Final Results - Year Ended 31 December 1999

Mears Group PLC 4 April 2000 MEARS GROUP PLC PRELIMINARY RESULTS FOR THE YEAR ENDED 31st DECEMBER 1999 TURNOVER UP 142% AT £47.5m (1998 - £19.6m) PRE TAX PROFITS UP 30% AT £1,069,040 (1998 - £820,535) EARNINGS PER SHARE UP 22% AT 1.90p (1998 - 1.56p) DIVIDENDS PER SHARE UP 25% AT 0.5p (1998 - 0.4p) NEW CONTRACT AWARD ORDER BOOK IN EXCESS OF £100 MILLION 4TH APRIL 2000 MEARS GROUP PLC The Board of Mears Group PLC today announce record profits for the year ended 31 December 1999. Profits before tax were up 30% at £1,069,040 (£820,535 - 1998) on turnover up 142% at £47,455,954 (£19,635,263 - 1998). Earnings per share, before the amortisation of goodwill, increased by 32% to 2.13p (1.61p - 1998). After the amortisation of goodwill the earnings per share increased by 22% to 1.90p (1.56p - 1998). The Board recommends a final dividend of 0.4p per ordinary share making a total dividend for the year of 0.5p (0.4p - 1998). The final dividend is payable on 4th July 2000 to shareholders on the register on 14th April 2000. TRADING REVIEW The results include four months of trading from Haydon and Company Limited. Haydon, which was acquired by the Group on 1st September 1999, had been loss making for the two years prior to acquisition. The Group acquired Haydon for an initial consideration of £500,000 with a further consideration payable of £2 million plus or minus half the profit or loss of Haydon in the following two years. On 29th March 2000 the Board reached an agreement in principle to settle the contingent consideration at a fixed sum of £771,110, with no further payments to be made. The Board has been mindful of both reaching an early settlement to the final consideration so as to avoid an uncertain outcome to the extent of the consideration payable, and to continue the improvement in profitability of Haydon without the need to share those improvements with the former owners. Both these issues are now resolved. I am delighted to confirm that, following a substantial reorganisation, the Haydon business is now performing well. A number of contracts have been renegotiated and the Group expects to show a substantial improvement to the Haydon business in the current year. These results reflect that Haydon had a turnover of £12 million in the four months since acquisition with no contribution to profit nor any loss recognised. The effect of tax losses from Haydon reduced, on consolidation, the tax payable by the Group by £120,000. The Haydon acquisition brought into the Group additional geographical coverage, an expanded range of services provided and new business sectors in which to operate. The original Haydon branded business was primarily involved in the provision of mechanical and electrical services to the commercial sector and since acquisition has been reorganised back to its core business discipline. The management team are motivated and incentivised to provide a profitable platform for growth in the future. I welcome Dave Cutler and his management team into the Group. Haydon have reduced their involvement in the rail infrastructure and refurbishment sector after incurring significant losses in the past. The majority of the Group's business, accounting for £25 million of turnover in the year, continues to be in the provision of maintenance services to the local authority, social housing and Ministry of Defence housing estate sectors under the Mears brand name. These sectors provide the Group with long-term contracts with organisations who are unlikely to encounter financial restrictions in any periods of economic downturn. The citizens charter, upon which most tenants rely, provides protection for tenants to be provided with a timely response repair service to satisfy their property maintenance needs. During the year the core business continued to grow and was strengthened by the purchase of a number of response maintenance contracts complete with a management team in the north of England. The management team has become an integral part of Mears within a short period of time and along with the existing Mears businesses in the south east and south west of England are recognised by clients as a preferred supplier of response and planned maintenance services. Additional contracts were awarded to the Group in the year in Warrington, Trowbridge, Liverpool, South Oxfordshire, Dover and Thanet. I am pleased to announce that since the year end we have been awarded a contract with Ashford District Council for an initial period of five years at a value of £1.2 million per annum. The trend of contracts being awarded for longer periods continues. The air conditioning installation business disappointed in the year with the management team unable to build the business in a healthy economy for mechanical services. The Group is unlikely to invest further in this sector until the business has a profitable basis for growth. Turnover in the year was £4 million. United Fleet Distribution Limited was acquired by the Group in October 1998. UFD is regarded as the largest provider of trade plated vehicle distribution services with only a small involvement in the trailer delivery market. The business provides in excess of 300 drivers on a daily basis and delivered 125,000 vehicles in the year with a turnover of £6 million. The relocation of the central control to prestigious offices in the centre of Birmingham and the installation of a new computer software system has provided the infrastructure for substantial growth for the future. UFD have been awarded a contract to collect and deliver the motor fleet for Motability UK Limited one of the largest providers of vehicles in the UK. Due to the growth of the business in the year, the Board continues to invest in quality systems and people to ensure a controlled environment for all parts of the business. The control of the business at the micro level is paramount to the future success of the Group. The Group operates in a high volume, low margin environment and the control of costs and the management of cash is vital. The Group's central services team has been strengthened in the year so as to ensure that all the necessary controls are in place and adhered to. It gives me great pleasure to preside over a Group that has produced record profits for the year and again delivered everything that has been expected. The Group currently has an order book in excess of £100 million. During the year a significant amount of effort has been made to increase the awareness of the Group with the investing public at large. Following the launch of the Group's web site at www.mearsgroup.co.uk, it is intended to provide regular updates and information to all those wishing to register via the web site E- mail facility. The building blocks are in place to develop the business further and to take advantage of the opportunities that exist within the support services sector. The Board is actively seeking other acquisition opportunities to further develop the geographical coverage and range of services provided. The Board is mindful of the excellent support received from the Group's suppliers and customers. The members of staff who manage the businesses within the Group deserve a special mention. Without the very real commitment of staff at all levels we would not have achieved the high profitable growth as reported. It is for all these reasons stated herewith that the Board remains optimistic about the future. I look forward to being able to report another year of good progress in twelve months time. MEARS GROUP PLC CONSOLIDATED PROFIT AND LOSS ACCOUNT For the year ended 31 December 1999 1999 1999 1998 1998 £ £ £ £ Turnover Continuing operations 35,219,648 19,635,263 Acquisitions 12,236,306 - ---------- ---------- 47,455,954 19,635,263 Cost of sales (37,855,760) (15,456,718) ------------ ------------ Gross profit Continuing operations 8,373,844 4,178,545 Acquisitions 1,226,350 - ---------- ---------- 9,600,194 4,178,545 Administrative expenses (9,952,116) (3,327,386) Exceptional item 1,580,804 - Operating profit Continuing operations 1,228,882 851,159 Acquisitions - - 1,228,882 851,159 Net interest (159,842) (30,634) ---------- ---------- Profit on ordinary 1,069,040 820,525 activities before taxation Tax on profit on ordinary (190,926) (244,268) activities ---------- ---------- Profit on ordinary 878,114 576,257 activities after taxation Equity minority interests 19,104 29,018 ---------- ---------- Profit for the financial 897,218 605,275 year Dividends (256,194) (178,545) ---------- ---------- Profit retained 641,024 426,730 ========== ========== Earnings per share Basic 1.90p 1.56p ========== ========== Diluted earnings per share 1.70p 1.50p ========== ========== The exceptional item represents a partial release of the negative goodwill arising from the acquisition of Haydon and Company Limited. MEARS GROUP PLC CONSOLIDATED BALANCE SHEET AT 31 DECEMBER 1999 1999 1999 1998 1998 £ £ £ £ Fixed assets Intangible assets - 2,315,874 2,098,967 positive goodwill Intangible assets - (1,558,356) - negative goodwill Tangible assets 1,017,702 401,026 Investments 19 - ----------- ---------- 1,775,239 2,499,993 Current assets Stocks 3,282,137 998,082 Debtors 18,325,307 4,877,332 Cash at bank and in hand 2,878,176 638,824 ---------- ---------- 24,485,620 6,514,238 Creditors: amounts falling (22,157,142) (5,332,439) due within one year ----------- ----------- Net current assets 2,328,478 1,181,799 ---------- ---------- Total assets less current 4,103,717 3,681,792 liabilities Creditors: amounts falling (600,000) (800,000) due after more than one year Provisions for liabilities and charges (6,500) (6,500) ----------- ---------- 3,497,217 2,875,292 ========== ========= Capital and reserves Called up share capital 471,363 471,363 Share premium account 2,135,343 2,135,343 Other reserve (249,898) (249,898) Profit and loss account 1,177,076 536,052 ---------- --------- Equity shareholders' funds 3,533,884 2,892,860 Equity minority interests (36,667) (17,568) ----------- ---------- 3,497,217 2,875,292 =========== ========== MEARS GROUP PLC CONSOLIDATED CASH FLOW STATEMENT For the year ended 31 December 1999 1999 1998 £ £ Net cash inflow from operating 1,488,070 915,247 activities Returns on investments and servicing of finance Interest received 995 6,394 Interest paid (140,268) (33,749) Finance lease and hire purchase interest paid (2,789) (3,279) interest paid ---------- --------- Net cash outflow from returns on (142,062) (30,634) investments and servicing of ---------- --------- finance Taxation paid (279,181) (282,147) Capital expenditure Purchase of intangible fixed assets (338,495) - Purchase of tangible fixed assets (471,469) (114,087) Sale of tangible fixed assets 19,695 131,050 Purchase of investment (19) - ---------- --------- Net cash (outflow)/inflow from capital expenditure (790,288) 16,963 ---------- --------- Acquisitions Purchase of subsidiary undertakings (576,409) (1,887,164) Net cash acquired with subsidiary undertakings 7,684 7,287 --------- ----------- Net cash outflow from acquisitions (568,725) (1,879,877) --------- ----------- Equity dividends paid (188,545) (118,836) Financing Issue of shares - 600,000 Repayment of borrowings (200,000) - Receipts from borrowings 500,000 1,000,040 Capital element of finance leases (14,955) (26,821) and hire purchase rentals --------- ---------- Net cash inflow from financing 285,045 1,573,219 --------- ---------- (Decrease)/increase in cash (195,686) 193,935 ========= ========== NOTES The financial information set out does not constitute the Group's statutory accounts for the years to 31 December 1999 or 1998 but is derived from the Group's statutory accounts for the year to 31 December 1999 which will be delivered to the Registrar of Companies following the Company's Annual General Meeting. Statutory accounts for the year to 31 December 1998 have been delivered to the Registrar of Companies. The auditors reported on those accounts, their report was unqualified and did not contain statements under section 237(2) or (3) of the Companies Act 1985. Copies of the Report and Accounts will be posted to shareholders in due course and will be available at the Company's registered office at The Leaze, Salter Street, Berkeley, Gloucestershire, GL13 9DB or available on the Company's website at www.mearsgroup.co.uk.

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