Final Results
Mears Group PLC
11 March 2008
Embargoed Release: 07:00hrs Tuesday 11 March 2008
Mears Group PLC
('Mears' or the 'Group')
Preliminary Announcement Year Ended 31 December 2007
Mears Group PLC is once again pleased to announce record results for the year
ended 31 December 2007.
The highlights for the year include:
• Turnover £304.6m (2006: £241.4m), up 26.2%
• Operating profit pre amortisation £17.1m (2006: £12.5m), up 36.5%
• Diluted EPS - normalised for full tax pre amortisation 16.40p (2006: 13.63p), up 20.3%
• Dividend per share 4.0p (2006: 3.3p), up 21.2%
• Operating profit to cash conversion 92.9% (2006: 99.4%)
• Operating margins increased across all business segments
• Acquisition of Careforce Group plc and a further 10 Care
acquisitions
• Record forward order book currently at £1.4 billion with
robust bid pipeline
Bob Holt, Chairman, said:
'2007 has been a very good year for Mears and I am grateful to all Mears
employees for their tremendous work. 2008 and beyond looks even brighter for our
customers, our staff, our partners and our investors. I have personally never
been more excited about, nor committed to, the future of this Group.
Our order book is at record levels with a very healthy new business pipeline.
Government policy, which both embraces investment in communities and ongoing
public private sector partnership, continues to generate new opportunities. Our
investment in people, IT and operational best practice ensures that we have the
capability to make the most of the growth opportunities.'
Enquiries:
Bob Holt, Chairman, Mears Group tel: 07778 798816
Andrew Smith, Executive Director, Mears Group tel: 07712 866461
Media enquiries:
Threadneedle Communications, Trevor Bass/Alex White tel: 020 7936 9666
Joint broker and Nominated adviser, Investec tel: 020 7597 4000
Joint broker, Arbuthnot Securities tel: 020 7012 2000
A presentation for analysts will be held at 10.00 a.m. today at the offices of
Investec, 2 Gresham Street, London, EC2V 7QP.
Chairman's statement
I am delighted to announce another record year in both turnover and
profitability. All business segments achieved record results and are well placed
to continue building on our success in 2008. Since joining the Alternative
Investment Market this is our twelfth consecutive year of profitable growth and
we have delivered compound growth in profit before tax pre amortisation of 40%
over that period.
In the year ended 31 December 2007, turnover was up 26.2% to £304.6m (2006:
£241.4m). Operating profit before amortisation was up 36.5% to £17.1m (2006:
£12.5m). Diluted normalised earnings per share was up 20.3% to 16.40p (2006:
13.63p). We now employ 6,000 people, which is more than double a year ago.
I am particularly pleased by the performance of our Development team, with over
£500m of new business being secured across the Group, while retaining our
strategy of focusing on quality contracts with partnership principles at their
heart. We have an order book of £1.4 billion and have already secured 97% of
consensus forecast turnover for 2008 and 77% for 2009.
The strategic acquisition of Careforce in April 2007 allowed the Group to gain a
foothold in the Domiciliary Care market and has been followed by eight smaller
acquisitions in 2007 and a further two acquisitions in 2008, giving us the
foundation for achieving market leadership. The latest acquisition has seen an
extension of our care to cover those with learning difficulties which we are
confident gives us scope for developing a national offering. The post
acquisition integration has gone well and the Careforce team is working closely
with their Mears colleagues. One of our first actions has been to bring Mears
experience of tendering and bid management to improve the Careforce tender
submissions. In addition we have invested significant resource into both the IT
and accounting systems and the Careforce workforce development and training
programmes. It is the quality of our care workers by which our service will be
judged.
We see the social services domiciliary care market being in a similar position
to where the social housing market was some seven years ago. I believe that a
Mears-style care provision will be a competitive and efficient force in a
rapidly evolving market and I am determined that Careforce will be the quality
offering and the partner of choice. We have already established our first
partnership serving both the domiciliary care and housing repair needs of a
single community in Wigan.
Development success built on Partnering
A return to bidding on a highly selective basis has yielded immediate returns
for Mears. Particularly pleasing have been new major wins in Birmingham,
Sedgefield and midlands-based Midland Heart, as well as securing a 15 year
partnership with Welwyn Hatfield District Council. We have been working in
Welwyn and Hatfield for the last 6 years and this new contract worth over £168m
reflects the success of our partnership approach. In total over £400m of new
Social Housing business was won in 2007. Our Care business has also seen
significant new wins including Wigan and Hertfordshire. Moreover, we have seen
our M&E division secure record new contracts, establishing itself as one of the
most successful contractors of its type.
I would like to take this opportunity to thank all our partners for their
support in 2007. We apply the principles of partnering across our supply chain
which has been significantly rationalised in 2007 down to a small group of
partners with whom we share similar aspirations.
People
Mears success has been built on the ability and commitment of its people and
their desire to serve customers to the best of their abilities. We have again
increased our customer satisfaction levels in 2007, with 98% of tenants
regarding our service as satisfactory whilst over 70% of those regard our
service as excellent. Both measures substantially exceed reported average
satisfaction levels for the market as a whole. Our people continue to make a
real difference to the communities in which they work. Once again we recognise
the outstanding contribution of our employees highlighted by the achievements of
four people each representing their colleagues across the Group; they are Paul
Martin, Chris Senior and Luke Brownbridge, all from our new Scunthorpe branch,
each awarded the Mears Customer Service Champion of the Year Award and Jayne
Cornell from Careforce who won our Carer of the Year Award.
Development of our people remains a top priority for Mears. I am pleased to
welcome both David Miles and Andrew Smith to the PLC Board. David joined Mears
in 1996 and has led our Social Housing division for many years. Andrew has eight
years experience with Mears and is a further example of Mears developing its own
talent for the future. Andrew takes over from David Robertson who is stepping
down from the role of Group Finance Director. We signalled this change in August
of last year. David has been an integral part of Mears success and I do not
believe that we would have been so successful in our early years without his
skills and commitment. David will be missed by myself and all his colleagues. I
wish him and Linda a long and healthy retirement.
In the year we have welcomed into the Group in excess of 3,000 employees from
the domiciliary care sector. We are committed to building a leading position in
this sector. Mike Rogers the founder of Careforce joined the PLC Board in April
2007.
I also welcome Peter Dicks and David Hosein to the PLC Board as Non Executive
Directors. Their experience will be invaluable through the next stage of our
development.
Improving communities is part of our DNA
Those who have read previous commentary from me will know the importance I place
on corporate social responsibility. Our community work is second to none with
over 50% of our staff volunteering their time to help schools, community
centres, homeless facilities, training and work experience provision and
environmental improvement projects. Our work here is aligned directly to our
Group strategy. By building strong community links, we build relationships and
understanding with these communities. By encouraging our staff to make a
personal commitment we see people taking on new challenges, increasing job
satisfaction and indeed making a difference to the communities in which they
often live. It was hard to choose the best overall community project that Mears
supported in 2007, given that there were over 220, but congratulations go to our
Wycombe branch for their work with the homeless.
A strong position in growth markets
The outlook I outlined a year ago remains unchanged. There remain excellent
prospects in social housing. We have demonstrated in 2007 that there is real
demand for larger, longer-term contracts, which play to our strengths as a
leader in that market. The political and economic climate is not one that will
undermine the Social Housing sector and indeed the 2007 Comprehensive Spending
Review outlined significant increased investment to address underlying demand
issues and moreover set an agenda for efficiency which is good for us. Given our
scale, our focus on customers and their communities and the quality of people we
employ, we are well placed to benefit from these opportunities.
The UK Care market is also one with significant growth potential. Demographic
trends as well as the political and social will for people to stay in their own
homes when they get older will continue to drive growth in this sector. I also
expect to see changes in procurement practices that will increase service
quality and will provide opportunities for organisations like Mears, which have
the reputation and the right skills to deliver the services required efficiently
and effectively and with empathy.
Outlook
2007 has been a very good year for Mears and I am grateful to all Mears
employees for their tremendous work. 2008 and beyond looks even brighter for our
customers, our staff, our partners and our investors. I have personally never
been more excited about, nor committed to, the future of this Group.
Our order book is at record levels with a very healthy new business pipeline.
Government policy, which both embraces investment in communities and ongoing
public private sector partnership, continues to generate new opportunities. Our
investment in people, IT and operational best practice ensures that we have the
capability to make the most of the growth opportunities.
Bob Holt
bob.holt@mearsgroup.co.uk
Chairman
Operating and Financial Review
Turnover
In the year to 31 December 2007 we grew turnover to £304.6m (2006: £241.4m), an
increase of 26.2%. The domiciliary care division contributed £28.7m of this
growth which was predominantly generated through acquisition.
Operating result
We achieved an operating result before amortisation of £17.1m (2006: £12.5m), a
36.5% increase. All business segments reported increased operating margins. The
Group increased operating margin before amortisation from 5.2% in 2006 to 5.6%
in 2007. Even after excluding the margin enhancing care acquisition, the margin
shows an increase in 2007 to 5.5% on a like for like basis. We are now
benefiting from the significant investment made in our in-house information
technology platform which has helped to further enhance the financial control
throughout the business. We continue to invest in our infrastructure ahead of
the projected organic growth.
Amortisation of acquisition intangibles
The Group carried out ten acquisitions during the course of 2007 which created
intangibles amounting to £12.9m which will be amortised over their useful
economic life. This resulted in a charge of £1.5m in 2007 (2006: £0.3m). The
excess of purchase price over the fair value of net assets is capitalised as
goodwill and under IFRS is not amortised however will be subject to an annual
impairment review.
Share based payments
The share-based payment charge in 2007 was £0.6m (2006: £0.5m).
Finance costs
The Group again maintained its broadly neutral cash position throughout the 12
months to 31 December 2007 and suffered a net interest charge of £0.12m (2006:
income £0.01m). The Group's focus on tight working capital control remains a
cornerstone of our offering given the tremendous scale of growth encountered
during the later part of 2007 and continuing into 2008.
Tax expense
£4.7m has been provided as a tax charge, an effective rate of 30.4% (2006:
17.3%). This is marginally higher than the standard rate of 30% as a result of
adjustment for amortisation of acquisition intangibles, depreciation and
share-based payments. The effective rate is higher than in 2006 as the
comparative period benefited from an exceptional level of employee share option
exercises in a single period.
Earnings per share (EPS)
The normalised diluted EPS pre intangible amortisation and incorporating a full
corporation tax charge of 30% shows an increase of 20.3% rising to 16.40p from
13.63p.
Dividend
The dividend increase is in line with our earnings growth. A final dividend of
2.9p per share is proposed which combined with the 1.1p interim dividend gives a
total dividend in the year of 4.0p per share (2006: 3.3p). The final dividend
has not been recognised within the preliminary announcement as it did not
represent an obligation at the balance sheet date.
The dividend is payable on 2 July 2008 to shareholders on the register on 13
June 2008.
Borrowings, cash flow and treasury
Group net cash position at 31 December 2007 was £15.3m, up from £11.9m at the
start of the year.
The cash flow position continues to underline our strength as a business. The
Group converted into cash 92.9% of operating profit before amortisation into
operating cash flow (2006: 99.4%).
The Group used £28.4m to fund the acquisition of Careforce Group PLC ('
Careforce') together with further bolt-on acquisitions. The Group financed this
by raising £24.2m by way of placing 7.5m shares, with the balance of £4.2m being
financed through working capital. A sum of £3.5m was invested in new technology
and operational bases. The Group benefited from the exercise of options in 2007
by some £1.4m.
Acquisition
During the year, the Group expanded into domiciliary care through initially the
acquisition of Careforce for a total consideration of £23.8m. This consideration
comprised of £12.2m of cash with the balance settled by the issue of 3.3m Mears
shares in exchange for existing Careforce shares. A further £5.6m was used to
settle the debt facility held by Careforce. This acquisition gave the Group a
significant foothold within the domiciliary care market from where it has
continued to grow both organically and through acquisition.
The Group carried out a further eight domiciliary care acquisitions
strengthening our national coverage of this market. The entire share capital of
each business was purchased for a combined cash consideration of £10.6m
(including costs). All acquisitions were structured on a similar basis,
typically on a multiple of between four or five times EBITDA. Further
consideration of £3.0m is deferred subject to meeting future performance
targets.
The domiciliary care business is performing in line with our expectations and
ended the year with a run rate in excess of 75,000 hours per week, an increase
of some 50% on the original Careforce business.
The Group also acquired the social housing contracts from Makers UK Limited for
a nominal consideration. An additional payment of £1.3m was made to acquire the
work in progress at book value.
Order book
The visibility of our earnings continues to improve with in excess of £500m of
new work being secured in 2007. Our order book now stands at £1.4 billion (2006:
£1.1 billion). The element of market forecast turnover secured for 2008 is 97%
and 77% for 2009. We continue to place great emphasis on winning good quality
contracts that can provide clear and sustainable margins.
Balance sheet
Total shareholders' equity value rose by £44.7m to £82.7m at 31 December 2007.
The increase in net assets is due to retained profits and the shares issued in
the year. Significant movements in the balance sheet are:
• The Group recognised £33.0m of goodwill and £13.1m of intangible
assets predominantly relating to the acquisition of Careforce Group plc and
additional eight bolt-on domiciliary care acquisitions.
• Trade and other receivables at 31 December 2007 were £51.6m, an
increase of £11.3m of which £6.1m was due to the inclusion of the acquisitions.
• Trade and other payables at 31 December 2007 were £52.4m, an increase
of £10.2m of which £6.2m was due to inclusion of the acquisitions and £2.8m of
deferred consideration that has now fallen payable in less than one year.
Major contract wins and mobilisations
We have achieved a number of major successes, winning contracts valued at in
excess of £500m in total over the last twelve months.
Social Housing contract wins
We won a 10 year contract, worth £50m, to carry out response and repairs work
for Midland Heart Housing Association. Midland Heart is one of the top ten
housing and regeneration groups in the country and the largest based in the
Midlands. The contract mobilised in December 2007.
We were awarded the 15 year sole partner contract with Welwyn Hatfield District
Council to deliver their entire housing maintenance and improvement programme.
This is worth a minimum of £168m over 15 years but further negotiated works
could see that rise. We have been working in Welwyn and Hatfield since 2001.
This award demonstrates the value of choosing customers with a strong
partnership ethos and represents the biggest sole partner contract award in
Mears history.
We were successful in winning a major new £89m partnership contract in
Sedgefield in the North East of England. The contract term is 5 years with a
possible 2 year extension. This strategic partnership covers all aspects of
housing repairs, maintenance and decent homes across the 8,500 properties in
Sedgefield Borough Council with 170 existing Sedgefield employees having
transferred to Mears. The contract mobilised in February 2008.
We were successful in obtaining a flagship contract worth £65m with Birmingham
City Council to provide responsive repairs and voids refurbishment in the
Northern area of the City. The work will encompass the transfer of over 300
staff and it will last for an initial period of 4.5 years with an option to
extend to a full term of 7 years. This win follows an extensive tender process,
lasting over 6 months, through which Mears was able to demonstrate service and
efficiency benefits for both the Council and the residents of North Birmingham.
The contract goes live on 1 April 2008.
We were awarded a £10m, 5 year contract with Mole Valley Housing Association.
The work is for planned maintenance and voids and can be extended for a further
5 years. Mole Valley Housing Association, based in Surrey, was created in 2007
following a transfer from Mole Valley District Council and has over 3,800 homes.
It is part of the Circle Anglia Group which has a housing stock of over 27,000
properties and is one of the largest housing associations in the UK. The
contract is currently mobilising and is due to commence on 1 April 2008.
We received a five year contract extension on the response and voids maintenance
contract with Wycombe District Council. This is worth £20m over 5 years and is
awarded on the back of providing the tenants a high quality service. The most
efficient way to win new business is to renew existing contracts. We have
renewed the majority of contracts as they come up for renewal. In the last 10
years, we have failed to renew only one material contract.
Domiciliary Care contract wins
The Group won a number of domiciliary care contracts including a contract with
Wigan Metropolitan Borough Council for the provision of domiciliary care
services for an initial period of three years plus a further potential two year
extension. The initial contract value will be around £1m per annum. The Group
was also successful in obtaining contracts for Homecare in Trafford, North
Tyneside and for Extra Care Sheltered Housing in Nottinghamshire. These three
contracts have combined annual revenues of approximately £1.5m.
Careforce has also been successful in securing future revenues in two areas
where existing contracts having come to the end of their natural term were being
retendered. In both cases, Careforce has been successful in winning higher
volumes of the outsourced work at similar or increased billing rates. In
Rotherham, Careforce has won the maximum possible allocation of three blocks and
in Hertfordshire we won contracts which will lead to significantly increased
volumes that will run to at least 2015 with possible extensions to 2018. The
anticipated aggregate forward sales value of the new contracts in Rotherham and
Hertfordshire is in the region of £34m during the basic contract terms or around
£52m if the options to extend both contracts are taken up.
Training and development
We are an established 'Investor in People' and we are meeting the challenge of
the skills shortage in our sector through a comprehensive national programme of
employee development, together with structured work experience and training
programmes for prospective employees.
We are particularly proud of our safety record which has been further enhanced
by our new safety course for staff that we have developed together with the
British Safety Council. All our operatives have received this additional
training in 2007.
In addition to our existing Training Foundation in Hackney, we have supported
the launch of the Ealing Diploma and Enterprise Centre (EDEC) which aims to give
young people aged 14-19 years broader options alongside other qualifications
such as GCSEs and A-Levels. Students who attend are given the opportunity to
learn skills that they would not learn in mainstream education and achieve the
Diploma in Construction and the Built Environment. We plan to invest in further
training centres in 2008 in Birmingham and Sedgefield.
Customer and Community care
With over 50% of our staff participating in community improvement projects,
Mears has one of the highest levels of volunteering of any company of its size
in the UK. Over 13,000 hours of community work was undertaken, with over 220
individual projects.
Over the last 3 years, we have been a particular supporter of the Bobby Moore
Bowel Cancer Fund with some £250,000 having been collected by our staff through
a huge variety of events, from coffee mornings, to supporting projects in
Brazil, India and South Africa.
One of the biggest issues for vulnerable people can be the risk of falling.
Mears has invested in providing special anti-fall slippers to tenants to reduce
this risk.
Environment
We are committed to reducing our carbon emissions per employee by 5% per annum
as well as to recycling over 50% of our waste. We have had a dynamic recycling
policy throughout our history and it is pleasing to see our continuing
commitment. Through our Thought Leader Conference in London in November we
worked with clients, suppliers and key stakeholders to put greater focus on the
need to tackle carbon reduction within the existing social housing stock, rather
than to just focus on new build, where most of the Government focus has been so
far. Our activity is now broad, from working with our suppliers to identify
sustainable materials, through to working with the Tenants Participation
Advisory Service to help Tenants take action to reduce both energy usage and
waste.
Bob Holt, Chief Executive
bob.holt@mearsgroup.co.uk
David Robertson, Finance Director
david.robertson@mearsgroup.co.uk
Corporate Social Responsibility
Goals
Mears regularly reviews its Corporate Responsibility goals and ensures that they
are fully aligned to business strategy
Our 4 Goals are:
• To improve the lives of vulnerable people.
• To help build community cohesion and integration.
• To provide career opportunities to those needing them the most.
• To be a positive contributor to the environment.
Our Communities
We work throughout the UK and have branches in every kind of community. In areas
as diverse as rural villages, bustling market towns, historic boroughs, garden
cities, busy metropolitan cities and industrial heartlands you will find Mears
working to improve peoples lives. We do work in some of the most socially
deprived areas of the country so we feel a strong sense of responsibility
towards the wider community.
Helping a local community to thrive increases the quality of life for tenants
and makes our job that little bit easier. 90% of our employees live in the
communities they support.
In 2007 our staff delivered over 13,000 hours of community work with 50% of
staff actively volunteering. We supported over 220 different projects:
• 45 schools have received direct support from us.
• 2,200 people in 55 community centres, homeless centres and hospices have had
their facilities improved.
• 183 youngsters have been given work experience and/or taken part in one of
our apprenticeship schemes.
• 1,000 children have received information on safety at home through our Mr
Menda campaign.
• 100 children have had their reading skills improved through our reading
buddies scheme.
• £100,000 of fund raising has helped various charities.
At our annual conference this year awards were given to our top five nominated
community projects:
The Big Breakfast in High Wycombe
Employees have supported their local homeless charity in a very practical way
over recent years by helping out every month in the preparation and serving of
breakfasts to the clients. Over the years every member of staff from the branch
has taken part in this project demonstrating a long term commitment to community
involvement.
Growing Together in Broadstairs
Working with local school children and the elderly residents of a sheltered
housing complex we helped them to plan, design and create a community garden
that enhanced the environment and brings young and old together in a very
sustainable way.
The Triangle Community Centre in Northampton
Following an approach from members of a local community association after their
centre had been vandalised, our whole branch turned out over a weekend to help
restore and refurbish the centre. Since then the centre has thrived and
vandalism hugely reduced as the centre gets greater use and is open for the
community.
Young Offenders Project in Peterborough
We have provided mentoring and vocational skills training to a number of former
young offenders enabling them to gain new skills and confidence and helping them
back into community engagement and work opportunities.
DIY Training for Residents in Christchurch
Residents from two local housing associations were given training in DIY skills.
Using a community hall which we kitted out as a training centre, our employees
took residents through practical painting and decorating examples, enabling them
to feel confident to carry out improvements to their own homes.
Supporting good causes
Our commitment to the community is recognised in Mears attaining the Business in
the Community 'Percent Standard'. This benchmark measures the contributions made
by companies through cash donations, staff and management time and gifts in
kind, calculated as a percentage of pre-tax profit. The Percent Club recognises
those companies who put the equivalent of at least 1% of their pre-tax profit
into community work.
We have also expanded the support provided by the Mears 'Future Champions'
project. This provides both financial and practical support to ten young
talented athletes from communities in which we work. We hope to see these
inspirational youngsters participating in a number of national and international
events culminating in the London Olympics 2012.
We have developed a very strong relationship with the Bobby Moore Bowel Cancer
Fund, helping raise some £250,000 for this important charity over the last 3
years.
Our workplace
We want to become a recognised 'Employer of Choice' within our sector with a
workforce that fully reflects the communities we serve. To help us achieve this,
we have three key aims:
• To develop a culture of good communication and trust within the business, so
that every employee shares the same values and works towards the same
business objectives.
• To manage change in a fast-growing, high-performance organisation by
anticipating the people and resources we will need well before they are
needed.
• To encourage our employees to work together effectively in all situations.
Training and development
We are an established 'Investor in People', retaining the award in 2007 and we
are meeting the challenge of the skills shortage in our sector through a
comprehensive national programme of employee development, together with
structured work experience and training programmes for prospective employees.
We have invested heavily in employee development including:
• Taking all our trades professionals through a trades based NVQ programme.
• The development of a unique Mears Professional Development Customer and
Community Care NVQ to help raise our customer service standards even higher.
• Supporting new training centres including the Western Skills Centre in Wigan,
the Ealing Diploma and Enterprise Centre and the Foundation Training Centre
in Hackney.
• Launching a national apprentice recruitment campaign.
Culture and diversity
In Mears, diversity is about having a group of employees who reflect the
community they serve. It is about having the right blend of age, sex, race and
cultural background required to understand the needs of the people we support.
We operate in a sector that has been very male-orientated for many years, but we
are addressing that imbalance. We will continue to address the issues involved
and support the Women in Construction programme. We also achieved the Age
Positive award in 2007, demonstrating our fair approach across all age groups.
Support for employees
We continue to provide a free 24 hour, 365 days per year confidential helpline
called Mears Assist. This provides employees with advice on a wide range of
personal and work-related matters and is available to their immediate families.
We see Mears as a community in its own right and initiatives such as this are
intended to help people get the most from their life while working here.
Our market
We are leaders in the social housing sector and we believe we have a
responsibility to help improve knowledge, understanding and the overall
performance of our market. In particular, we set out:
• To find and work with partners who share our values.
• To help clients and other organisations meet and learn from one another.
• To look for innovative ways to improve efficiency and effectiveness - for the
benefit of clients, tenants, local communities and tax payers.
Thought leadership
We have run and published our fourth Thought Leader report on the subject of
improving the carbon footprint of the UK's social housing stock. We run this
with support from the Chartered Institute of Housing, the Tenant Participation
Advisory Service and others. Professionals from the Housing industry debated how
to deliver real community improvements effectively. The report is available from
our website www.thoughtleader.org.uk.
Procurement policies
Mears is determined to use true partnering and open book principles in the
supply chain to ensure best value for all parties, in particular, our clients.
Our nationally agreed supply chain partnering arrangements balance financial,
service and sustainability requirements to ensure that we are delivering genuine
all round best value to our clients.
Our environment
We take our environmental performance very seriously and work continuously to
improve our practices. Our aims are:
• In 2007 we achieved recycling levels of in excess of 50% and we have a short
term target of recycling 80% of our waste.
• Reduce carbon emissions by 5% per annum per employee for next 5 years.
• Offset the majority or all of our carbon footprint.
• Improve the energy efficiency of 50,000 homes per annum.
• Raise the percentage of wood sourced from certified sources to 90% by 2010.
We have achieved the ISO 14001 standard in many of our branches and are rolling
this out across the remaining locations. As a part of this we are significantly
improving the level of waste we recycle.
At Mears we are always working tirelessly to ensure that we do everything in our
power to reduce our carbon footprint. In order to do this we are currently
seeking to implement a number of key initiatives, which we believe will make us
totally carbon neutral in the very near future. These initiatives include:
• Commissioning an external verification of our existing carbon footprint
together with the production of a vigorous carbon reduction strategy.
• Planting 32,000 renewable saplings in 2008.
• Introducing fuel efficient vehicles.
• Providing special Energy Saving Packs for tenants.
• Improving procurement of sustainable products.
As well as these important projects, Mears also encourages many of our staff to
qualify for City and Guilds Energy Advisory Certificates. These qualifications
enable our staff to provide tenants with practical advice on the best way to
achieve energy efficiency within their homes.
We believe this is an important area for our business in the future. Most of the
focus on housing environmental improvement has been on new build so far and we
see more of the focus shifting to refurbishment strategies if the UK is to
achieve its carbon reduction targets.
Health and safety
Mears Group substantially increased its Health and Safety training in 2007. In
partnership with the British Safety Council, Mears has developed a Company
specific accredited Safety, Health and Environment course, which was rolled out
in 2007 to all our employees. This was the first time the British Safety Council
has worked with a company to produce such a course.
We are proud to continue to hold the RoSPA Gold Health and Safety Award. In 2007
we reduced our Accident Incident Rate again as we have done year on year.
Consolidated income statement for the year ended 31 December 2007
2007 2007 2006 2006
Note £'000 £'000 £'000 £'000
Sales revenue 2 304,620 241,414
Cost of sales (224,808) (174,399)
Gross profit 79,812 67,015
Other administrative (62,186) (53,970)
expenses
Operating result before share-based payments and amortisation of 17,626 13,045
acquisition intangibles
Amortisation of acquisition intangibles (1,500) (255)
Share-based payments (550) (535)
Total administrative costs (64,236) (54,760)
Operating result 2 15,576 12,255
Finance income 222 130
Finance costs (345) (118)
Result for the year before 15,453 12,267
tax
Tax expense 3 (4,519) (2,068)
Net result for the year 10,934 10,199
Earnings per share
Basic 5 15.65p 17.05p
Diluted 5 15.11p 15.99p
All activities are continuing.
Consolidated balance sheet as at 31 December 2007
2007 2006
£'000 £'000
Assets
Non-current
Goodwill 46,781 13,811
Intangible assets 12,608 1,029
Property, plant and equipment 8,199 5,716
Trade and other receivables 1,710 701
Deferred tax asset 1,116 3,000
70,414 24,257
Current
Inventories 9,277 9,104
Trade and other receivables 49,929 39,633
Cash at bank and in hand 15,250 12,127
74,456 60,864
Total assets 144,870 85,121
Equity
Equity attributable to the shareholders of Mears Group
PLC
Called up share capital 732 615
Share premium account 31,007 5,547
Share-based payment reserve 2,035 1,485
Merger reserve 11,548 -
Retained earnings 37,373 30,363
Total equity 82,695 38,010
Liabilities
Non-current
Deferred tax liabilities 3,721 -
Other liabilities 3,191 2,876
6,912 2,876
Current
Short term borrowings and - 228
overdrafts
Trade and other payables 52,410 42,186
Current tax liabilities 2,798 1,438
Pension and other employee 55 383
benefits
Current liabilities 55,263 44,235
Total liabilities 62,175 47,111
Total equity and liabilities 144,870 85,121
Consolidated statement of recognised income and expense for the year ended 31
December 2007
2007 2006
£'000 £'000
Actuarial gain (loss) on defined benefit pension scheme 295 (77)
Decrease in deferred tax asset (1,675) (550)
Net expense recognised directly to equity (1,380) (627)
Profit for the financial period 10,934 10,199
Total recognised income and expense for the period 9,554 9,572
Consolidated cash flow for the year ended 31 December 2007
2007 2006
Note £'000 £'000
Operating activities
Result for the year before tax 15,453 12,267
Adjustments 6 3,767 2,312
Change in inventories (134) (3,468)
Change in operating receivables (5,190) (7,697)
Change in operating payables 1,971 9,023
Cash inflow from operating activities before 15,867 12,437
taxes paid
Taxes paid (3,506) (2,394)
12,361 10,043
Investing activities
Additions to property, plant and equipment (3,314) (1,371)
Additions to development expenditure (225) (222)
Proceeds from disposals of property, plant and 143 146
equipment
Acquisition of subsidiary undertaking, net of (28,391) (3,543)
cash
Interest received 280 136
(31,507) (4,854)
Financing activities
Proceeds from share issue 25,544 1,614
Discharge of finance lease liability (88) (46)
Interest paid (415) (124)
Dividends paid (2,544) (1,676)
22,497 (232)
Cash and cash equivalents, beginning of year 11,899 6,942
Net increase in cash and cash equivalents 3,351 4,957
Cash and cash equivalents, end of year 15,250 11,899
Cash and cash equivalents is comprised as
follows:
Cash at bank and in hand 15,250 12,127
Short term borrowings and overdrafts - (228)
Cash and cash equivalents 15,250 11,899
Notes to the preliminary announcement for the year ended 31 December 2007
1. Basis of preparation
The preliminary announcement contains extracts from the full financial
statements.
The full financial statements have been prepared in accordance with
International Financial Reporting Standards (IFRS) as adopted by the European
Union and also in accordance with IFRS as issued by the International Accounting
Standards Board. The financial statements are prepared under the historical cost
convention. The accounting policies remain unchanged from the previous year.
2. Segment reporting
The Group operates four (2006: three) business segments: social housing,
domiciliary care, mechanical and electrical (M&E) and vehicle distribution. All
of the Group's activities are carried out within the United Kingdom.
2007
Business segments Social Domiciliary M&E Vehicle Total
housing Care distribution
£'000 £'000 £'000 £'000 £'000
Revenue 205,559 28,718 61,181 9,162 304,620
Operating result pre amortisation 12,208 1,801 2,587 480 17,076
of acquisition intangibles
Amortisation of acquisition (300) (1,200) - - (1,500)
intangibles
Operating result 11,908 601 2,587 480 15,576
2006
Business segments Social Domiciliary M&E Vehicle Total
housing Care distribution
£'000 £'000 £'000 £'000 £'000
Revenue 184,017 - 49,069 8,328 241,414
Operating result pre amortisation 10,323 - 1,793 394 12,510
of acquisition intangibles
Amortisation of acquisition (255) - - - (255)
intangibles
Operating result 10,068 - 1,793 394 12,255
3. Tax expense
Tax recognised in the income statement
2007 2006
£'000 £'000
United Kingdom corporation tax effective rate 30.4% (17.3%) 4,703 2,118
Adjustment in respect of previous periods (203) -
Total current tax recognised in income statement 4,500 2,118
Deferred taxation charge:
- on defined benefit pension obligations 10 -
- on share-based payments 200 (50)
- on accelerated capital allowances 300 -
- on amortisation of acquisition intangibles (491) -
Total deferred taxation recognised in income statement 19 (50)
Total tax expense recognised in income statement 4,519 2,068
Deferred tax recognised directly in equity
Deferred taxation charge:
- on defined benefit pension obligations 25 -
- on share based payments (1,700) (550)
Total deferred taxation recognised in equity (1,675) (550)
4. Dividends
The following dividends were paid on ordinary shares in the year:
2007 2006
£'000 £'000
Final 2006 dividend of 2.40p (2006: final 2005 dividend of 1.90p) per share 1,743 1,125
Interim 2007 dividend of 1.10p (2006: interim 2006 dividend of 0.90p) per share 801 550
2,544 1,675
The proposed final dividend of 2.90p per share has not been included within the
Group financial statements as no obligation existed at 31 December 2007.
5. Earnings per share
Basic Diluted
2007 2006 2007 2006
p p p p
Earnings per share 15.65 17.05 15.11 15.99
Effect of amortisation of acquisition intangibles 2.15 0.35 2.07 0.33
Effect of full tax adjustment (0.81) (2.87) (0.78) (2.69)
Normalised pre amortisation earnings per share 16.99 14.53 16.40 13.63
A normalised earnings per share is disclosed in order to show performance
undistorted by amortisation of intangibles and the tax effect of share options.
The profit attributable to shareholders before and after adjustments for both
basic and diluted earnings per share is:
2007 2006
£'000 £'000
Profit attributable to shareholders 10,934 10,199
- amortisation of acquisition intangibles 1,500 255
- tax effect of share options (567) (1,765)
Adjusted profit attributable to shareholders 11,867 8,689
The calculation of earnings per share is based on a weighted average of ordinary
shares in issue during the year. The diluted earnings per share 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.
The additional normalised basic and diluted EPS use the same weighted average
number of shares as the basic and diluted EPS.
2007 2006
millions millions
Weighted average number of shares in issue 69.85 58.82
- dilutive effect of share options 2.51 4.97
Weighted average number of shares for calculating diluted earnings per share 72.36 63.79
6 Notes to consolidated cash flow statement
The following non operating cash flow adjustments have been made to the pre-tax
result for the year:
2007 2006
£'000 £'000
Depreciation 1,666 1,513
(Profit)/loss on disposal of property, plant and equipment (127) 21
Amortisation 1,555 255
Share-based payments 550 535
Finance income (222) (130)
Finance cost 345 118
Total 3,767 2,312
7. Publication of Non Statutory Accounts
The financial information set out in the announcement does not constitute the
Group's statutory accounts for the years ended 31 December 2007 or 2006. The
financial information for the year ended 31 December 2006 is derived from the
statutory accounts for that year which have been delivered to the Registrar of
Companies. The auditors reported on those accounts; their report was unqualified
and did not contain a statement under s.237(2) or (3) Companies Act 1985. The
Statutory accounts for the year ended 31 December 2007 have not yet been
delivered to the Registrar of Companies nor have the auditors reported on them.
They will be finalised on the basis of the information presented by the
Directors in this preliminary announcement.
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