Mears Group revenue up as board continues turnaround

Provider of support services to the social housing and care sectors Mears Group announced its interim results for the six months to 30 June on Tuesday,with revenue of £466.2m up 8% from the same time last year.

The London-listed company’s housing division, which accounts for 84% of group revenues, reported revenues increasing to £389.6m, organic growth of 6%, following a particularly successful period of new bidding in the second half of 2015.

Its care division, which accounts for 16% of group revenues, contributed revenues of £76.6m, reflecting a flat underlying performance after excluding the impact of the acquired Care at Home business.

Mears reported an operating margin of 4.2%, against 4.7% a year ago.

Its housing operating margin decreased as expected to 4.8%, from 5.0%, which the board said reflects the dilutive impact from a busy period of new contract mobilisations.

Housing margins are expected to normalise in the second half of the year as mobilisations bed down, it added.

The care operating margin reduced to 1.3%, from 4.6%, which was also in line with management expectations and reflects the trends reported in 2015.

“Following the decision to exit unsustainable care contracts, the planned reduction in revenues of 20% will reinforce our commitment to operational quality and allow us to focus on our more strategically important clients,” the board said in a statement.

“Given the estimated cost of this decision, the care division is expected to be close to breakeven for the full year.

“All costs of change will be recognised within normal trading [and] our care margin expectations for 2017 remain unchanged,” it explained.

Mears’ order book stood at £3.5bn, up from £3.2bn a year ago, reflecting a “particularly successful” period of new contract bidding over the last twelve months.

Net debt at 30 June 2016 was £14.1m, a sizeable increase from £4.2m, reflecting the increase in working capital required to support the new contract mobilisations.