Interim Management Statement

RNS Number : 2025S

Mears Group PLC

05 November 2013

 



5 November 2013

Mears Group PLC

("Mears" or "the Group")

Interim Management Statement

Mears today releases its Interim Management Statement ("IMS") for the period from 1 July 2013 to date.

Mears continues to deliver solid trading across both core divisions in line with management expectations.

Mears also separately announced today that it has agreed, subject to shareholder approval, to sell its Haydon M&E business to an acquisition vehicle owned and controlled by key management personnel of Haydon. Since 1 July 2013, the M&E business has continued to report trading losses.

The Group has experienced strong spends from its existing customer base and has full visibility of the £900 million consensus revenue forecast for 2013 and in excess of 87% visibility of the £915 million consensus revenue forecast for 2014 (excluding revenues from the M&E activities ).

The order book stands at £3.7 billion and the bid pipeline remains at £3.0 billion.

Business Development

Since 1 July 2013, Mears has secured new contracts from its traditional social housing bidding pipeline worth £75 million, taking the order intake for the current year to in excess of £300 million and representing a bidding success rate of 33% (by value) of all contracts bid during the period. We remain on target to tender for £1.7 billion of new contract opportunities in 2013 which will underpin new contract news flow between now and April 2014.

In addition, we have continued to build on our Mears Energy platform to benefit from the carbon reduction and fuel poverty tender opportunities.  Mears Energy provides an end to end service, assisting clients with access to funding, survey stock, installation measures and aftercare and maintenance programmes.  Since 1 July 2013, we have been awarded contracts valued at £20 million taking our order intake for the current year to £25 million.

In Care, since 1 July 2013, we have secured new contracts worth £40 million, taking our order intake for the current year to in excess of £60 million, a bidding success rate of 66% (by value) of all contracts bid. The new contract awards include a potentially market transformational new award with Wiltshire County Council, described in more detail below, with an estimated value of over £20 million over a term of 5 years.

Integration of Morrison Facilities Services Limited

Mears acquired Morrison in November 2012 and reported a positive update within its interim results statement in respect of the speed of the turnaround. Since 1 July 2013, excellent progress has been made in respect of the migration of Morrison to the Mears IT systems. It is anticipated that the migrations will be substantially complete by the end of the year.  Improvements to both service delivery and financial performance continue to be made at a local level which will deliver benefits in future periods.

The performance of Morrison remains in line with management expectations. Having delivered a break-even result for the half-year (before the exceptional cost of integration), Morrison remains on course to deliver a positive contribution to Group profits in respect of the full year.

Acquisition of ILS Group Limited

In April 2013, Mears announced the acquisition of ILS. One of the principal attractions of ILS was its greater proportion of work in higher acuity services, which are delivered through the Nurseplus brand. These activities have continued to make strong progress since 1 July 2013 with weekly volume now in excess of 3,000 hours per week, an increase of 20% since acquisition.

Developing the Care market - Wiltshire County Council ('Wiltshire')

Wiltshire County Council has entered into an innovative partnership with Mears to deliver care services across six areas in the south of the county as part of the Council's ground-breaking Help to Live at Home service.  The contract, which mobilised in September 2013 and runs for five years with a possible two year extension, has a total potential value of £28 million (including extension).

All work commissioned by the Council in the locality will be directed to Mears. In a move away from traditional domiciliary care contracts, Mears will not be paid on a task and time basis; instead, the Council have adopted a payment by results model which pays providers on meeting desired outcomes that have been agreed directly with service users.

In order to achieve the outcomes, Mears will be harnessing and making the best use of a full range of technology and resources which is typically beyond the scope of a traditional domiciliary care contract.  This includes aids and adaptations, telecare, community equipment as well as looking to create partnerships with community groups and charities.

The length and stability of the contract also enables providers to move away from zero hours contracts and actively encourages career development for care workers. We hope to extend this model to other partners in due course.

Financial position

Mears continues to benefit from a strong balance sheet. The efficiency with which the Group manages working capital continues to be a cornerstone of the business.The Group's revolving credit facility of £120 million is committed until July 2016 and provides sufficient headroom above our current working capital requirements.

Commenting, David Miles, Chief Executive, Mears Group, said:

"I am delighted with the progress Mears has made in recent months. Group revenue visibility, order book and pipeline remain strong.

"The award of the Wiltshire Care contract is of significant strategic importance and supports our previously communicated views on how the Care market would mature and professionalise over time. Wiltshire has adopted a truly innovative approach to social care delivery.  We aim to deliver quality care in the home with the best possible levels of customer satisfaction.  The contract will also allow Mears to innovate and invest further in the workforce.

I am pleased to have reached an agreement for the sale of Haydon, our M&E division. Haydon played a significant role in the growth and maturity of Mears over the last 14 years. I would like to thank the Haydon management team and wish them future success. The activities of Haydon had become non-core and the transaction is good for Mears and will now allow the Group to focus solely on growing its core operating divisions."

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About Mears

www.mearsgroup.co.uk

(tickers: MER.L MER.LN  MER.PL)

Mears is a leading social housing repairs and maintenance service provider to Local Authorities and Registered Social Landlords in the UK and now commands a leading position in the UK Local Authorities' outsourced care market, providing personal care services to people in their own homes.

Mears employs in excess of 15,000 people and provides maintenance and repairs services to in excess of 10% of the UK social housing stock. Mears also provides circa 200,000 hours of care to over 20,000 service users each week.

Enquiries:
Mears Group PLC
David Miles, Chief Executive Andrew Smith, Finance Director Bob Holt, Chairman	Tel: [phone] Tel: [phone] Tel: [phone]
Joint Broker - Investec Keith Anderson/Daniel Adams	Tel: [phone]
Joint Broker - Canaccord Genuity Piers Coombs / Lucy Tilley	Tel: [phone]

 

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