Mears Group's full year results 'solid enough', says Investec

Mears Group’s shares rose slightly as Investec said the company’s full year results were “solid enough” and in line with expectations.

Investec retained its ‘hold' rating and left its target price at 440p after the service provider for the social housing and care sectors reported a 12% fall in annual profit before tax to £36.8m.

The acquisition of the loss-making Care at Home business from Care UK in May 2015 cut into profits but was anticipated.

The business nevertheless made healthy revenues, helping the care division to achieve an 18% increase in revenue to £146m despite a reduction in margins.

Social housing revenue climbed 3% to £735.1m, driven by a positive contribution from the acquisition of Omega in October 2014.

Group revenue rose 5% to £881.1m and the dividend was raised 10% to 11p.

"Full year results are broadly in line with our expectations, with Housing posting a good performance (particularly within the Housing Management business) and Care again proving a challenge," said Investec analyst Andrew Gibb.

"The group will have to contend with the additional financial pressure on the National Living Wage in 2016, although initial reactions from clients have been ‘encouraging’. Key to this story is the recovery in growth in Housing and the level of new (contract) wins during the year (£900m) suggests this is emerging."