Annual Financial Report and Notice of AGM

RNS Number : 0827A

Mears Group PLC

27 May 2021

 

27 May 2021

Mears Group PLC

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

Annual Financial Report 2020 and Notice of Annual General Meeting 2021

The Annual Financial Report for the year ended 31 December 2020 (the "2020 Annual Report") and Notice of Annual General Meeting 2021 (the "2021 Notice of Meeting") has today been posted or otherwise made available to shareholders. In accordance with Listing Rule 9.6.1, a copy of these documents have been uploaded to the National Storage Mechanism and will be available for viewing shortly at https://www.fca.org.uk/markets/primary-markets/regulatory-disclosures/national-storage-mechanism .

The 2020 Annual Report and 2021 Notice of Meeting are also available on the Company's website at https://www.mearsgroup.co.uk .

In accordance with DTR 6.3.5 this announcement contains, in the attached appendix, information on the principal risk factors, a responsibility statement and details of related party transactions which have been extracted in full unedited text from the 2020 Annual Report. This information is included herein solely for the purpose of complying with DTR 6.3.5 and the requirement it imposes on the Company as to how it makes public its annual financial report. These extracts should be read in conjunction with the full 2020 Annual Report and is not a substitute for reading the full 2020 Annual Report. A condensed set of financial statements were appended to Mears' final results announcement on 12 May 2021 together with a management report. The statutory accounts for the year ended 31 December 2020 have been approved by the Board and will be delivered to the Registrar of Companies following the Company's Annual General Meeting.

For further information, contact:

Mears Group PLC

David Miles, Chief Executive Officer		Tel: [phone]
Andrew Smith, Finance Director		Tel: [phone]
Alan Long, Executive Director		Tel: [phone]
Joe Thompson, Investor Relations		Tel: [phone]
www.mearsgroup.co.uk

About Mears

Mears currently employs around 6,000 people and provides services in every region of the UK. In partnership with our Housing clients, we maintain, repair and upgrade the homes of hundreds of thousands of people in communities from remote rural villages to large inner-city estates. 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.

Appendix

Unedited extract from Annual Financial Report for the year 2020

Principal risks and uncertainties

Risks are identified as 'principal' based on the likelihood of occurrence and the potential impact on the Group. The Group's principal risks are identified below, together with how we mitigate those risks.

Principal Risks

Each principal risk is considered in the context of how it relates to the achievement of the Group's strategic objectives. The risk discussion includes assessment of gross risk and net risk. Gross risk reflects the exposure and risk landscape before considering the mitigations in place, with net risk being the residual risk after mitigations. The gross risk movement from the prior year for each principal risk has been assessed and is presented below.

Mitigations in place supporting the management of the risk to a net risk position are also described for each principal risk.

Reputation
Definition	Mitigation
We recognise the significant commercial value attributable to the Mears brand. Our success in securing larger and more complex contracts, such as the new Asylum contract, increases the risk of reputational damage in the event of failure. Poor service delivery would damage our Reputation. Both our Housing and Care markets are close-knit communities where examples of poor performance are quickly communicated widely. In the environment of caring for vulnerable people, there is a risk of isolated incidents of abuse and neglect, which rightly receive significant press coverage with the inevitable reputational damage.	· In-house IT system developed to provide operational management with a real-time dashboard of service delivery indicators. · Internal auditing of KPI reporting including 'mystery shoppers'. · Strict process in place for vetting and approval of subcontractors. · We drive a culture of putting our customers first; this is continually reinforced through internal communications. · Well-communicated policy for dealing with press enquiries and incident management. · Care risk plans for dealing with vulnerable customers. · Compliance management of bribery and corruption legislation and whistleblowing policy. · We induct and train all new starters. This induction ensures that all employees understand our values and it reinforces the Group's culture. · We ensure that staff are properly trained for their roles. We ensure that we deliver relevant training and implement best practice.
People
Definition	Mitigation
The Group employs around 6,000 people who are critical to the success of our contract performance. Attracting and maintaining good relations with employees and investment in their training and development are essential to the efficiency and sustainability of the Group's operations. Delivery of strategic objectives increases our ability to attract, motivate and retain talent.	· We induct and train all new starters. This induction ensures that all new employees understand our strategy, vision and values. All Care staff have access to NVQ training. · We regularly review and benchmark our remuneration packages to ensure that they remain competitive. In Care, we are investing in an innovative recruitment process to ensure an increase in the volume and quality of carers. Local Care branches are targeted on a monthly basis in the areas of recruitment and retention. · At the senior end of the business, we have increased our focus on succession planning and increased our investment in senior management development. Our senior leadership programme has identified a cross-section of the Group's brightest talent that we would envisage will play central roles in our future business. · Expansion of apprenticeships. · An annual appraisal process is completed for all employees to ensure that all people receive feedback in respect of their performance and to identify future training and development requirements. · We hold a national accreditation as an Investor in People. We are continually looking to improve our position as an employer of choice by improving the level of engagement with our employees through formal communications, awards to recognise success, local events and family fun days. · We are continually monitoring our future skills requirements. · We regularly undertake employee surveys to gauge employee satisfaction and engagement, and any barriers to high level performance.
Health and safety
Definition	Mitigation
Prevention of injury or loss of life for both employees and customers is of utmost importance. In addition, it is vital to maintain the confidence our customers and clients have in our business.	· Significant investment in the centralised health, safety and environment (HSE) function to maintain consistency and quality. · We have comprehensive safe systems of work which are well communicated through a robust and coordinated internal training regime. · We have robust processes for inducting new staff to ensure the importance of health and safety is emphasised together with detailed method statements for working safely. · Compliance Committee to monitor and oversee health and safety strategy and performance, regulatory compliance and risk management. · Closer review of buildings safety compliance (post Grenfell) in higher risk areas, e.g. Housing Management. · Regular HSE training and updates are held, predominantly delivered by the in-house training function. · Internal health and safety auditing takes place using third party validation.
IT and data
Definition	Mitigation
A major incident or catastrophic event could impact on the Group's ability to trade. In addition, it is essential that the security of customer, employee and Company confidential data is maintained. A major breach of information security could have a major negative financial and reputational impact on the business. The risk landscape of IT and data is constantly increasing with deliberate acts of cyber-crime becoming more sophisticated and frequent across all markets.	· The Business Continuity Plan is constantly reviewed and frequently tested to ensure it is fit for purpose. · Business continuity and IT disaster recovery management resource is convened at short notice to manage the response and any associated risk to the Group. · General Data Protection Regulation (GDPR) steering group. · Information security penetration is externally tested to recommend improvements which are then implemented. · Data Security Committee in place to monitor and review both physical data security and IT data security. · GDPR implementation plan and steering group.

Statement of Directors' responsibilities

The Directors are required to prepare the financial statements for the Company and the Group at the end of each financial year in accordance with all applicable laws and regulations. Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs and profit or loss of the Group and the Company for that period. In preparing these financial statements, the Directors are required to:

· select suitable accounting policies and apply them consistently;

· make judgements and accounting estimates that are reasonable;

· state whether the Consolidated Financial Statements have been prepared in accordance with International Financial Reporting Standards ('IFRSs') adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union and with international accounting standards in conformity with the Companies Act 2006;

· state for the Company Financial Statements whether United Kingdom Accounting Standards and applicable law, including Financial Reporting Standard 101 Reduced Disclosure Framework ("FRS 101") have been followed; and

· prepare the Financial Statements on the going concern basis unless it is inappropriate to presume that the Company and the Group will continue in business.

The Directors are responsible for ensuring that the Group keeps proper accounting records which disclose with reasonable accuracy the financial position of the Group and the Company to enable them to ensure that the Financial Statements comply with the Companies Act 2006 and, as regards the Consolidated Financial Statements, IFRSs adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union. The Directors are also responsible for the system of internal control, for safeguarding the assets of the Group and the Company, and taking reasonable steps to prevent and detect fraud and other irregularities.

Under applicable law and regulations, the directors are also responsible for preparing a strategic report, directors' report, directors' remuneration report and corporate governance statement that comply with that law and those regulations. The directors are responsible for the maintenance and integrity of the corporate and financial information included on the company's website.

The Directors confirm that:

· so far as each Director is aware there is no relevant audit information of which the Company's auditor is unaware; and

· the Directors have taken all the steps that they ought to have taken as Directors in order to make themselves aware of any relevant audit information and to establish that the auditor is aware of that information.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

The Board confirms that to the best of its knowledge:

· that the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group and the undertakings included in the consolidation taken as a whole; and

· that the Annual Report includes a fair review of the development and performance of the business and the position of the Group and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.

The Directors are responsible for preparing the Annual Report in accordance with applicable law and regulations. The Board considers the Annual Report and Accounts, taken as a whole, is fair, balanced and understandable and that it provides the information necessary for shareholders to assess the Group's performance, business model and strategy.

Going Concern

We principally operate in robust defensive markets where spend is largely non-discretionary and our contracts tend to be long-term partnerships. The Group reported net cash of £56.9m at 31 December 2020. The core debt required to satisfy the day-to-day requirements of the business is in the region of £70m. This represents significant headroom against the £120m unsecured revolving credit facility, with an additional accordion mechanism allowing the facility to be increased to a maximum of £200m, maturing in November 2022.

After reviewing the Group's and Company's budget for the next financial year and longer-term plans, the Directors consider that, as at the date of approving the financial statements, it is appropriate to adopt the going concern basis in preparing the financial statements.

Related Party Transactions and Remuneration of key management personnel

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 29 to the financial statements.

Subsidiaries

The Group has a central treasury arrangement in which all subsidiaries participate. The Directors do not consider it meaningful to set out details of transfers made in respect of this treasury arrangement between companies, nor do they 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:

	2020	2019
	%	%
Directors	0.6	0.3

Key management personnel's compensation is as follows:

	2020	2019
	£'000	£'000
Salaries including social security costs	2,063	1,634
Contributions to defined contribution pension schemes	131	130
Share-based payments	340	-
	2,534	1,764

Further details of Directors' remuneration are disclosed within the Remuneration Report.

No dividends were paid to Directors during the year (2019: £0.04m).

Transactions with other related parties

During the year the Group made an additional short-term loan to YourMK LLP, an entity in which the Group is a 50% member, totalling £0.2m (2019: £0.1m). This loan was repaid during the period. At 31 December 2020, the Group was owed £0.5m (2019: £0.5m) by YourMK LLP.

During the year the Group provided maintenance services to Pyramid Plus South LLP, an entity in which the Group is a 30% member, totalling £7.9m (2019: £6.5m). At 31 December 2020, £0.9m (2019: £0.8m) was due to the Group in respect of these transactions. Pyramid Plus South LLP also made recharges of certain staff costs to the Group totalling £0.1m (2019: £nil). There were no amounts outstanding at 31 December 2020 in respect of these recharges (2019: £nil).

 

END

 

 

ACSBXGDUGXDDGBR