£m) 52.8 59.6 -11%
· Group revenues increased to £1,135.5m (FY24: £1,132.5m). Strong
growth in Maintenance-led activities (organic, +11%), which represents 55% of
Group revenue (FY24: 49%) offset, as anticipated, by a reduction in
Management-led revenues, a trend that is expected to continue.
· Profit before tax marginally lower at £63.5m (FY24: £64.1m) but
adjusted operating margin strengthened further to 5.7%(1) (FY24: 5.6%)
reflecting robust commercial and operational performance.
· Excellent cash performance with average daily adjusted net cash
of £52.8m (FY24: £59.6m)
o Cash conversion at 82% of EBITDA, including, as anticipated, an unwind in
negative working capital (FY24: 101%, last four years: 104%).
o Adjusted net cash at 31 December 2025 of £51.8m(2) (FY24: £91.4m) after
absorbing £17.2m purchase of own shares, £8.9m of M&A and £25.1m of
property acquisitions.
· The Board is recommending a final dividend of 11.90p, increasing
the full year dividend by 9% to 17.50p (FY24: 16.00p) reflecting the Board's
increasing confidence in the outlook.
Clear progress against our key strategic objectives:
· Growth in our traditional Maintenance-led activities underpinned
by excellent contract retention through an unusually busy period of rebids.
Key highlights include:
o Announcement today of two significant new contract retentions with livin
(Sedgefield) and Leeds City Council, with an estimated total contract value
('TCV') of £210m (10 years) and £100m (5 years) respectively
o 100% retention on contracts maturing in 2025 including Milton Keynes City
Council (TCV £230m, 5 years)
o The award of a new 10-year contract with Birmingham City Council, (TCV
£450m), which was a key growth target and Cross Keys Homes (Peterborough, TCV
£250m, 10 years)
o As a result, the order book as at today's date has increased to an
all-time high of £4.0bn (2024: £2.9bn, excluding FM).
· The acquisition of Pennington Choices ('Pennington') during the
year extended Mears' capabilities in Compliance, accelerating progress in this
key component of the strategic plan.
· We were proud to once again be named in the Top 10 Best Big
Companies to work for, a testament to the dedication, teamwork, and shared
values that unite our colleagues across the Group.
· Consistent with the Group's capital allocation strategy,
underpinned by excellent revenue and profit visibility, and robust generation
of free cash flows, the Board has today approved the launch of a new £20m
share buyback programme.
Solid start to 2026 - existing guidance maintained despite FM disposal
· Disposal of the non-core Facilities Management ('FM') activities
for cash consideration of £18m which brings a further simplification to the
Group, reinforcing our focus to delivering housing services. The Group's FM
activities reported revenue and profit before tax in FY25 of £32.1m and
£2.8m respectively,
· The positive progress in contract bidding re-enforces a high
level of confidence in delivering Maintenance-led annual growth in line with
previous guidance of 5-9%
· The Board anticipates a continued revenue reduction within its
Asylum Services, as revenues normalise from the previously elevated levels,
although the reduction timing remains uncertain
· The Board anticipates that the profit reduction from the disposal
of the FM activities will be fully offset in the current year by an
outperformance in the Core business.
· The Board is confident that adjusted operating margins will be
maintained within the range of 5-6%, underpinned by the robust approach to
operational and commercial management.
Lucas Critchley, Chief Executive Officer of the Group, commented:
"I am delighted to report another strong year of operational and financial
performance, and a period in which we have continued to make strong progress
against our key strategic objectives. Delivering strong growth in our
traditional Maintenance-led activities is a key achievement which continues to
be underpinned by excellent contract retention. We have extended the scope of
our Compliance offer both organically, and through acquisition; the addition
of Pennington in the second half of the year was a particular highlight. We
continue to maintain a robust and disciplined operational approach which
drives both service excellence and strong commercial performance."
1. Adjusted operating margin is stated before the impact of IFRS 16,
as detailed in the Financial Review
2. Adjusted net cash excludes IFRS 16 lease obligations, as detailed
within the Financial Review
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.
Chairman's Statement
I am delighted to introduce another year of strong performance across all
aspects of our business, including significant progress against all of our key
strategic goals. It is particularly satisfying to deliver strong growth in our
traditional Maintenance-led activities which has been a key strategic aim.
An important highlight has been the strength of our contract retentions, as
several key contracts reached the end of their term and were the subject of a
new procurement. Naturally any tender process brings some risk to the
incumbent, and this risk was magnified given the unusually high number of
rebids over a short period. Our near-100% success rate on rebids reflects the
quality of our service delivery and the strength of client relationships,
which ensured that those customers had little appetite for change.
Once again, I wish to place on record my thanks and recognition to all my
Mears colleagues, many of whom go above and beyond to provide a first-class
service in an often-challenging environment, where we support vulnerable and
complex service user groups, delivering our services with skill and empathy. I
regularly visit branches, and I continue to be impressed by the commitment,
hard work, professionalism and loyalty of our employees.
We were proud to once again be named in the Top 10 Best Big Companies to work
for, a testament to the dedication, teamwork, and shared values that unite our
colleagues across the Group. For the past seven years, we have partnered with
Best Companies to gather colleague feedback through its independent survey.
The insights we gain help us to understand areas in which we can further
improve.
The acquisition of Pennington Choices was a key strategic milestone, extending
Mears' capabilities, and accelerating the progress in building a full asset
management and compliance service offer. We welcomed 150 new colleagues to the
Group, and the cultural fit between the two teams has been evident.
Training and investment in our workforce remain a priority. This year, we
welcomed 140 new apprentices, the largest cohort yet, joining roles spanning
front line operations to business administration. By welcoming apprentices, we
are supporting their careers, strengthening our workforce, energising our
teams, and building the skills and ideas that will shape the future of Mears.
Our Chief Executive, Lucas Critchley, began his own career at Mears as a
trainee, and his journey demonstrates the value of nurturing talent from the
start, benefiting both individuals and the wider business.
Results
Group revenues showed a small increase to £1,135m (2024: £1,133m). The
organic growth in our Maintenance-led activities has been mirrored by a
reduction in our Management-led revenues. Growing our Maintenance revenues is
a key strategic objective and has been driven by a combination of excellent
contract retention, new orders secured and growing client spend driven by
increased regulation. As reported previously, the Group has experienced
elevated volumes in its Management-led activities, relating to the Asylum
Accommodation and Support contract ('AASC'). These peaked in 2024 as we have
worked with our client to reduce the use of contingency accommodation and
secure alternative, more cost-effective solutions, by increasing the capacity
of dispersed residential accommodation. This work will continue during 2026.
Profit before tax was marginally lower at £63.5m (£64.1m) but operating
margins continued to strengthen to 6.6% (2024: 6.4%). Adjusted operating
margin (as defined in the Financial Review), which is stated before the impact
of IFRS 16, increased to 5.7% (2024: 5.6%). The robust contract review
process, which demands strict adherence to businesses processes, continues to
bring operational, customer and commercial improvements which flow through to
the bottom line. Whilst we recognise that the reduction in AASC revenues will
reduce central overhead recovery leading to potential margin dilution, this is
being countered through organic growth in Maintenance and by other areas of
the business delivering improvements to productivity and other efficiencies.
Diluted Earnings Per Share ('EPS') increased by 10% to 53.9p (2024: 48.9p).
This improvement is driven by a reducing share count, as a result of the share
buyback programme. The Group has now repurchased around one quarter of its
share capital since it initiated a rolling programme of buybacks in May 2023.
The Group has continued to deliver strong underlying cash performance, with
conversion of EBITDA to operating cash of 82% (2024: 101%). As stated
previously, the Group enjoyed a timing benefit in previous periods, and this
working capital benefit unwound during 2025, contributing to the lower
conversion metric in the year. The Group's EBITDA to operating cash conversion
over the last four years has averaged in excess of 100%, reflecting both the
quality of earnings, and disciplined approach to working capital management.
Continuing to deliver a high conversion of EBITDA into operating cash remains
an important ongoing performance target.
Dividend and Capital Allocation
Given the excellent trading performance of the Group, the continued generation
of cash and the positive outlook, the Board is proposing a final dividend of
11.90p per share (2024: 11.25p). This brings the total dividend for the year
to 17.50p, an increase of 9% (2024: 16.00p). 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,
the Board has allowed dividend cover to increase beyond the range outlined
above, in line with our profit trajectory.
During the first half of the year, the Board approved a return of surplus
capital of £16m to shareholders, implemented through a buyback programme of
on-market purchases. This resulted in the purchase and cancellation of 4.3m
ordinary shares of 1p each at an average price of 371p. Over the last three
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. In addition, the
Employee Benefit Trust ('EBT') has purchased 5.3m shares over that same period
at a cash cost of c.£18m, with the EBT retaining 4.1m shares at the year end.
Our capital allocation policy remains consistent and prioritises the
allocation of capital to support our organic growth strategy, augmented by
strategic bolt-on acquisitions to further enhance our service offering and
accelerate the delivery of our plan. The excellent visibility of future
revenue and profits, combined with strong cash generation underpins a
progressive dividend and other routes for returning surplus funds to
shareholders remain in focus.
Consistent with the Group's capital allocation strategy, the Board has
approved a new £20m share buyback programme which is expected to be launched
in April 2026.
Corporate Governance
Ø Non-Executive appointment
Whilst the Group has a relatively small Board with just three independent
Non-Executive Directors, I have been satisfied that we have an suitable
balance of skills, experience and knowledge which are appropriate to effect
oversight of the Group's strategy. I am, however, also mindful that having
such a small Board could leave the Group exposed in the event of an
unanticipated absence. In January 2025, the tenure of Dame Julia Unwin, former
Non-Executive Director, came to an end, resulting in the loss to the Board of
Julia's considerable and varied experience. Following an extensive search, I
am delighted to announce that Dame Clare Tickell will join the Board on 1
April 2026. Clare's experience over three decades spans housing, public
service delivery, and corporate governance. She brings a deep understanding of
the interface between public accountability and commercial delivery and is a
good fit for Mears' purpose-led, contract-based business model.
Ø Succession Planning
While identifying and developing talent across the Group remains primarily the
responsibility of management, the Board has a duty to secure its long-term
success. I meet, individually, with all the senior executive team at least
once each year, and I continue to be impressed by the quality and strength we
have in the Group sitting immediately below the Board level. The Group has a
track record of developing talent internally, with both Executive Directors
having grown within the business prior to their Board appointments. I can
already see members of the senior team who will, in time, have the opportunity
to develop further as leaders of the business over the long term. In addition,
as part of our focus on succession planning, 2025 saw a number of key external
appointments, which complement the strengths of the existing management team.
Ø Employee Director (non-statutory) and employee relationship team (ERT)
Hema Nar was appointed as Employee Director in 2023. This was a position that
the Board first created in 2018 and the value of this role has increased year
on year since then. A key development, implemented in 2023, was the addition
of both a Deputy Employee Director and a Trade Representative. Since that
time, these three individuals have performed regular branch visits, and are
highly visible and in frequent contact with the Executive team, which has
become an increasingly valuable channel of communication. The Board
understands the vital role that our workforce plays in the success of the
Group. The ERT ensure that the Board receives full, open and honest insight
into the views from its workforce on how strategic initiatives are being
implemented.
Hema's tenure came to a natural end on 2 January 2026. The Board would like to
place on record their thanks and recognition of the tremendous progress made
by the ERT over the last three years, spearheaded by Hema. Our new incoming
Employee Director is Kiren Sampla, who was selected after an intensive
internal application process.
Chief Executive Review
I am delighted to report another strong year of operational and financial
performance, and a period in which we have continued to perform well against
our key strategic objectives.
Key strategic highlights include:
Ø Growing our Local Government work
We have delivered robust growth in our traditional Maintenance-led activities,
which continues to be underpinned by strong contract retention. The Group is
now approaching the end of an unusually busy period for rebids, which has seen
close to half of the Group's traditional maintenance activities subject to
re-tender within a narrow 24-month window. It was key to the delivery of our
strategic plan that the Group converted near-100% of the re-bids. The Group
now anticipates a quiet period of bidding activity on its existing contract
estate, and focus can switch to securing new growth opportunities.
The Group was delighted to receive notification of a contract award from
Birmingham City Council ('BCC') which will see Mears deliver extensive
maintenance and planned improvement works to BCC housing stock within the BCC
West-Central region. This new contract has an estimated value of £450m over
the initial period of 10 years and will see the Group deliver work to 11,500
housing units. The new contract is expected to mobilise in July 2026.
Ø Developing our services to our key Central Government clients
We place emphasis on ensuring we are delivering at a high level and
understanding the needs and requirements of Ministers and Central Government.
We approach challenges with a partnering ethos.
Our Asylum Accommodation and Support contract ('AASC') has received
significant focus over the last year, and it is disappointing that press
comment rarely represents the integrity and probity shown by Mears in
delivering quality services to a vulnerable user group. Mears has remained
focussed on securing sufficient residential accommodation to remove the
requirement for short-term contingent solutions. AASC revenues have reduced
from the peak seen in 2024, and there is a clear political drive to exit
hotels, which Mears will work collaboratively to support.
The preliminary market engagement is continuing in respect of the future
provision of asylum services, which will in time replace AASC. The intention
is for the new contracts to commence in September 2029, and Mears believes
that it is well placed to play a part in this subsequent provision, as well as
supporting Central Government with future housing related contracts.
Ø Extending our Compliance service capabilities
The Group identified a significant growth opportunity developing a full
Compliance and Asset Management offer. The housing compliance market is
fragmented, largely single service led, and driven by strong regulatory
drivers with the introduction of the Building Safety Act and Awaab's Law.
Whilst we have a clear organic growth strategy, we have also looked to augment
progress in this area where small-scale acquisitions provide additional
service capabilities. The Group had made solid progress in building its
technical and internal delivery capabilities, and this was transformed with
the acquisition of Pennington Choices ('Pennington'). Pennington is a
recognised and trusted brand in the social housing market, delivering a range
of Compliance activities such as stock condition surveys, fire risk
assessments, energy performance certification, asbestos testing and
consultancy services. The Pennington acquisition has extended Mears'
capabilities in this area, strengthening its well-rounded, holistic service
offer and accelerating progress in this key component of the strategic plan.
The initial integration has gone well, and the cultural fit between the two
teams has been evident.
Ø Divestment of our non-core activities
Mears has a consistent and well-communicated strategy focussed entirely on
delivering housing services to the public and regulated sector. The Group
owned a small FM business, Morrison Facilities Services ('MFS'), which was a
legacy from a previous acquisition. This business has been largely
self-contained, and has delivered consistent financial outputs, with limited
resources allocated from the wider Group. Given the Group's focus on housing,
the Board took a decision to divest this business. The transaction process ran
throughout 2025, and the disposal was completed after the year end, on 2 March
2026. Further detail is included within the Financial Review section.
Operational Review
2025 2024 Change
Revenue (£m)
Maintenance-led 620.4 555.8 12%
Management-led 515.0 576.7 -11%
Total 1,135.5 1,132.5 0%
Operating profit before tax measures:
Statutory operating profit (£m) (1) 75.0 72.6 +3%
Statutory operating margin (%)(1) 6.6% 6.4%
Adjusted operating profit (pre-IFRS 16) (£m) (2) 64.8 63.6 +2%
Adjusted operating margin (pre-IFRS 16) (%)(2) 5.7% 5.6%
Profit before tax measure (£m)
Statutory profit before tax 63.5 64.1 -1%
1. Statutory operating profit includes share of profit of associate.
2. Adjusted measures are defined in the Alternative Performance Measures
section of the Financial Review.
The Group delivered solid financial results that stand up compared to a strong
prior year. Group revenues edged up to £1,135m (2024: £1,133m). The sales
mix has seen our Maintenance-led activities increase to 55%, which brings an
improved balance to the business and is a trend that is expected to continue.
Profit before tax showed a small reduction to £63.5m (2024: £64.1m). The
Group has used an unadjusted figure as its headline profit measure reflects
the steady state of the business, and the quality of the earnings.
The statutory operating margin strengthened to 6.6% (2024: 6.4%). The Group
also reports an adjusted operating margin, which is stated before the impact
of IFRS 16, of 5.7% (2024: 5.6%) which is the measure most closely aligned
with how contracts are priced and reflects how operational performance is
analysed. The margin performance has been driven by maintaining a strict
adherence to process through robust operational and commercial performance
reviews, and a continuing disciplined approach to bidding.
Whilst the Executive team remains focused on maintaining operating margins,
there is recognition of the requirement for additional investment in headcount
to expand our capabilities to service and support the new and emerging market
opportunities. This new investment includes increasing our technical and
service delivery capabilities in Compliance, the extension of our approach to
contract bidding and enabling the delivery of an accelerated programme of IT
development. Investment in these areas has built over the course of the year
and is likely to continue through 2026.
The progress on operating margins was achieved despite the introduction of the
increased rate of Employers' National Insurance and a reduction in the
associated threshold, which is particularly significant in respect of
employees at the lower end of the pay scale. This change increased the Group's
annual payroll cost by c.£5 million, the additional cost having been absorbed
within the reported financials.
The Executive team is mindful that the elevated Management-led revenues have
delivered additional economies of scale and an increased level of overhead
recovery, which has been a factor behind an increasing operating margin across
recent periods. As the revenues for this segment normalise, and some of this
increased overhead recovery diminishes, the impact has been mitigated by
efficiency improvements within the business, and it is particularly pleasing
that the operating margin has been maintained.
The Group has reported 11% organic growth in Maintenance-led revenues which,
when combined with the acquired Pennington activities, have increased to
£620.4m (2024: £555.8m). A key highlight in the year was the mobilisation of
a short-term contract with Moat Homes, delivering responsive and voids
maintenance services to around 22,000 properties in the South of England. This
contract delivered revenues of £12m in the period, and the procurement for
the long-term contract opportunity is well advanced. The Group also reported
growth within its North Lanarkshire Council ('NLC') contract, which mobilised
in 2024, and under which new workstreams come online over a two-year period.
During FY25, the NLC contract reported revenues of £85m (2024: £65m). The
near-100% Maintenance-led contract retention rate during the year ensured that
all new work secured was additive.
As anticipated, Management-led activities reduced by 11%, owing to the
continued normalisation of revenues relating to AASC which, in isolation,
decreased by 16% to £370m (2024: £440m). The Group anticipates that AASC
revenues will continue to normalise to an annual revenue of c.£200m, although
the timing is uncertain. The other Management-led activities delivered for the
Ministry of Defence and Ministry of Justice reported modest growth.
Business Development
The Group's forward order book today stands at £4.0bn (2024: £2.9bn) and it
is reassuring that the Group now has full visibility of market forecast
revenue for FY26.
The Group has a strong record of retaining contracts. Re-bids naturally bring
some risk of attrition and require a shift in focus away from bidding new
works. It is extremely significant that the Group was able to celebrate new
long-term contracts with our Local Authority clients in Medway, Folkestone,
Thanet, Dover and Milton Keynes during FY25. Since the year end, Cross Keys
Homes, Leeds City Council and Livin have been added to this list.
The award of a new contract with Milton Keynes City Council ('MKCC') was a key
highlight. The MKCC partnership has been a flagship contract for Mears since
it was originally secured in 2016. The local Mears team, epitomises Mears'
culture and values and has delivered tremendous performance for almost a
decade, which has been recognised through this new contract award. The base
contract is valued at £230m over the initial period of five years and it will
see the Group continue to deliver both planned and reactive maintenance works
across the Council's housing stock. There is an option for the Council to
extend for a further period of five years, which would increase the total
contract value to an estimated £475m.
On a similar note, the Group secured a new contract with Cross Keys Homes,
which is one of the Group's longest standing relationships, and this new
contract is valued at £250m over the initial 10-year term.
Having experienced an unusually hectic period of retention-bids, the Group
hopes to now enjoy a period with few existing contract expiries, meaning focus
can be applied to securing new growth opportunities. The table below provides
detail of contracts expiring over the last three years, and the Group's
expectation, subject to being awarded anticipated extensions, of contracts
expected to be the subject of re-bid over the next three years:
Contract expiry Contract number Annual value at risk £m Annual value resecured £m Annual value lost on rebid £m Retention % (by value)
2024 2 70 65 5 93%
2025 5 95 95 - 100%
2026* 6 103 68 9 88%
2027 2 38
2028 - -
2029 - -
*2026: Cross Keys (£26m), Leeds (£22m) and Livin (£20m) have all been
secured. Eastbourne (£9m) is the single contract loss. Thurrock (£15m) and
Moat (£12m) are both active live bids and are excluded from the above
retention %.
The Executive team recognises that whilst the Group has a strong track record
of retaining works on re-bid, its ability to secure work from new customers
has been less consistent. Additional investment has been allocated to enhance
the Group's pre-sales capabilities, increasing prospective clients' knowledge
of Mears' service quality and capabilities before the commencement of new
procurement processes. Given the elongated bid process, the impact from the
additional investment may take 24 months to crystallise.
The Group remains disciplined and highly selective when targeting new contract
opportunities. One priority client target was secured through a significant
new contract with Birmingham City Council. The contract is expected to deliver
annual revenues of around £45m, and this new hub will allow the Group to more
easily extend its services across the Midlands.
Following the acquisition of Pennington Choices in September 2025, the
integration of the business is on track. Since the acquisition, the business
has enjoyed a strong period of securing orders with new clients. The increased
scope of the Group's Compliance capabilities has seen new opportunities
created with both existing Mears and Pennington clients. One such example is
the award of a contract to deliver Fire Risk Assessments to the London Borough
of Havering. This contract is for an initial period of 10 years and is valued
at £7.5m.
The Group has continued to develop its operational and commercial expertise to
deliver standalone planned works, including retrofit. Over recent years, Mears
has looked to create an end-to-end decarbonisation service to assist our
clients with the huge challenge of improving social housing stock. The Group
has performed well in supporting clients securing grants through the Social
Housing Decarbonisation Fund (SHDF). Mears submitted applications on behalf of
clients in respect of SHDF Wave 3, securing £30m of grant funding,
contributing to over £60m of total works value to be delivered over the
course of 2026 and 2027. The SHDF Wave 4 has not yet been committed. This
future wave of funding will sit within the wider Warm Homes policy framework.
The reformed Decent Homes Standard (DHS2) has introduced a materially
strengthened regulatory framework for housing quality to social housing in
England, with compliance required from April 2035. Government modelling
indicates that bringing the sector up to the new standard will require
approximately £11.3bn of capital investment. This represents a substantial
uplift from the previous framework. Spread across roughly a decade of
preparation and delivery, this equates to circa £1bn per annum of additional
maintenance and planned works investment across England's social housing
stock. DHS2 should be viewed as a regulatory capital cycle that will operate
alongside retrofit, energy efficiency and other building safety programmes.
Outlook
The Group has made a strong start to FY26. Further contract retentions
combined with the award of the Birmingham City Council contract provide a high
level of confidence that the Group is on track to deliver against its
Maintenance growth target of 5-9% per annum. The low level of renewals in the
next three years and a strong pipeline of new bidding opportunities, provides
confidence that this growth can be sustained over the medium term.
The Group continues to develop its operational and commercial expertise to
deliver planned works, which will be further buoyed by the reformed Decent
Homes standard. The combined Mears-Pennington Compliance offer will increase
the addressable market and opportunity for growth in that area.
The Group anticipates that AASC revenues will continue to normalise to an
annual revenue of c.£200m, although the timing is uncertain. Over the medium
term, the Group believes that it is well positioned to deliver additional
housing related services to Central Government clients.
The Group is well positioned to maintain adjusted operating margins within the
range of 5-6% underpinned by a disciplined approach to new contract bidding
and a robust 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 an 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 management 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 this preliminary announcement.
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 2025 2024
£'000 £'000
Profit before tax Income Statement 63,488 64,141
IFRS 16 profit impact See below 4,629 3,744
Net finance income (non-IFRS 16) 5 (3,299) (4,275)
Adjusted operating profit pre-IFRS 161 APM 64,819 63,610
Amortisation of software and acquisition intangibles 12 2,254 2,244
Depreciation and loss on disposal (non-IFRS 16) 4/13 7,608 7,574
EBITDA pre-IFRS 161 APM 74,681 73,428
IFRS 16 profit impact See below (4,629) (3,744)
Finance costs (IFRS 16) 5 14,851 12,693
Depreciation, profit on disposal and impairment (IFRS 16) 4/14 72,519 62,733
EBITDA post-IFRS 161 157,422 145,110
Amortisation of software and acquisition intangibles 12 (2,254) (2,244)
Depreciation, loss on disposal and impairment (IFRS 16) 4/14 (72,519) (62,733)
Depreciation and loss on disposal (non-IFRS 16) 4/13 (7,608) (7,574)
Operating profit post-IFRS 161 Income Statement 75,041 72,559
1 Operating profit and EBITDA measures include share of profits of
associates.
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 2025 2024
£'000 £'000
Revenue Statutory 1,135,461 1,132,510
Adjusted operating profit pre IFRS 16 APM 64,819 63,610
Adjusted operating margin % APM 5.7% 5.6%
IFRS 16 profit impact
The profit impact in respect of IFRS 16, which was included within the APM
analysis above, is detailed below:
2025 2024
£'000 £'000
Charge to income statement on a post-IFRS 16 basis (86,514) (74,793)
Charge to income statement on a pre-IFRS 16 basis (82,741) (71,682)
Profit impact from the adoption of IFRS 16 and before impairment (3,773) (3,111)
Impairment of right of use assets (856) (633)
Profit impact from the adoption of IFRS 16 (4,629) (3,744)
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, and 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, but 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.
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 2025 2024
£'000 £'000
Cash and cash equivalents Cashflow Statement 51,807 91,404
Lease liabilities (current) 19 (80,652) (66,861)
Lease liabilities (non-current) 19 (238,069) (230,641)
Net debt (including IFRS 16 lease obligations) (266,914) (206,098)
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 preliminary
announcement, and these are signposted below to assist the user in accessing
these and to better understand the underlying performance in the period.
2025 2024
Note £'000 £'000
Impairment of right of use assets 14 (856) (633)
Amortisation of acquired intangibles 12 (387) (245)
Loss on sale and leaseback transaction 23 (122) (283)
Increase in fair value of other investments 15 1,500 785
Onerous contract provisions (provided in year less amounts released unused) 20 (1,289) (759)
Legal provisions (provided in year less amounts released unused) 20 (2,025) (4,792)
Settlements on exiting LGPS pension schemes 28 - 2,413
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 an earlier impairment, 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 shown a small increase in 2025. Property
maintenance costs have also been broadly consistent during 2025, having
stabilised since the rising costs experienced in the period following the
pandemic. 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 £0.9m (2024:
£0.6m) to align the carrying value of the right of use assets to their value
in use. This additional charge applied to 2025 will be mirrored by a reduction
in depreciation in future periods and ultimately has no impact on the lifetime
profitability of the underlying assets.
AASC property acquisitions and 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 for a cash cost of £22.7m, which
were the subject of a sale and leaseback in 2024. On a similar basis, the
Group procured 200 properties across a similar geography in 2024 for a cash
cost of £25.5m and these were the subject of a second sale and leaseback in
2025. This second transaction saw the Group receive £18.1m in cash on
completion, with the balance taking the form of a £6.5m interest-bearing
loan, combined with a continuing 25% equity interest in this investment
vehicle. The transaction crystallised a small loss on disposal of £0.1m.
These properties will continue to be used to support the delivery of the AASC
until the contract expiry.
During 2025, the Group purchased 230 properties in Scotland for a cash cost of
£38.4m which are held on the Balance Sheet at the year end.
Acquisition - Pennington Choices Group Limited ('Pennington')
In September 2025, the Group acquired 100% of the issued share capital of
Pennington, a provider of building compliance services. This acquisition has
enhanced the Group's ability to deliver compliance services to its key
customer groups, which remains a key pillar of the Group's strategy.
The purchase consideration was £9.5m plus £0.3m for excess working capital,
comprised entirely of cash on completion. The assets and liabilities
recognised as a result of the acquisition were as follows:
£'000
Net tangible assets acquired 996
Goodwill 3,117
Identified intangible assets acquired 5,673
Cash consideration 9,786
The identified intangible assets acquired comprises customer relationships and
brand and will be amortised on a straight-line basis over 10 years. The
goodwill is attributable to the workforce and the expected synergies from
combining the operations of the acquired business with those of the existing
Group.
Disposal - Morrison Facilities Services (transaction completed post balance
sheet date)
In March 2026, the Group completed the disposal of 100% of the share capital
in Morrison Facilities Services Limited, a business delivering Facilities
Management with a focus on the education and health sectors. This business was
previously identified as non-core and has been the subject of a competitive
sales process.
The sale was for a total consideration of £18.0m, settled in cash on
completion. The business is sold on a debt and cash-free basis, and with a
normal level of working capital. In the financial year ended 31 December 2025,
the Group's FM activities reported revenue and profit before tax of £33m and
£2.7m respectively, and these activities have previously been reported within
the Maintenance-led segment. The net assets sold are estimated at £9.2m, and
the profit on disposal, net of legal and other transaction-related costs, is
c.£7.5m.
The associated assets and liabilities that are the subject of the disposal are
classified as held for sale as at 31 December 2025 as detailed below:
£'000
Assets classified as held for sale 18,376
Liabilities directly associated with assets classified as held for sale (9,145)
Net assets subject to disposal 9,231
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. 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 £17.5m (2024: £17.2m), at an effective tax
rate of 27.6% (2024: 26.8%). It is anticipated that the effective tax rate
will remain above the standard corporation tax rate of 25.0%.
Mears is a significant contributor of revenues to the UK Exchequer, paying
£224.8m of taxes in the year (2024: £203.3m). This relates to taxes borne by
Mears (principally corporation tax and Employers' National Insurance) and
taxes collected by Mears (being VAT, income tax under PAYE and Employees'
National Insurance). Further detail in respect of the taxes paid during 2025
are provided below:
Taxes Tax Total
borne collected £m
£m £m
Corporation Tax 15.7 0.0 15.7
VAT and Insurance Premium Tax1 0.5 128.7 129.2
Construction Industry Scheme 0.0 13.4 13.4
Employment taxes 0.9 32.6 33.5
National Insurance 23.6 9.4 33.0
Total 40.7 184.1 224.8
1 VAT excludes the disallowance of input tax recovery on the Group's
exempt supplies.
Earnings per share ('EPS')
2025 2024
Basic earnings per share (p) 55.70 50.27
Diluted earnings per share (p) 53.86 48.86
Weighted average number of shares (for basic EPS) (m) 82.99 92.56
Weighted average number of shares (for diluted EPS) (m) 85.81 95.22
Diluted earnings per share increased by 10% to 53.9p (FY24: 48.9p). The
improvement is driven by the reduction in the weighted average number of
shares as a result of the share buyback programme.
Net Assets
The Group reported an increase in net assets from £187.5m to £204.8m.
Notwithstanding the significant distribution to shareholders through both
ordinary dividends and share buybacks, the profit generation has ensured a
robust position has been maintained. The key movements are detailed below:
£m
Net assets at 1 January 2025 187.5
Profit after tax 45.9
Dividends (13.9)
Share buybacks including purchases by EBT (17.2)
Share based payment charges 2.3
Other equity movements 0.2
Net assets at 31 December 2025 204.8
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.
· Three schemes where the Group holds 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 future deficit risk.
('Indemnified')
· 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. ('No indemnity')
The two principal Group schemes enjoy a strong financial position and have
done consistently over the last 10 years. Both schemes are mature, and most
assets held are matched to the underlying obligations. It was extremely
positive to reach a position where both Group schemes can be considered
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.
The Directors are comfortable with the position on both the indemnified 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.
Group No indemnity
£'000 Indemnified £'000 Total
£'000 £'000
Total scheme assets 119,784 55,815 66,260 241,859
Total obligations (96,449) (34,498) (40,306) (171,253)
Funded status 23,335 21,317 25,954 70,606
Surpluses not recognised as assets - (20,858) (25,066) (45,924)
Assets held for sale - - (585) (585)
Pension surplus 23,335 459 303 24,097
Cash flow and working capital management
The Group reported an adjusted net cash position at the year-end of £51.8m
(2024: £91.4m). Whilst it is reassuring to report a strong cash position
within the year-end balance sheet, of much greater significance is the
performance over the 365-day period. The year-end performance was also
mirrored in the average daily adjusted net cash for the year at £52.8m (2024:
£59.6m).
2025 2024
£'000 £'000
Average daily adjusted net cash 52,826 59,626
Adjusted net cash at 31 December 51,807 91,404
During the year, the Group allocated c.£27.4m of capital (net of sale and
leaseback proceeds) in properties to provide additional support to the AASC
contract, purchased its own shares at a cost of £17.2m, and paid out £13.9m
in ordinary dividends, whilst registering only a small reduction in the
adjusted net cash balance over that period.
Mears fosters a "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 our 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 clear indication of the quality of the earnings.
2025 2024
£'000 £'000
Profit before tax 63,488 64,141
Net finance costs 11,552 8,418
Depreciation and amortisation 9,862 9,818
Right of use asset depreciation and impairment 72,519 62,733
EBITDA 157,422 145,110
Other adjustments 574 278
Change in inventories 263 290
Change in operating receivables (24,684) (7,021)
Change in operating payables and provisions (5,234) 7,551
Operating cash flow 128,340 146,208
Operating cash to EBITDA conversion 82% 101%
The Group has consistently delivered operating cash flows in excess of EBITDA
over the last 4 years reporting the conversion of 104% 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 enjoyed a
timing benefit in respect of certain contractual mechanisms linked to payments
on account and gainshares. This benefit has largely unwound during the period.
.
4-year total 2025 2024 2023 2022
£'000 £'000 £'000 £'000 £'000
EBITDA 515,775 157,422 145,110 118,375 94,868
Operating cash flow 535,103 128,341 146,208 145,224 115,330
EBITDA to operating cash conversion 104% 82% 101% 123% 122%
Share Capital
During 2025, the Board approved a return of surplus capital of £16m to
shareholders, which was implemented through a programme of on-market
purchases, resulting in the purchase and cancellation of 4.3m ordinary shares
of 1p each at an average price of 371p. As detailed below, over the last three
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 £89.2m. The Board has
approved a new £20.0m share buyback programme which is expected to be
launched in April 2026.
Year
Opening basic share count (millions) Option exercises (millions) Closing basic share count (millions) Buyback cash cost £m
Buyback (millions)
2023 111.0 (12.2) 2.7 101.6 (33.2)
2024 101.6 (10.9) 0.2 90.8 (40.0)
2025 90.8 (4.3) 0.0 86.4 (16.0)
Total 111.0 (27.4) 2.9 86.4 (89.2)
In addition to the shares acquired through the share buyback programmes, the
Group holds 4.1m shares through its Employee Benefit Trust ('EBT'), which
waives its entitlement to a dividend and also reduces the share count when
calculating EPS measures.
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.
Covenant Formulae Covenant ratio
Leverage Consolidated net borrowing(1) divided by adjusted consolidated EBITDA(2) 3.00x
Interest cover Adjusted consolidated EBITDA(2) divided by consolidated net finance 3.50x
charges(3)
(1) Net borrowing is stated on a pre-IFRS 16 basis
(2) Adjusted EBITDA on a rolling 12-month basis, pre IFRS 16, and stated
before non-underlying items and share-based payments.
(3) 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 1.45-2.45% 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).
Consolidated statement of profit or loss
For the year ended 31 December 2025
Note 2025 2024
£'000 £'000
Sales revenue 2 1,135,461 1,132,510
Cost of sales (869,622) (879,257)
Gross profit 265,839 253,253
Administrative expenses (190,811) (181,708)
Operating profit 4 75,028 71,545
Share of profits of associates 15 12 1,014
Finance income 5 4,526 5,367
Finance costs 5 (16,078) (13,785)
Profit for the year before tax 63,488 64,141
Tax expense 8 (17,549) (17,205)
Profit for the year 45,939 46,936
Attributable to:
Owners of Mears Group PLC 46,222 46,526
Non-controlling interest (283) 410
Profit for the year 45,939 46,936
Earnings per share
Basic 10 55.70p 50.27p
Diluted 10 53.86p 48.86p
The accompanying accounting policies and notes form an integral part of this
preliminary announcement. All activities were in respect of continuing
operations.
Consolidated statement of comprehensive income
For the year ended 31 December 2025
Note 2025 2024
£'000 £'000
Profit for the year 45,939 46,936
Other comprehensive income that will not be subsequently reclassified to the
Consolidated Statement of Profit or Loss:
Actuarial gain on defined benefit pension schemes 28 284 2,665
Pension guarantee asset movements in respect of actuarial gain 28 (296) (516)
Deferred tax credit/(charge) in respect of defined benefit pension schemes 25 3 (537)
Other comprehensive income for the year (9) 1,612
Total comprehensive income for the year 45,930 48,548
Attributable to:
Owners of Mears Group PLC 46,213 48,138
Non-controlling interest (283) 410
Total comprehensive income for the year 45,930 48,548
The accompanying accounting policies and notes form an integral part of this
preliminary announcement. All comprehensive income for the year attributable
to owners of Mears Group PLC arises from continuing operations.
Consolidated balance sheet
As at 31 December 2025
Note 2025 2024
£'000 (restated*)
£'000
Assets
Non-current
Goodwill 11 118,206 121,868
Intangible assets 12 9,695 6,244
Property, plant and equipment 13 51,919 38,836
Right of use assets 14 289,308 272,171
Investments 15 3,786 2,274
Loan notes and other non-current receivables 24 20,196 10,195
Pension and other employee benefits 28 24,097 23,245
Total non-current assets 517,207 474,833
Current
Inventories 16 824 1,173
Trade and other receivables 17 155,034 133,205
Current tax assets 186 730
Cash and cash equivalents 24 48,479 91,404
204,523 226,512
Assets classified as held for sale 22 18,376 -
Total current assets 222,899 226,512
Total assets 740,106 701,345
Equity
Equity attributable to the shareholders of Mears Group PLC
Share capital and premium 26 3,506 3,489
Capital redemption reserve 26 274 231
Share-based payment reserve 4,637 3,604
Treasury shares 26 (13,897) (14,985)
Merger reserve 7,971 7,971
Retained earnings 199,254 183,797
Total equity attributable to the shareholders of Mears Group PLC 201,745 184,107
Non-controlling interest 3,075 3,358
Total equity 204,820 187,465
Liabilities
Non-current
Deferred tax liabilities 25 5,606 3,518
Lease liabilities 19 238,069 230,641
Non-current provisions 20 10,742 9,765
Total non-current liabilities 254,417 243,924
Current
Trade and other payables 18 185,049 192,278
Lease liabilities 19 80,652 66,861
Provisions 20 6,023 10,817
271,724 269,956
Liabilities directly associated with assets classified as held for sale 22 9,145 -
Total current liabilities 280,869 269,956
Total liabilities 535,286 513,880
Total equity and liabilities 740,106 701,345
* The comparative figures have been restated in respect of a change in
presentation of equity, as described in note 26.
The accompanying accounting policies and notes form an integral part of this
preliminary announcement.
Consolidated cash flow statement
For the year ended 31 December 2025
Note 2025 2024
£'000 £'000
Operating activities
Profit for the year before tax 63,488 64,141
Adjustments 27 94,507 81,247
Change in inventories 263 290
Change in trade and other receivables (24,684) (7,021)
Change in trade, other payables and provisions (5,234) 7,551
Cash inflow from operating activities before taxation 128,340 146,208
Taxes paid (15,689) (17,407)
Net cash inflow from operating activities 112,651 128,801
Investing activities
Payment for acquisition of subsidiary, net of cash acquired (8,889) -
Payments for property, plant and equipment (45,243) (29,816)
Payments of software development costs (1,703) (1,442)
Loans to related parties (3,160) -
Proceeds from sale and leaseback of residential property 23 18,094 16,285
Repayment of loans from related parties 110 -
Proceeds from sale of property, plant and equipment 305 141
Distributions from associates 15 - 147
Movement in short-term cash deposits held for investment purposes - 7,090
Interest received 3,028 4,036
Net cash outflow from investing activities (37,458) (3,559)
Financing activities
Proceeds from share issue 60 251
Proceeds on distribution of shares from treasury 6 6
Purchase of own shares 26 (17,792) (52,050)
Proceeds from sale of own shares 552 -
Net cash outflow relating to other credit facilities - (11,244)
Principal element of lease payments (68,347) (57,907)
Interest paid (15,383) (13,262)
Dividends paid - Mears Group PLC shareholders 9 (13,886) (12,933)
Net cash outflow from financing activities (114,790) (147,139)
Cash and cash equivalents, beginning of year 27 91,404 113,301
Net decrease in cash and cash equivalents (39,597) (21,897)
Cash and cash equivalents, end of year 27 51,807 91,404
Consolidated statement of changes in equity
For the year ended 31 December 2025
Attributable to equity shareholders of the Company Non- Total
controlling equity
interest £'000
£'000
Share Capital redemption reserve* Share- Treasury Merger Retained
capital and premium £'000 based reserve reserve earnings
£'000 payment £'000 £'000 £'000
reserve
£'000
At 1 January 2024 3,348 - 1,883 (5,122) 7,971 189,428 2,948 200,456
Restatement - 121 - - - (121) - -
As restated 3,348 121 1,883 (5,122) 7,971 189,307 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 251 - - - - - - 251
Purchase of treasury shares - - - (11,733) - - - (11,733)
Cancellation of shares (110) 110 - - - (40,317) - (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 1 January 2025 3,489 231 3,604 (14,985) 7,971 183,797 3,358 187,465
Net profit for the year - - - - - 46,222 (283) 45,939
Other comprehensive income - - - - - (9) - (9)
Total comprehensive income for the year - - - - - 46,213 (283) 45,930
Tax credit on share-based payments - - - - - 199 - 199
Issue of shares 60 - - - - - - 60
Purchase of treasury shares - - - (1,619) - - - (1,619)
Disposal of treasury shares - - - 552 - - - 552
Cancellation of shares (43) 43 - - - (16,173) - (16,173)
Share options - value of employee services - - 2,286 - - - - 2,286
Share options - exercised or lapsed - - (1,253) 2,155 - (896) - 6
Dividends - - - - - (13,886) - (13,886)
At 31 December 2025 3,506 274 4,637 (13,897) 7,971 199,254 3,075 204,820
* The nominal value of shares repurchased and cancelled has been re-presented
in the capital redemption reserve as detailed in note 26.
The accompanying accounting policies and notes form an integral part of this
preliminary announcement.
Notes to the preliminary announcement
For the year ended 31 December 2025
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 2025 or 2024 but is derived from
those accounts. Statutory accounts for 2024 have been delivered to the
registrar of companies, and those for 2025 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.
The consolidated financial statements of the Group have been prepared in
conformity with the requirements of the Companies Act 2006 and in accordance
with United Kingdom adopted International Financial Reporting Standards
(IFRS). The financial statements are prepared under the historical cost
convention as modified by the revaluation of investments and assets in the
Group's defined benefit pension schemes. They are presented in Sterling and
all values are rounded to the nearest thousand (£'000).
The preparation of financial statements in accordance with IFRS requires the
use of estimates and judgements that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts
of revenue and expenses during the year. Although these estimates are based on
management's best knowledge of the amounts, actual results may ultimately
differ from those estimates. The most significant judgements and estimates
made by management in the financial statements are set out in the accounting
policies to which they relate.
Government and societal responses to climate change are still developing and
are interdependent upon each other, and consequently financial statements
cannot capture all possible future outcomes as these are not yet known. There
were no material impacts of climate change in determining asset and liability
valuations and the timing of future cash flows to be incorporated into the
financial statements.
Mears Group PLC is the ultimate parent company of the Group. It is
incorporated and domiciled in the United Kingdom (registration number
03232863). Its registered office and principal place of business is 2nd Floor
5220 Valiant Court, Gloucester Business Park, Brockworth, Gloucester GL3 4FE.
Mears Group PLC's shares are listed on the Main Market of the London Stock
Exchange.
Basis of consolidation
The Consolidated Balance Sheet includes the assets and liabilities of the
Company and its subsidiaries and is made up to 31 December 2025. Entities for
which the Group has the ability to exercise control over financial and
operating policies are accounted for as subsidiaries. Control is achieved
where the Company has existing rights that give it the current ability to
direct the activities that affect the Company's returns and exposure or rights
to variable returns from the entity. Interests acquired in entities are
consolidated from the effective date of acquisition and interests sold are
consolidated up to the date of disposal.
All significant intercompany transactions and balances between Group
enterprises, including unrealised profits arising from intra-group
transactions, are eliminated on consolidation; no profit is taken on sales
between Group companies.
Non-controlling interests in the net assets of consolidated subsidiaries are
identified separately from the Group's equity therein. Non-controlling
interests consist of the amount of those interests at the date of the original
business combination and the non-controlling shareholders' share of changes in
equity since the date of the combination.
A joint venture is a joint arrangement whereby the parties that have joint
control have the rights to the net assets of the arrangement. Associates are
entities over which the Group does not have control but has significant
influence. Investments in joint ventures and associates are accounted for
using the equity method of accounting. Under this method, the Group's share of
post-acquisition profits or losses is recognised in the Consolidated Statement
of Profit or Loss; the cost of the investment in a given joint venture or
associate, together with the Group's share of that entity's post-acquisition
changes to shareholders' funds, is included in investments within the
Consolidated Balance Sheet.
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 2025 and the budget for 2026. The Group has modelled
its cash flow outlook for the period to 30 June 2027 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 2026, 31 December 2026 and 30
June 2027.
The Board approved a budget for 2026 which was considered to reflect solid
performance. The forecast was built up on a contract-by-contract basis for the
next 12 months and rolled forward. The forecast for 2026 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 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.
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 financial statements. The Directors have
used a going concern period for this purpose up to 30 June 2027. 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 2026, 31 December 2026 and 30 June 2027. On 31 December
2025, the Group held £70m of undrawn committed borrowing facilities, maturing
in December 2029. The principal borrowing facilities are subject to covenants
as detailed in the Financial Review section of this preliminary announcement.
The Annual Report and Accounts 2025 also details the principal risks and
uncertainties and how the Group manages its risks.
In making its assessment of going concern, the Board has confirmed that there
have been no post-balance sheet changes that have a material negative impact
on the business or liquidity.
A range of scenarios that encompass the principal risks have been applied to
the base case. These downside cases were prepared by management to consider
the impact of adverse changes in key variables used within the base case
forecast and projections. These downside cases were intended to represent a
reasonable worst-case scenario that could affect solvency or liquidity in
"severe but plausible" scenarios. No mitigating actions were included within
any of these downside scenarios, which was considered conservative and
unrealistic.
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 2027. 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.
Trade and other receivables, trade and other payables and other loans are
initially measured at fair value and are subsequently held at amortised cost.
Other assets are measured at fair value when they are assessed for impairment
or on classification as held for sale.
Fair value is the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at
the measurement date. The Group uses valuation techniques that maximise the
use of relevant observable inputs using the following valuation hierarchy,
ordered from highest to lowest priority:
Level 1 - Quoted prices in active markets for identical assets or liabilities.
Level 2 - Inputs other than quoted prices included in level 1 that are
observable either directly or indirectly.
Level 3 - Unobservable inputs, typically derived from the Group's own
information with any necessary adjustments to eliminate factors specific to
the Group.
For assets and liabilities measured at fair value on a recurring basis, the
Group determines whether transfers have occurred between levels in the
hierarchy by assessing the lowest level input that is significant to the most
recent measurement.
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 the consolidated financial statements, 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 28).
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.
Repairs and maintenance contracts
For contracts in this category, the customer raises orders on demand, for
example to carry out responsive repairs. Payments from the customer take the
form of lump-sum periodic payments, task-based payments, or a mixture of both,
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 works to be carried out, for a fixed price. Typically, this type of
contract covers planned and regeneration works that follow a programme across
a portfolio of customer properties. Mears is continuously satisfying the
single performance obligation of completing the programme as cost is incurred,
determining progress against the performance obligation on an output basis.
The customer controls the portfolio as the work is being performed on it and,
therefore, revenue is recognised over time.
Under the output method, an assessment is made of the value of the work
delivered to date against the contractual price for each element of the work
to determine the stage of completion. The output method matches the transfer
of services to the customer, so is considered a suitable method to determine
progress.
Contract variations are always accounted for as if they were part of the
existing contract because the nature of the contract means that any additional
services required will not be distinct from the originally agreed scope of
services. The variations are incorporated into the assessment of the
transaction price and progress against the overall performance obligation.
Property and lease income
Where the Group is providing an accommodation and support service, each day of
providing the service is a separate performance obligation and revenue is
recognised over time for that day. For some contracts, the performance
obligation is linked to the service user and revenue is therefore recognised
only on days when the accommodation is occupied. For other contracts, the
performance obligation is the availability of the service and revenue is
therefore not linked directly to occupancy.
Where the transaction price is linked directly to a performance obligation
(such as a service user in accommodation for a day), it is allocated to that
performance obligation. Contracts typically provide for an amount to be paid
that is not linked directly to a performance obligation, such as a monthly
amount to contribute to overheads. Where these amounts are small in the
context of the overall contract and the number of performance obligations
completed in a month is consistent, these amounts are recognised over the
month for which they are paid.
In one contract, the element of the price that is not directly linked to a
performance obligation is more substantial and the profile of performance
obligations completed in a month is highly variable over time. In that
instance, the transaction price is allocated across the performance
obligations based on the activity in each period across the entire contract
life.
Some contracts may include an element of variable revenue related to service
credits arising from elements of the service delivery being outside agreed
parameters. Management estimates the expected service credits and recognises
revenue on the contract only to the extent it is highly probable not to be
reversed by service credits.
When the Group arranges for certain goods or services to be provided to its
customers by third parties, it evaluates whether it is acting as a principal
or an agent in relation to those goods or services. For example, in some
contracts the Group arranges and pays for utility services that are delivered
directly to the customer. To determine whether it is acting as an agent, the
Group assesses whether it controls the goods or services before they are
transferred to the customer. If the Group is acting as an agent, it recognises
neither revenue from the customer's payment nor an expense for the amount paid
to the supplier. Any amounts paid to the supplier for which reimbursement has
not yet been received from the customer are recorded within Other debtors.
Where the Group enters into arrangements with customers for the provision of
housing property, an assessment is made as to whether this income is
recognised as a lease under IFRS 16, or as service revenue under IFRS 15. 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.
Lease income 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.
Professional services
Professional services includes standalone property compliance services and
decarbonisation retrofit analysis. The transaction price for this type of work
is either a fixed fee per task or on a time basis. The performance obligations
in respect of these services are recognised over time as the Group has an
enforceable right to payment for performance completed at any given point.
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 repayments due to customers. Estimation uncertainty is
typically low, as the calculation of gainshare is prescribed in the contract
with the customer.
Critical judgements in applying the Group's accounting policies
Revenue recognition
The valuation 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 valuation 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:
2025 2024
£'000 £'000
Revenue from contracts with customers
Repairs and maintenance 551,071 455,058
Contracting 49,563 77,956
Property income 486,839 551,198
Care services 22,372 22,164
Professional services 5,337 579
Other 140 56
1,115,322 1,107,011
Lease income 20,139 25,499
1,135,461 1,132,510
Repairs and maintenance and care service revenue is typically invoiced between
1 and 30 days from completion of the performance obligation. Contracting
revenue is typically invoiced based on the stage of completion of the overall
contract. Property income is typically invoiced monthly in arrears. Lease
income is typically invoiced monthly in advance. Payment terms for revenue
invoiced are typically 30 to 60 days from the date of invoice.
A maturity analysis of future minimum lessor income as at 31 December is shown
in the table below:
2025 2024
£'000 £'000
Less than 1 year 4,733 5,439
Between 1 and 2 years 3,243 4,051
Between 2 and 3 years 2,355 3,317
Between 3 and 4 years 2,348 2,429
Between 4 and 5 years 2,348 2,422
Over 5 years 6,727 9,299
21,754 26,957
Due to the nature of short-term tenancy agreements, the future minimum lessor
income for the majority of leased properties is substantially lower than the
lease income the Group expects to receive. The above table discloses only
lease income to which tenants were contractually committed at the balance
sheet date.
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 the financial statements.
2025 2024
Maintenance Management Total Maintenance Management Total
£'000 £'000 £'000 £'000 £'000 £'000
Revenue 620,437 515,024 1,135,461 555,813 576,697 1,132,510
Cost of sales (465,416) (404,206) (869,622) (420,722) (458,535) (879,257)
Gross profit 155,021 110,818 265,839 135,091 118,162 253,253
Administrative costs (122,648) (68,163) (190,811) (109,191) (72,517) (181,708)
Share of profits of (40) 52 12 1,014 - 1,014
associates
Net finance income/(costs) 4,108 (15,660) (11,552) 4,673 (13,091) (8,418)
Profit/(loss) before tax 36,441 27,047 63,488 31,587 32,554 64,141
Tax expense (17,549) (17,205)
Profit for the year 45,939 46,936
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 £160m for 2025, 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 30% of Group revenues in 2025. 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, except £8.0m (2024:
£nil) of repairs and maintenance income that is included in the Management
segment.
4. Operating costs
Operating costs, relating to continuing activities, include the following:
Note 2025 2024
£'000 £'000
Share-based payments 7 2,286 2,622
Depreciation of property, plant and equipment 13 6,639 6,783
Depreciation of right of use assets 14 71,800 62,249
Impairment of right of use assets 14 856 633
Amortisation of acquisition intangibles 12 387 245
Amortisation of other intangibles 12 1,867 1,999
Loss on sale and leaseback 122 283
Loss on disposal of property, plant and equipment 848 508
Profit on disposal of right of use assets (138) (150)
Fees payable for audit and non-audit services during the year were as follows:
2025 2024
£'000 £'000
In respect of continuing activities:
Fees payable to the auditor for the audit of the Group's financial statements 696 722
Other fees payable to the auditor in respect of:
- auditing of financial statements of subsidiary undertakings pursuant to 552 587
legislation
- additional fees in respect of the prior year audit* 248 18
- other non-audit services - 1
Total auditor's remuneration 1,496 1,328
*
5. Finance income and finance costs
2025 2024
£'000 £'000
Interest charge on overdrafts and loans (560) (957)
Interest on lease obligations (14,851) (12,698)
Finance costs on bank loans, overdrafts and leases (15,411) (13,655)
Other interest (667) (93)
Interest charge on defined benefit pension obligation - (37)
Total finance costs (16,078) (13,785)
Interest income resulting from short-term deposits 2,521 3,791
Interest income resulting from defined benefit pension asset 1,249 926
Other interest income 756 650
Total finance income 4,526 5,367
Net finance charge (11,552) (8,418)
6. Employees
Staff costs during the year were as follows:
2025 2024
£'000 £'000
Wages and salaries 204,108 189,290
Social security costs 24,549 20,513
Other pension costs 7,815 4,882
236,472 214,685
The average number of employees of the Group during the year was:
2025 2024
Site workers 2,828 2,552
Carers 612 632
Office and management 2,076 2,287
5,516 5,471
7. Share-based employee remuneration
Accounting policy
All share-based payment arrangements are recognised in the consolidated
financial statements 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 2025, the Group maintained four (2024: four) active
share-based payment schemes for employee remuneration.
Details of the share options outstanding and movement during the year are as
follows:
2025 2024
Number Weighted Number Weighted
'000 average '000 average
exercise price exercise price
p p
Outstanding at 1 January 4,353 139 2,553 48
Granted 713 1 2,628 206
Forfeited (237) 289 (130) 250
Exercised (674) 10 (698) 37
Outstanding at 31 December 4,155 128 4,353 139
The weighted average share price at the date of exercise for share options
exercised during the year was 393p. The weighted average remaining contractual
life of options outstanding at 31 December 2025 was 6.4 years. At 31 December
2025, 0.3m options had vested and were still exercisable at prices between 1p
and 429p (weighted average of 288p).
The weighted average fair value of options granted was 368p. The fair values
of executive scheme options granted, which included a market-related
performance condition, were determined using the Monte Carlo model, while
those for all-employee schemes used the Black-Scholes-Merton option pricing
model. Significant inputs into the calculations included the market price at
the date of grant, the exercise price and share price volatility. Furthermore,
the calculations incorporated an estimate of the future dividend yield and the
risk-free interest rate. The share price volatility was determined from the
daily log-normal distributions of the Company share price over a period
commensurate with the expected life as calculated back from the date of grant.
The risk-free interest rate utilised the zero-coupon bond yield derived from
UK Government bonds as at the date of calculation for a life commensurate with
the expected life. Adjustments are made to reflect expected and actual
forfeitures during the vesting period due to failure to satisfy service
conditions.
There were 0.71m options granted during the year and 0.24m options that were
forfeited during the year. The market price at 31 December 2025 was 358p and
the range during 2025 was 312p to 418p.
All share-based employee remuneration will be settled in equity. The Group has
no legal obligation to repurchase or settle the options.
The Group recognised the following expenses related to share-based payments:
2025 2024
£'000 £'000
Giving rise to share-based payment reserve:
All-employee schemes 533 416
Executive schemes 1,753 2,206
2,286 2,622
The Group is currently running four active schemes, detailed below:
Sharesave plan (All-employee scheme)
Options are available to all employees. Options are granted for a period of
three years. Options are exercisable at a price based on the quoted market
price of the Company's shares at the time of invitation, discounted by up to
20%. Options are forfeited if the employee leaves Mears before the options
vest, which impacts the number of options expected to vest. If an employee
stops saving but continues in employment this is treated as a cancellation,
which results in an acceleration of the share-based payment charge.
Company Share Option Plan (Executive scheme)
The Company operates a discretionary unapproved share plan and a Company Share
Option Plan. Options are exercisable at a price below market value at the date
of grant and often at nominal value. The vesting period is three years. If the
options remain unexercised after a period of 10 years from the date of grant,
the options expire. Options are forfeited if the employee leaves Mears before
the options vest. No awards to Executive Directors are proposed under these
plans.
Long Term Incentive Plan (Executive scheme)
The Long Term Incentive Plan provides for awards of free shares (i.e. either
conditional shares or nominal cost options), normally on an annual basis,
which are eligible to vest after three years subject to continued service and
the achievement of challenging performance conditions. Options are granted
under this scheme to key senior management subject to performance conditions
as detailed in the Remuneration Report within the Annual Report and Accounts
2025.
Deferred Share Bonus Plan (Executive scheme)
The Deferred Share Bonus Plan relates to annual bonus payments where typically
33% are deferred into shares and vest subject to continued employment.
Individuals may be able to receive a dividend equivalent payment on deferred
bonus shares at the time of vesting equal to the value of dividends that would
have accrued during the vesting period. The dividend equivalent payment may
assume the reinvestment of dividends on a cumulative basis. Clawback
provisions may apply for three years from the date of payment of any bonus or
the grant of any deferred bonus share award.
Further details of schemes relating to the Directors can be found in the
Report of the Remuneration Committee within the Annual Report and Accounts
2025.
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.
Deferred taxation liabilities are generally recognised on all taxable
temporary differences in full with no discounting. Deferred taxation assets
are recognised to the extent that it is probable that taxable profits will be
available against which deductible temporary differences can be utilised.
However, deferred tax is not provided on the initial recognition of goodwill,
nor on the initial recognition of an asset or liability, unless the related
transaction is a business combination or affects tax or accounting profit.
Deferred taxation is calculated using the tax rates and laws that are expected
to apply in the period when the liability is settled or the asset is realised,
provided they are enacted or substantively enacted at the balance sheet date.
The carrying value of deferred taxation assets is reviewed at each balance
sheet date and reduced to the extent that it is no longer probable that
sufficient taxable profits will be available against which taxable temporary
differences can be utilised. Deferred tax is charged or credited to either the
Consolidated Statement of Profit or Loss, the Consolidated Statement of
Comprehensive Income or equity to the extent that it relates to items charged
or credited. Deferred tax relating to items charged or credited directly to
equity is also credited or charged to equity.
Tax recognised in the Consolidated Statement of Profit or Loss:
2025 2024
£'000 £'000
United Kingdom corporation tax 16,895 16,567
Adjustment in respect of previous periods (69) 406
Total current tax charge recognised in Consolidated Statement of Profit or 16,826 16,973
Loss
Deferred taxation charge:
- on defined benefit pension obligations 362 358
- on share-based payments (258) (466)
- on capital allowances (189) 209
- on amortisation of acquisition intangibles (97) (61)
- on corporate tax losses - (274)
- on fair value adjustments 331 (14)
- other timing differences 70 73
Adjustment in respect of previous periods 504 407
Total deferred taxation recognised in Consolidated Statement of Profit or Loss 723 232
Total tax charge recognised in Consolidated Statement of Profit or Loss 17,549 17,205
The charge for the year can be reconciled to the profit for the year as
follows:
2025 2024
£'000 £'000
Profit for the year before tax 63,488 64,141
Profit for the year multiplied by standard rate of corporation tax in the 15,872 16,035
United Kingdom for the year of 25.0% (2024: 25.0%)
Effect of:
- expenses not deductible for tax purposes 474 222
- income not subject to tax - (395)
- previously unrecognised losses - (274)
- permanent tax differences in respect of assets 768 803
- adjustment in respect of prior periods 435 814
Actual tax charge 17,549 17,205
Deferred tax is recognised on temporary differences between the treatment of
items for both tax and accounting purposes. Deferred tax on the amortisation
of acquisition intangibles is a temporary difference and arises because no tax
relief is due on this kind of amortisation.
Tax losses generated in previous years which are expected to be utilised
against future profits are recognised as a deferred tax asset and a subsequent
charge arises as those losses are utilised. There are no losses for which
deferred tax is not recognised.
Capital allowances represent tax relief on the acquisition of property, plant
and equipment and are spread over several years at rates set by legislation.
These differ from depreciation, which is an estimate of the use of an item of
property, plant and equipment over its useful life. Deferred tax is recognised
on the difference between the remaining value of such an asset for tax
purposes and its carrying value in the financial statements. Permanent
differences in respect of assets arise where certain types of capital
expenditure do not qualify for tax relief.
The following tax has been charged to other comprehensive income or equity
during the year:
2025 2024
£'000 £'000
Deferred tax (credit)/charge/ recognised in other comprehensive income
- on defined benefit pension obligations (3) 537
Total deferred tax (credit)/charge recognised in other comprehensive income (3) 537
Current tax credit recognised directly in equity
- on share-based payments (362) (409)
Total current tax credit recognised in equity (362) (409)
Deferred tax charge/(credit) recognised directly in equity
- on share-based payments 163 (156)
Total deferred tax charge/(credit) recognised in equity 163 (156)
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:
2025 2024
£'000 £'000
Final 2024 dividend of 11.25p (2024: final 2023 dividend of 9.30p) per share 9,271 8,660
Interim 2025 dividend of 5.60p (2024: interim 2024 dividend of 4.75p) per 4,615 4,273
share
13,886 12,933
The Directors recommend a final dividend of 11.90p per share. This has not
been recognised within the consolidated financial statements as no obligation
existed at 31 December 2025.
10. Earnings per share
2025 2024
p p
Earnings per share 55.70 50.27
Diluted earnings per share 53.86 48.86
For the purpose of calculating earnings per share (EPS), earnings have been
calculated as follows:
2025 2024
£'000 £'000
Profit for the year 45,939 46,936
Attributable to non-controlling interests 283 (410)
Earnings 46,222 46,526
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.
2025 2024
Millions Millions
Weighted average number of shares in issue: 82.99 92.56
Dilutive effect of share options 2.82 2.66
Weighted average number of shares for calculating diluted earnings per share 85.81 95.22
The opening number of shares in issue for 2026 is shown below:
2026
Millions
Opening number of shares in issue 86.5
Treasury shares to exclude (4.1)
Opening number of shares in issue for calculating basic earnings per share 82.4
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.
Note £'000
Gross carrying amount
At 1 January 2024 and 1 January 2025 121,868
Acquisition of a subsidiary 21 3,117
Assets classified as held for sale 22 (6,779)
At 31 December 2025 118,206
Accumulated impairment losses
At 1 January 2024, 1 January 2025 and 31 December 2025 -
Carrying amount
At 31 December 2025 118,206
At 31 December 2024 121,868
Goodwill on consolidation arises on the excess of cost of acquisition over the
fair value of the net assets acquired on purchase of a company.
Purchased goodwill arises on the excess of cost of acquisition over the fair
value of the net assets acquired on the purchase of the trade and assets of a
business by the Group.
Goodwill is not amortised but is reviewed for impairment on an annual basis or
more frequently if there are any indications that goodwill may be impaired.
Goodwill acquired in a business combination is allocated to groups of CGUs
according to the level at which management monitors that goodwill. Goodwill is
carried at cost less accumulated impairment losses.
The carrying value of goodwill is allocated to the following groups of CGUs:
2025 2024
£'000 £'000
Maintenance (excluding Housing with Care) 65,670 69,332
Management 33,447 33,447
Housing with Care 19,089 19,089
118,206 121,868
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.
An asset is impaired if the carrying value exceeds the CGU's recoverable
amount. At 30 September 2025, impairment reviews were performed by comparing
the carrying value with the value in use for the groups of CGUs to which
goodwill has been allocated.
The value in use for each group of CGUs is calculated from the Board-approved
one-year budgeted cash flows and extrapolated cash flows for the next four
years discounted at a post-tax discount rate over a five-year period with a
terminal value. The impairment reviews incorporated a terminal growth
assumption, which is conservative when compared with the UK long-term growth
rate and the underlying demographics, which will be positive for the Group's
core markets.
The estimated growth rates are based on knowledge of the relevant sector and
market and represent management's base level expectations for future growth.
Changes to revenue and direct costs are based on past experience and
expectation of future changes within the markets of the CGUs. All CGUs have
the same access to the Group's treasury function and borrowing arrangements to
finance their operations.
Management considers that reasonably possible changes in these assumptions
would not cause the carrying amount of a group of CGUs to exceed its
recoverable amount.
The rates used were as follows:
Post-tax Pre-tax Volume Volume Terminal
discount rate discount rate growth rate growth rate growth
(years 1-3) (years 4-5) rate
Maintenance 9.35% 11.90% 5.00% 2.00% 2.00%
Management 9.35% 11.07% 2.00% 2.00% 2.00%
Housing with Care 9.35% 11.67% 3.00% 3.00% 2.00%
No indicators of impairment arose between 30 September 2025 and 31 December
2025 to indicate that the impairment assessment should be updated.
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,
typically five to ten years
Development expenditure - over the useful life of the resulting software,
typically five to ten years
Purchased software - 20% p.a., straight line
The useful economic lives of intangible assets are reviewed annually and
amended if appropriate.
Acquisition intangibles Development Purchased software Total
expenditure £'000 intangibles
£'000 £'000
Customer relationships £'000 Brand Total acquisition intangibles £'000
£'000
Gross carrying amount
At 1 January 2024 4,890 - 4,890 18,394 2,722 26,006
Additions - - - 1,204 238 1,442
Disposals - - - (1,443) (344) (1,787)
At 1 January 2025 4,890 - 4,890 18,155 2,616 25,661
Acquisition of subsidiary 4,701 972 5,673 - - 5,673
Additions - - - 1,638 64 1,702
Disposals - - - (12,798) (919) (13,717)
Assets classified as held for sale (4,890) - (4,890) - - (4,890)
At 31 December 2025 4,701 972 5,673 6,995 1,761 14,429
Amortisation
At 1 January 2024 2,730 - 2,730 14,449 1,781 18,960
Provided in the year 245 - 245 1,478 521 2,244
Eliminated on disposal - - - (1,443) (344) (1,787)
At 1 January 2025 2,975 - 2,975 14,484 1,958 19,417
Provided in the year 363 24 387 1,664 203 2,254
Eliminated on disposal - - - (12,798) (919) (13,717)
Assets classified as held for sale (3,220) - (3,220) - - (3,220)
At 31 December 2025 118 24 142 3,350 1,242 4,734
Carrying amount
At 31 December 2025 4,583 948 5,531 3,645 519 9,695
At 31 December 2024 1,915 - 1,915 3,671 658 6,244
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 contract management system and
decarbonisation assessment software. It 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 - 33% p.a., straight line
Equipment - 25% 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 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 1 January 2025 28,361 10,986 104 9,918 180 49,549
Additions 43,242 126 324 1,759 4 45,455
Acquired with subsidiary - - - 201 93 294
Transfers between categories - - 1,064 (1,064) - -
Disposals (284) (1,025) - (1,220) (143) (2,672)
Eliminated on expiry of useful life - (3,382) (226) (1,685) - (5,293)
Assets classified as held for sale - - (16) (77) (14) (107)
Disposals on sale and leaseback (25,490) - - - - (25,490)
At 31 December 2025 45,829 6,705 1,250 7,832 120 61,736
Depreciation
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 1 January 2025 549 5,715 74 4,289 86 10,713
Provided in the year 1,041 2,582 473 2,517 26 6,639
Transfers between categories - - 389 (389) - -
Eliminated on disposal (14) (615) - (823) (67) (1,519)
Eliminated on expiry of useful life - (3,382) (226) (1,685) - (5,293)
Assets classified as held for sale - - (1) (35) (4) (40)
Disposal on sale and leaseback (683) - - - - (683)
At 31 December 2025 893 4,300 709 3,874 41 9,817
Carrying amount
At 31 December 2025 44,936 2,405 541 3,958 79 51,919
At 31 December 2024 27,812 5,271 30 5,629 94 38,836
Sale and leaseback
On 22 December 2025, the Group entered into a sale and leaseback arrangement
in respect of 199 residential properties with a carrying value of £24.8m that
had previously been acquired on the open market. Further details of this
transaction are provided in note 23.
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.
In the Consolidated Balance Sheet, right of use assets and lease liabilities
are presented separately.
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; and
· • determining the lease term.
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 the Group 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; and
· • where a wider agreement for a supply of services
includes a lease component which meets the definition of a lease under IFRS
16.
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 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 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 1 January 2025 162,878 234,312 10,310 43,763 451,263
Additions* 3,595 66,601 1,843 11,327 83,366
Acquired with subsidiary - - 182 - 182
Sale and leaseback - 10,623 - - 10,623
Disposals (354) (23,203) (1,204) (5,112) (29,873)
Assets classified as held for sale - - (515) - (515)
At 31 December 2025 166,119 288,333 10,616 49,978 515,046
Depreciation
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 1 January 2025 54,687 98,357 6,175 19,873 179,092
Provided in the year 9,548 50,685 1,787 9,780 71,800
Impairments 856 - - - 856
Eliminated on disposals (354) (19,166) (1,204) (4,943) (25,667)
Assets classified as held for sale - - (343) - (343)
At 31 December 2025 64,737 129,876 6,415 24,710 225,738
Carrying amount
At 31 December 2025 101,382 158,457 4,201 25,268 289,308
At 31 December 2024 108,191 135,955 4,135 23,890 272,171
* 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 199 residential properties. Further details of this transaction can
be found in note 23.
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 £22.0m (2024: £25.5m). Direct operating expenses of £19.6m
(2024: £22.2m), 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 £0.9m (2024: £0.6m) 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 2025, the Group's impairment
assessments at 31 December 2025 resulted in an additional impairment.
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 the Group
financial statements is through the equity method, as outlined in the basis of
consolidation.
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 2024 557 65 622
Share of profit 1,014 - 1,014
Increase in fair value - 785 785
Distributions received (147) - (147)
At 1 January 2025 1,424 850 2,274
Share of profit 12 - 12
Increase in fair value - 1,500 1,500
At 31 December 2025 1,436 2,350 3,786
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
£1.5m (2024: £0.8m). 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 (45%).
If the P/E ratio had been higher by 1.0x, the fair value would have been
£0.7m higher. If the discount for lack of control and marketability had been
20 percentage points lower, the fair value would have been £0.8m higher.
Subsidiaries
The subsidiary undertakings within the Group at 31 December 2025 are detailed
within note 15 of the Annual Report and Accounts 2025. All subsidiary
undertakings prepare financial statements to 31 December.
16. Inventories
Accounting policy
Inventories are stated at the lower of cost and net realisable value. Cost is
the actual purchase price of materials calculated on a first-in, first-out
basis.
2025 2024
£'000 £'000
Materials and consumables 824 1,173
The Group consumed inventories totalling £79.9m during the year (2024:
£81.8m). No items are being carried at fair value less costs to sell (2024:
£nil).
17. Trade and other receivables
Accounting policy
Trade receivables represents 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.
etention assets represents 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 represents 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.
2025 2024
£'000 £'000
Current assets
Trade receivables 23,921 20,940
Contract assets 98,692 84,335
Contract fulfilment costs - 148
Prepayments and accrued income 26,104 24,468
Other debtors 6,317 3,314
Total trade and other receivables 155,034 133,205
Included in trade receivables is £3.6m (2024: £2.7m) in respect of retention
payments due in more than one year.
Trade receivables are normally due within 30 to 60 days and do not bear any
effective interest rate. All trade receivables and accrued income are subject
to credit risk exposure.
The maximum exposure to credit risk in relation to trade receivables and
accrued income at the balance sheet date is the fair value of trade
receivables and accrued income. The Group's customers are primarily a mix of
Local and Central Government and Housing Associations where credit risk is
minimal. The Group's customer base is large and unrelated and, accordingly,
the Group does not have a significant concentration of credit risk with any
one counterparty.
The amounts presented in the balance sheet in relation to the Group's trade
receivables and accrued income balances are presented net of loss allowances.
The Group measures loss allowances at an amount equal to lifetime expected
credit losses using both quantitative and qualitative information and analysis
based on the Group's historical experience.
The ageing analysis of trade receivables is as follows:
2025 2024
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 20,398 (171) 20,227 18,378 (181) 18,197
Less than three months past due 4,103 (547) 3,556 3,032 (637) 2,395
More than three months past due 2,254 (2,116) 138 1,979 (1,631) 348
Total trade receivables 26,755 (2,834) 23,921 23,389 (2,449) 20,940
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.
Expected credit losses in respect of the majority of the Group's customers are
rare, as Housing Associations, Local Authorities and Central Government do not
typically default on debts. Where exceptional circumstances require an
expected credit loss provision in respect of these customer types, they are
assessed individually based on all the relevant facts.
The movement in expected credit loss during the year is shown below:
2025 2024
£'000 £'000
At 1 January 2,449 1,722
Changes in amounts provided 403 727
Amounts utilised (18) -
At 31 December 2.834 2,449
No expected credit loss is typically required in respect of contract assets as
they relate entirely to Housing Associations, Local Authorities and Central
Government customers, which do not typically default on debts. The movement in
contract assets during the year is shown below:
2025 2024
£'000 £'000
At 1 January 84,335 79,703
Recognised on completion of performance obligations 1,094,537 1,093,075
Invoiced during the year (1,080,180) (1,088,443)
At 31 December 98,692 84,335
Included in contract assets is a balance of £23.9m recognised in respect of a
single Maintenance contract, elements of which are subject to a dispute. The
Directors have referred this dispute to an adjudication and may seek other
routes of legal recourse in due course. The Group has taken legal advice and
engaged an independent expert with quantity surveying proficiency. The
carrying value reflects the Directors' best estimate of the likely outcome.
The Directors recognise that there is litigation risk associated with any
claim. Based on the information available to the Directors, a range of
possible outcomes is considered to be +/- £2.0m above and below this net
balance. The uncertainty is expected to be resolved within the next financial
year, and the final settlement could result in a recovery which is either
greater than or less than the net contract asset recognised at 31 December
2025.
18. Trade and other payables
2025 2024
£'000 (restated)
£'000
Trade payables 58,688 51,723
Accruals 51,649 48,355
Social security and other taxes 26,458 27,734
Contract liabilities 22,209 20,835
Repayments due to customers 23,516 41,141
Other creditors 2,529 2,490
185,049 192,278
During the year, the Financial Reporting Council's (FRC) Corporate Reporting
Review Team reviewed the Group's financial statements for the year ended 31
December 2024. The FRC sought clarification on the treatment of amounts due to
customers under gainshare arrangements as contract liabilities. This review
resulted in the Group restating the comparatives in the table above to reflect
gainshare and other repayments due to customers in a new line separately from
contract liabilities. The FRC has subsequently closed its review.
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:
2025 2024
£'000 (restated)
£'000
At 1 January 20,835 17,260
Revenue recognised in respect of contract liabilities (19,108) (13,936)
Payments received in advance of performance obligations being completed 20,482 17,511
At 31 December 22,209 20,835
Contract liabilities relate to payments received from the customer on the
contract, and/or amounts invoiced to the customer in advance of the Group
performing its obligations on contracts. These amounts are expected to be
recognised within revenue within one year of the balance sheet date.
19. Lease liabilities
Lease liabilities are separately presented on the face of the Consolidated
Balance Sheet as shown below:
2025 2024
£'000 £'000
Current 80,652 66,861
Non-current 238,069 230,641
318,721 297,502
The Group had not committed to any leases which had not commenced at 31
December 2025. The majority of the Group's property leases contain variable
lease payments that vary annually either by reference to an index, such as the
Consumer Prices Index (CPI), or based on market conditions each year. The
potential impact of this variation depends on future events and, therefore,
cannot be quantified, but the Group would typically expect commensurate
adjustments to income derived from these properties.
A smaller number of property leases contain termination or extension options.
Management has assessed whether it is reasonably certain that the extension or
termination options will be exercised, which is then reflected in the
valuation.
The Group has elected not to recognise a lease liability for short-term leases
and leases of low value. Payments made under such leases are expensed on a
straight-line basis. Certain leases incorporate variable lease payments that
are not included in the measurement of lease liabilities in accordance with
IFRS 16. The expense relating to payments not included in the measurement of
the lease liability is as follows:
2025 2024
£'000 £'000
Short-term leases 68,623 64,678
Low value leases 503 850
Variable lease payments 737 859
The portfolio of short-term leases to which the Group is committed at the end
of the reporting period is not dissimilar to the portfolio to which the above
disclosure relates.
Other disclosures relating to lease liabilities are provided in the table
below:
Note 2025 2024
£'000 £'000
Depreciation of right of use assets 14 71,800 62,249
Impairment of right of use assets 14 856 633
Additions to right of use assets arising from new leases or modifications 14 83,366 95,746
Additions to right of use assets arising from sale and leaseback 14 10,623 11,257
Carrying value of right of use assets at the year end 14 289,308 272,171
Interest on lease liabilities during the year 5 14,851 12,698
Total cash outflow in respect of leases during the year 27 83,198 70,605
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:
2025 2024
Current Non-current Total Current Non-current Total
£'000 £'000 £'000 £'000 £'000 £'000
Onerous contract provisions 1,156 7,800 8,956 794 7,408 8,202
Property provisions 1,283 993 2,276 849 993 1,842
Insurance provisions 2,334 1,949 4,283 2,774 1,364 4,138
Legal and other provisions 1,250 - 1,250 6,400 - 6,400
Total provisions 6,023 10,742 16,765 10,817 9,765 20,582
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 2025 8,202 1,842 4,138 6,400 20,582
Provided during the year 1,649 524 1,933 2,525 6,631
Utilised during the year (535) - (1,788) (7,175) (9,498)
Unused amounts reversed (360) (90) - (500) (950)
At 31 December 2025 8,956 2,276 4,283 1,250 16,765
Onerous contract provisions
The Group has identified two contracts, one expiring during 2026, the other
with a remaining term of 31 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 component within onerous contract provisions is £8.2m (2024:
£6.8m) relating to a single Community Housing contract which is reported
within the Management segment. The remaining balance of £0.8m (2024: £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 the contract 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, the cash flows for the Community Housing contract have
incorporated an appropriate risk factor, before discounting at the relevant
risk-free rate for the maturity profile. The discount rate used was a real
rate, in line with the cash flows modelled, and was set at 2.55% at 31
December 2025.
If the discount rate used was 0.5 percentage points higher, 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 £0.4m to
£0.8m across the different contracts and forecast years, was 10% lower, the
onerous contract provision would have been £0.9m 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 relate to previously completed customer contracts
where management is aware of probable liabilities and future losses associated
with work defects or other commercial disputes. The balance reduced
significantly in the period, with the settlement of the two highest value
claims. Of these two claims, one settled with a shortfall compared to the
opening provision, and the second settled below the opening provision. In
aggregate, these two claims carried a provision at 31 December 2024 of £5.7m
and settled at a combined cost of £7.2m, with the net shortfall of £1.5m
being charged to the income statement in the period.
21. Acquisition
On 14 September 2025, the Group acquired 100% of the issued share capital of
Pennington Choices Group Limited, a provider of building compliance services.
This acquisition has enhanced the Group's ability to deliver compliance
services to its key customer groups, which remains a key pillar of the Group's
strategy.
The purchase consideration was £9.5m plus £0.3m for excess working capital,
comprised entirely of cash on completion. The fair value of assets and
liabilities recognised as a result of the acquisition were as follows:
£'000
Intangible assets 5,673
Property, plant and equipment 294
Right of use assets 182
Trade and other receivables 3,147
Bank and cash 897
Trade and other payables (1,867)
Lease liabilities (182)
Deferred tax (1,475)
Net identifiable assets acquired 6,669
Goodwill 3,117
Net assets acquired 9,786
The goodwill is attributable to the workforce and the expected synergies from
combining the operations of the acquired business with those of the existing
Group. It will not be deductible for tax purposes.
The gross contractual amount and fair value of trade and other receivables is
£3.1m. The customers of the acquired business are largely Local Authorities
and Housing Associations with very limited risk of default.
The acquired business contributed revenues of £4.6m and net profit of £0.1m
for the period from 14 September to 31 December 2025. If the acquisition had
occurred on 1 January 2025, consolidated revenue and profit for the year ended
31 December 2025 would have been £1,147.2m and £45.9m respectively.
£'000
Cash consideration 9,786
Cash acquired (897)
Net outflow of cash - investing activities 8,889
Acquisition-related costs of £0.1m are included in administrative expenses in
the Statement of Profit or Loss and in operating cash flows in the
Consolidated Cash Flow Statement.
22. Disposal group held for sale
During the year, management identified that one of its subsidiaries, Morrison
Facilities Services Limited ('MFS'), had met the criteria to be treated as
held for sale. MFS is a provider of facilities management services with a
focus on the education and healthcare sectors and has historically been
reported within the Maintenance segment.
A competitive sales process was commenced to identify whether a buyer could be
found for MFS at a suitable price. Towards the end of 2025, the Group entered
into an exclusivity agreement with a potential buyer to sell MFS for £18.0m
on a debt- and cash-free basis with a normal level of working capital. MFS was
therefore considered as held for sale at the year end.
The sale completed on 2 March 2026 on the basis set out above. A breakdown of £'000
the assets and liabilities of the disposal group held for sale at 31 December
2025 is set out below:
Goodwill 6,779
Intangible assets 1,670
Property, plant and equipment 67
Right of use assets 172
Pension assets 585
Inventories 87
Trade and other receivables 5,688
Bank and cash 3,328
Assets classified as held for sale 18,376
Trade and other payables (8,476)
Lease liabilities (171)
Current tax liabilities (228)
Deferred tax liabilities (270)
Liabilities associated with assets classified as held for sale (9,145)
Net assets held for sale 9,231
MFS does not represent a separate major line of business or geographical area
of operations for the Group and it has therefore not been classified as a
discontinued operation.
The assets and liabilities included above are separately identifiable as
belonging to the disposal group, with the exception of goodwill, which is an
appropriate proportion of the goodwill allocated to the Maintenance group of
CGUs. This proportion has been determined by comparing the estimated fair
value of the group of CGUs including the disposal group and excluding the
disposal group.
23. Sale and leaseback
On 22 December 2025, the Group entered into a sale and leaseback arrangement
in respect of 199 residential properties with a carrying value of £24.8m. The
transaction was effected via the disposal of Mears Property Company 3 Limited,
the subsidiary entity that had previously purchased the properties on the open
market. Immediately following the disposal, a long-term lease was put in place
allowing the Group to continue to use the properties.
The Group received cash of £18.1m, as well as a loan note from the buyer for
£6.5m as detailed in note 24. Additionally, the Group acquired a 25% holding
in MPC 3 Holdco Limited, the buyer of Mears Property Company 3 Limited. The
disposed entity held no cash or cash equivalents.
The carrying value of the assets in the disposed entity is matched by its
debt, so it had £nil net assets at the point of the transaction. As such, the
carrying value of the Group's investment in the entity measured using the
equity method was £nil at both 22 December 2025 and 31 December 2025.
24. 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. The Group also considers its revolving credit facility to be an
integral part of its cash management, although this facility was not drawn at
31 December 2024 or 2025.
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 and
other creditors. They are included in the Consolidated Balance Sheet line
items "Trade and other payables" and "Lease 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.
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
2025 2024
£'000 (restated*)
£'000
Non-current assets
Fair value (level 3)
Investments - other investments 2,350 850
Amortised cost
Loan notes and other non-current receivables 20,196 10,195
Current assets
Amortised cost
Trade receivables 23,921 20,940
Other debtors 6,317 3,314
Cash and cash equivalents 48,479 91,404
78,717 115,658
Non-current liabilities
Amortised cost
Lease liabilities (238,069) (230,641)
Current liabilities
Amortised cost
Trade payables (58,688) (51,723)
Lease liabilities (80,652) (66,861)
Repayments due to customers (23,516) (41,141)
Other creditors (2,529) (2,490)
(165,385) (162,215)
(302,191) (266,153)
* The comparative figures have been restated to reflect repayments due to
customers, as detailed in note 18.
The amount recognised as an allowance for expected credit losses on trade
receivables during 2025 was £0.4m (2024: £0.7m).
The IFRS 13 hierarchy level categorisation relates to the extent the fair
value can be determined by reference to comparable market values. The
classifications range from level 1, where instruments are quoted on an active
market, through to level 3, where the assumptions used to arrive at fair value
do not have comparable market data.
The fair values of investments in unlisted equity instruments are determined
by reference to an assessment of the fair value of the entity to which they
relate. This is typically based on a multiple of earnings of the underlying
business.
There have been no transfers between levels during the year.
Fair value information
The fair value of the Group's financial assets and liabilities approximates to
the book value as disclosed above.
Financial risk management
The Group's activities expose it to a variety of financial risks: market risk
(including interest rate risk and price risk); credit risk; and liquidity
risk. The main risks faced by the Group relate to the availability of funds to
meet business needs and the risk of credit default by customers. The Group's
overall risk management programme focuses on the unpredictability of financial
markets and seeks to minimise potential adverse effects on the Group's
financial performance.
Risk management is carried out under policies and guidelines approved by the
Board of Directors.
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 has a revolving credit facility of £70.0m with Barclays Bank PLC
and HSBC Bank PLC. 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
1.45% and 2.75% during the year.
During the year, the Group agreed an extension to its existing borrowing
facilities that were originally due to mature in December 2026. As part of
this extension, the banking consortium was reduced from three banks to two,
resulting in Citi departing. The extension was agreed at a lower margin range
(1.45%-2.45% compared with 1.75%-2.75%) but with the same available amount.
The facility now expires in December 2029.
Details of the Group's banking covenants are provided within the Finance
Review section of this preliminary announcement.
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 2025, 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.
The table below shows the undiscounted maturity profile of the Group's
financial liabilities:
Within 1 year 1-2 years 2-5 years Over 5 years Total
£'000 £'000 £'000 £'000 £'000
2025
Non-derivative financial liabilities
Trade payables 58,688 - - - 58,688
Lease liabilities 84,901 70,537 118,603 96,209 370,250
Repayments due to customers 23,516 - - - 23,516
Other creditors 2,529 - - - 2,529
2024
Non-derivative financial liabilities
Trade payables 51,723 - - - 51,723
Lease liabilities 70,229 61,906 109,019 104,224 345,378
Repayments due to customers 41,141 - - - 41,141
Other creditors 2,490 - - - 2,490
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.
Housing customers are typically Local and Central Government and Housing
Associations. The nature of these customers means that credit risk is minimal.
Other trade receivables contain no specific concentration of credit risk as
the amounts recognised represent a large number of receivables from various
customers.
The Group continually monitors the position of major customers and
incorporates this information into its credit risk controls. External credit
ratings are obtained where appropriate.
Details of the ageing of trade receivables are shown in note 17.
Loan notes receivable
Loan notes with a carrying value of £5.1m (2024: £4.7m) were received as
part of the disposal of the Terraquest Group. They are repayable in December
2028 and accrue interest at 10% per annum.
Loan notes with a carrying value of £5.2m (2024: £5.3m) were received as
part of the sale and leaseback transaction completed in 2024. Interest is
payable monthly at 5% per annum. They are repayable in 2039 or on the event of
a further sale of the properties by the buyer.
During the year, the Group entered into a sale and leaseback transaction as
detailed in note 23. As part of this transaction, the Group received loan
notes with a carrying value of £6.5m. Interest accrues monthly at 4% 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.
During the year, the Group provided a loan of £3.2m to MPC 3 Holdco Limited,
an associate. The loan was utilised to fund the acquisition by MPC 3 Holdco
Limited of a portfolio of properties that were being leased by the Group from
a third party. The Group's lease arrangement was unchanged as a result of this
transaction. Interest accrues monthly at 10% 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.
All loan notes are presented in non-current assets.
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.
The Group monitors its equity and net cash (or debt) as capital. The year-end
total of equity is that indicated in the Consolidated Balance Sheet and the
net cash position is detailed in note 27.
25. Deferred taxation
Deferred tax is calculated on temporary differences under the liability
method. Deferred tax relates to the following:
Pension scheme £'000 Share- based payments £'000 Leases £'000 Tax losses £'000 Capital allowances £'000 Acquisition intangibles £'000 Total £'000
Fair value adjustments £'000 Other £'000
At 1 January 2024 (4,799) 698 569 - 1,295 (540) (128) - (2,905)
(Debit)/credit to Consolidated Income Statement (319) 466 (56) 274 (872) (232)
61 14 200
Credit to Consolidated Statement of Changes in Equity - 156 - - - - - 156
-
Debit to Consolidated Statement of Comprehensive Income (537) - - - - - - (537)
-
At 31 December 2024 (5,655) 1,320 513 274 423 (479) (114) 200 (3,518)
(Debit)/credit to Consolidated Income Statement (390) 258 (57) - (20) (723)
96 (543) (67)
Debit to Consolidated Statement of Changes in Equity - (163) - - - - - - (163)
Credit to Consolidated Statement of Comprehensive Income 3 - - - - - - - 3
Transfer to assets held for sale 146 - - - (293) 417 - - 270
Resulting from business combinations - - - - (57) (1,418) - - (1,475)
At 31 December 2025 (5,896) 1,415 456 274 53 (1,384) (657) 133 (5,606)
In accordance with IFRS 2 'Share-based Payment', the Group has recognised an
expense for the consumption of employee services received as consideration for
share options granted. A tax deduction will not arise until the options are
exercised. The tax deduction in future periods is dependent on the Company's
share price at the date of exercise. The estimated future tax deduction is
based on the options' intrinsic value at the balance sheet date.
The cumulative amount credited to the Consolidated Statement of Profit or Loss
is limited to the tax effect of the associated cumulative share-based payment
expense. The excess has been credited directly to equity. This is presented in
the Consolidated Statement of Comprehensive Income.
There are no unused tax losses that have not been recognised for the purposes
of deferred tax.
Intangible assets acquired as part of a business combination are capitalised
at fair value at the date of the acquisition and amortised over their useful
economic lives. The UK tax regime calculates tax using the individual
financial statements of the members of the Group and not the consolidated
financial statements. Hence, the tax base of acquisition intangible assets
arising on consolidation is £nil. The estimated tax effect of this £nil tax
base is accounted for as a deferred tax liability which is released over the
period of amortisation of the associated acquisition intangible asset.
It is expected that £0.2m of the net deferred tax liability will be settled
within 12 months, with the remaining £5.4m being settled after 12 months.
26. 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.
The capital redemption reserve represents the nominal value of shares
previously issued that have since been repurchased and cancelled by the Group.
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.
The merger reserve relates to the difference between the nominal value and
total consideration in respect of acquisitions, where the Company was entitled
to the merger relief offered by the Companies Act 2006.
Share capital and premium
2025 2024
£'000
£'000
Allotted, called up and fully paid
At 1 January: 90,764,444 (2024: 101,551,082) ordinary shares of 1p each 3,489 3,348
Issue of 30,003 (2024: 153,880) shares on exercise of share options 60 251
Cancellation of 4,319,819 (2024: 10,940,518) shares following share buybacks (43) (110)
At 31 December: 86,474,628 (2024: 90,764,444) ordinary shares of 1p each 3,506 3,489
During the year 30,003 (2024: 153,880) ordinary 1p shares were issued in
respect of share options exercised.
Capital redemption reserve
2025 2024
£'000 (restated)
£'000
At 1 January: 23,103,356 (2024: 12,162,838) ordinary shares of 1p each 231 121
Cancellation of 4,319,819 (2024: 10,940,518) shares following share buybacks 43 110
At 31 December: 27,423,175 (2024: 23,103,356) ordinary shares of 1p each 274 231
During the year, 4,319,819 (2024: 10,940,518) shares were repurchased by the
Group and cancelled at a cost of £16.2m (2024: £40.3m).
In the financial statements for the year ended 31 December 2024, the
cumulative total nominal value of shares repurchased and cancelled was
credited to retained earnings. Following a review, the cumulative total
nominal value of shares repurchased is now presented as a capital redemption
reserve.
Treasury shares
Thousands £'000
At 1 January 2025 4,461 14,985
Acquired during the year 400 1,619
Disposed of during the year (150) (552)
Distributed to satisfy the exercise of share options during the year (644) (2,155)
At 31 December 2025 4,067 13,897
27. 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:
2025 2024
£'000 £'000
Depreciation 78,439 69,032
Impairment of right of use assets 856 633
Loss on disposal of assets 710 358
Loss on sale and leaseback transaction 122 283
Amortisation 2,254 2,244
Share-based payments 2,286 2,622
IAS 19 pension movement (200) (544)
Movement in fair value of investments (1,500) (785)
Share of profits of associates (12) (1,014)
Finance income (4,526) (5,367)
Finance cost 16,078 13,785
Total 94,507 81,247
Movements in financing liabilities during the year are as follows:
Revolving Lease Total
credit facility liabilities £'000
£'000 £'000
At 1 January 2024 - 254,440 254,440
Inception of new leases* - 95,746 95,746
Sale and leaseback - 10,971 10,971
Termination of leases - (5,748) (5,748)
Interest 440 12,698 13,138
Arrangement fees 31 - 31
Cash outflows including in respect of capital and interest (471) (70,605) (71,076)
At 1 January 2025 - 297,502 297,502
Inception of new leases* - 83,366 83,366
Liabilities acquired with subsidiary - 182 182
Sale and leaseback - 10,533 10,533
Termination of leases - (4,344) (4,344)
Liabilities directly related to assets classified as held for sale - (171) (171)
Interest 438 14,851 15,289
Arrangement fees 27 - 27
Cash outflows including in respect of capital and interest (465) (83,198) (83,663)
At 31 December 2025 - 318,721 318,721
* Including modifications to existing leases resulting in a change in
lease liabilities.
Cash outflows in respect of lease liabilities include £14.9m (2024: £12.7m)
in respect of interest paid and £68.3m (2024: £57.9m) in respect of
discharge of the underlying lease liabilities.
For the purpose of the Consolidated Cash Flow Statement, cash and cash
equivalents comprise the following at 31 December:
2025 2024
£'000 £'000
Bank and cash 43,479 85,404
Readily available deposits 5,000 6,000
Bank and cash attributable to assets held for sale 3,328 -
51,807 91,404
28. 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 contributions recognised in respect of defined contribution plans are
expensed as they fall due. Liabilities and assets may be recognised if
underpayment or prepayment has occurred and are included in current
liabilities or current assets as they are normally of a short-term nature.
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.
Scheme liabilities are measured using the projected unit funding method,
applying the principal actuarial assumptions at the balance sheet date. Assets
are measured at market value. In accordance with IFRIC 14, the asset that is
recognised is restricted to the amount by which the IAS 19 service cost is
expected, over the lifetime of the scheme, to exceed funding contributions
payable in respect of accruing benefits, or to the amount of any unconditional
right to a refund, if greater.
Where the Group has a contractual obligation to make good any deficit in its
share of a Local Government Pension Scheme (LGPS) but also has the right to
recover the costs of making good any deficit from the Group's client, the fair
value of that guarantee asset has been recognised and disclosed. Movements in
the guarantee asset are taken to the Consolidated Statement of Profit or Loss
and to the Consolidated Statement of Comprehensive Income to match the
movement in pension assets and liabilities.
The Group recognises the pension liability and guarantee assets separately on
the face of the Consolidated Balance Sheet.
Actuarial gains and losses are taken to the Consolidated Statement of
Comprehensive Income as incurred. For this purpose, actuarial gains and losses
comprise both the effects of changes in actuarial assumptions and experience
adjustments arising because of differences between the previous actuarial
assumptions and what has actually occurred.
Other movements in the net surplus or deficit are recognised in the
Consolidated Statement of Profit or Loss, including the current service cost,
any past service cost and the effect of curtailments or settlements. The net
interest cost is also charged to the Consolidated Statement of Profit or Loss.
The amount charged to the Consolidated Statement of Profit or Loss in respect
of these plans is included within operating costs.
When the Group ceases its participation in a defined benefit pension scheme,
the difference between the carrying value of the scheme as calculated on an
IAS 19 basis and any deficit payment or surplus receipt due is recognised in
the Consolidated Statement of Profit or Loss as a settlement.
The Group's contributions to the scheme are paid in accordance with the rules
of the scheme and the recommendations of the scheme actuary.
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.
Where the Group has a contractual obligation to make good any deficit in its
share of an LGPS but also has the right to recover the costs of making good
any deficit from the Group's client, the fair value of that asset has been
recognised and disclosed. The right to recover costs is limited to exclude
situations where the Group causes the scheme to incur service costs in excess
of those which would have been incurred were the members employed within Local
Government. Management has made judgements in respect of whether any of the
deficit is as a result of such situations.
The right to recover costs is also limited to situations where any cap on
employer contributions to be suffered by the Group is not set so as to
contribute to reducing the deficit in the scheme. Management, in conjunction
with the scheme actuaries, has made judgements in respect of the predicted
future service cost and contributions to the scheme to reflect this in the
fair value of the asset recognised.
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 £6.0m (2024: £4.8m) to these schemes.
Defined benefit schemes
The Group participated in 15 (2024: 15) principal defined benefit schemes on
behalf of a number of employees which require contributions to be made to
separately administered funds.
These pension schemes are operated on behalf of Mears Group PLC, Mears
Limited, Morrison Facilities Services Limited, Mears Extra Care Limited and
their subsidiary undertakings. The assets of the schemes are administered by
trustees in funds independent from the assets of the Group.
The Group schemes are no longer open to new members and have no particular
concentration of investments, so expose the Group only to typical risks
associated with defined benefit pension schemes including the risk that
investments underperform compared with movements in the scheme liabilities.
The Group has an unconditional right to a refund of any surplus within the
Group schemes on the basis that decisions over the use of such a surplus
require the principal employer's consent and can include paying the surplus to
the employers. The Group has, therefore, recognised those surpluses in
accordance with IFRIC 14.
In certain cases, the Group will participate under Admitted Body status in the
LGPS. The Group will contribute for a finite period until the end of the
particular contract. The Group is required to pay regular contributions as
detailed in the scheme's schedule of contributions. In some cases, these
contributions are capped and any excess can be recovered from the body from
which the employees originally transferred. Where the Group has a contractual
right to recover the costs of making good any deficit in the scheme from the
Group's client, the fair value of that asset has been recognised as a separate
pension guarantee asset. Certain judgements around the value of this asset
have been made and are discussed in the judgements and estimates disclosure
within the accounting policies.
Upon exiting an LGPS, the surplus or deficit position of the scheme will be
calculated by the scheme actuary on a funding basis. This is a different basis
from IAS 19 and, therefore, may result in a different surplus or deficit
position. Where the scheme is in surplus on a funding basis on exit, the
pension authority has discretion over whether and to what extent the surplus
will be distributed to the outgoing employer. The Group has, therefore,
recognised any surplus in these schemes only to the extent that it will
benefit from reduced contributions in the period prior to the expiry of the
associated contract.
Management is aware of the Court of Appeal ruling in the case of Virgin Media
Ltd v NTL Pension Trustees II Ltd & Others, regarding amendments to
benefits for contracted out schemes. During 2024 the Group pension scheme
administrators and trustees performed an initial review of rules amendments
and identified a number of matters that require further investigation. In June
2025 the UK Government announced its intention to produce legislation which
would allow retrospective approval of rule changes for which there was no
contemporaneous actuarial certification. This legislation is included in the
Pensions Bill 2025 which is expected to receive Royal Assent in 2026. Given
this development it is not expected that the court ruling will have an impact
on the liabilities of the Group's pension schemes.
The disclosures in respect of the two (2024: two) Group defined benefit
schemes and the 13 (2024: 13) 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 2025 by qualified independent actuaries using the projected unit
funding method.
The principal actuarial assumptions at the balance sheet date are as follows:
2025 2024
Rate of increase of salaries 2.85% 3.05%
Rate of increase for pensions in payment - based on CPI with a cap of 5% 2.50% 2.60%
Rate of increase for pensions in payment - based on RPI with a cap of 5% 2.70% 2.85%
Rate of increase for pensions in payment - based on CPI with a cap of 3% 2.05% 2.10%
Rate of increase for pensions in payment - based on RPI with a cap of 3% 2.15% 2.25%
Discount rate 5.60% 5.50%
Retail prices inflation 2.85% 3.05%
Consumer prices inflation 2.55% 2.65%
Life expectancy for a 65-year-old male* 21.4 years 21.2 years
Life expectancy for a 65-year-old female* 23.6 years 23.6 years
Pension-age life expectancy for a 45-year-old male* 22.4 years 22.4 years
Pension-age life expectancy for a 45-year-old female* 25.3 years 25.3 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:
2025 2024
Group Other Total Group Other Total
schemes schemes £'000 schemes schemes £'000
£'000 £'000 £'000 £'000
Quoted assets
Equities - 53,897 53,897 1,781 54,765 56,546
Bonds 64,555 16,183 80,738 59,865 20,894 80,759
Pooled investment vehicles
Property - 1,087 1,087 1,905 - 1,905
Multi-asset funds 18,191 4,166 22,357 48,145 3,617 51,762
Alternative asset funds 1,856 11,511 13,367 2,095 3,781 5,876
Return seeking funds 1,151 - 1,151 1,548 1,307 2,855
Other assets
Equities - 15,736 15,736 - 7,053 7,053
Bonds* 29,917 5,011 34,928 - 4,529 4,529
Property - 9,738 9,738 - 14,920 14,920
Derivatives 1,481 - 1,481 707 60 767
Cash and other 3,491 4,761 8,252 6,212 4,505 10,717
Investment liabilities
Derivatives (858) (15) (873) (3,379) - (3,379)
Group's estimated asset share 119,784 122,075 241,859 118,879 115,431 234,310
Present value of funded scheme liabilities (96,449) (74,804) (171,253) (97,210) (76,705) (173,915)
Pension surplus 23,335 47,271 70,606 21,669 38,726 60,395
Scheme surpluses not recognised as assets - (45,924) (45,924) - (37,150) (37,150)
Pension assets 23,335 1,347 24,682 21,669 1,576 23,245
Assets classified as held for sale - (585) (585) - - -
Pension assets recognised 23,335 762 24,097 21,669 1,576 23,245
Pension guarantee assets - - - - - -
The amounts recognised in the Consolidated Statement of Profit or Loss are as
follows:
2025 2024
Group Other Total Group Other Total
schemes schemes £'000 schemes schemes £'000
£'000 £'000 £'000 £'000
Current service cost 561 1,174 1,735 809 1,490 2,299
Past service cost - - - - 224 224
Settlement and curtailment - - - - (2,413) (2,413)
Administration costs 441 - 441 489 - 489
Total operating charge 1,002 1,174 2,176 1,298 (699) 599
Net interest (1,215) (2,206) (3,421) (926) (1,261) (2,187)
Effects of limitation of recognisable surplus related to net interest - 2,122 2,122 - 1,298 1,298
Total charged to the profit for the year (213) 1,090 877 372 (662) (290)
Actuarial gains and losses recognised in other comprehensive income (OCI) are
as follows:
2025 2024
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 (1,773) 5,288 3,515 (12,755) (377) (13,132)
Actuarial gain arising from changes in demographic assumptions (624) 10 (614) 1,337 178 1,515
Actuarial gain/(loss) arising from changes in financial assumptions 2,785 2,883 5,668 10,739 10,029 20,768
Actuarial gain/(loss) arising from liability experience (225) (558) (783) 984 (11) 973
Effects of limitation of recognisable surplus related to OCI movements - (7,502) (7,502) - (7,459) (7,459)
Total gains/(losses) recognised in OCI 163 121 284 305 2,360 2,665
Changes in the present value of the defined benefit obligations are as
follows:
2025 2024
Group Other Total Group Other Total
schemes schemes £'000 schemes schemes £'000
£'000 £'000 £'000 £'000
Present value of obligations at 1 January 97,210 76,705 173,915 109,659 83,342 193,001
Current service cost 561 1,174 1,735 809 1,490 2,299
Past service cost - - - - 224 224
Interest on obligations 5,220 4,097 9,317 4,821 3,740 8,561
Plan participants' contributions 168 386 554 191 410 601
Benefits paid (4,774) (2,839) (7,613) (5,210) (2,305) (7,515)
Settlements - (2,384) (2,384) - - -
Actuarial gain arising from changes in demographic assumptions 624 (10) 614 (1,337) (178) (1,515)
Actuarial (gain)/loss arising from changes in financial assumptions (2,785) (2,883) (5,668) (10,739) (10,029) (20,768)
Actuarial (gain)/loss arising from liability experience 225 558 783 (984) 11 (973)
Present value of obligations at 31 December 96,449 74,804 171,253 97,210 76,705 173,915
Changes in the fair value of the plan assets are as follows:
2025 2024
Group Other Total Group Other Total
schemes schemes £'000 schemes schemes £'000
£'000 £'000 £'000 £'000
Fair value of plan assets at 1 January 118,879 115,431 234,310 129,494 111,563 241,057
Expected return on plan assets 6,435 6,303 12,738 5,747 5,001 10,748
Employer's contributions 1,290 740 2,030 1,901 1,139 3,040
Share of surplus received - - - - (2,413) (2,413)
Plan participants' contributions 168 386 554 191 410 601
Benefits paid (4,774) (2,839) (7,613) (5,210) (2,305) (7,515)
Scheme administration costs (441) - (441) (489) - (489)
Settlements - (3,234) (3,234) - 2,413 2,413
Return on plan assets (below)/above that recorded in net interest (1,773) 5,288 3,515 (12,755) (377) (13,132)
Fair value of plan assets at 31 December 119,784 122,075 241,859 118,879 115,431 234,310
Changes in the fair value of guarantee assets are as follows:
2025 2024
£'000 £'000
Fair value of guarantee assets at 1 January - -
Recognised in the Consolidated Statement of Profit or Loss
Guarantee asset movement in respect of service cost 346 516
Guarantee asset movement in respect of net interest (50) -
Recognised in other comprehensive income
Guarantee asset movement in respect of actuarial losses (296) (516)
Fair value of guarantee assets at 31 December - -
Funding arrangements are agreed for each of the Group's defined benefit
pension schemes with their respective trustees. The employer's contributions
expected to be paid during the financial year ending 31 December 2026 amount
to £1.7m.
Each of the schemes manages risks through a variety of methods and strategies
to limit downside in falls in equity markets, movement in inflation and
movement in interest rates.
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 2025. 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% (1,600) 1,600
Rate of increase in salaries - decrease/increase by 0.1% (381) 381
Discount rate - decrease/increase by 0.1% 1,996 (1,996)
Life expectancy - decrease/increase by 1 year (4,762) 4,762
29. Capital commitments
The Group had no capital commitments at 31 December 2025 or at 31 December
2024.
30. Contingent liabilities
The Group has received two legal claims relating to historical regeneration
work from separate Local Authorities. In one case, the authority has indicated
a potential claim value of £11.0m, although only limited substantiation and
detail have been provided. The Group has denied liability. In the second case,
no claim value has been specified, although the original works had a value of
£4.3m. The Group does not consider either claim to have merit.
31. Related party transactions
Identity of related parties
The Group has a related party relationship with its pension schemes, its
subsidiaries and its Directors.
Pension schemes
Details of contributions to pension schemes are set out in note 28.
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 at 31 December:
2025 2024
% %
Directors 0.7 0.5
Key management personnel's compensation is as follows:
2025 2024
£'000 £'000
Salaries including social security costs 1,909 1,910
Contributions to defined contribution pension schemes 22 19
Share-based payments 720 1,477
2,651 3,406
Further details of Directors' remuneration are disclosed within the
Remuneration Report.
Dividends totalling £0.1m (2024: £0.1m) 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 (2024:
£16.4m). Pyramid Plus South LLP also made recharges of certain staff costs to
the Group totalling £0.7m (2024: £0.7m). At 31 December 2025, £5.7m (2024:
£0.2m) was due to the Group in respect of these transactions. Pyramid Plus
also owed the Group £1.3m (2024: £1.0m) in respect of agreed distributions.
During the year, the Group leased properties from Housing Ventures MPC1
Limited, a subsidiary of MPC 1 Holdco Limited, an entity in which the Group is
a 25% member, totalling £2.0m (2024: £nil). No amounts were due at 31
December 2025 in respect of these transactions. The Group also held a loan
note issued by MPC 1 Holdco Limited with a balance of £5.2m (2024: £5.3m),
as described in note 24.
As part of the sale and leaseback transaction described in note 23, the Group
received a loan note from MPC 3 Holdco Limited of £6.5m, as detailed in note
24. The balance at 31 December 2025 was £6.5m.
During the year, the Group made loans totalling £3.2m (2024: £nil) to MPC 3
Holdco Limited, an associate. These loans were used to acquire a portfolio of
properties that were being leased to the Group from a third-party landlord.
Further information about the loans are included in note 24. The amount
outstanding at 31 December 2025 was £3.2m.
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 PREAKPBKKBKBBNB
Copyright 2019 Regulatory News Service, all rights reservedRecent news on Mears
See all newsREG - Mears Grp PLC - Preliminary Results
AnnouncementREG - Mears Grp PLC - Disposal of non-core operation
AnnouncementREG - Mears Grp PLC - Total Voting Rights
AnnouncementREG - Mears Grp PLC - Board appointment
AnnouncementREG - Mears Grp PLC - Contract Award
Announcement