Pre-Close Trading Update

RNS Number : 5320V

Mears Group PLC

15 January 2013

 



15 January 2013

Mears Group PLC

("Mears" or "the Group")

Pre-Close Trading Update

Continued Strong Trading and Increased Order Book to £3.8bn

Trading Statement

Mears anticipates reporting results for the full year to 31 December 2012 in line with management expectations, coupled with very strong cash performance.

·      Solid trading has continued in both core divisions of Social Housing and Care, despite the record number of mobilisations during the year and a significant amount of management time devoted to the Morrison acquisition.

·      New contract successes, together with the acquisition of Morrison, have increased the Group's order book from £2.6 billion to £3.8 billion providing forward visibility on 88% of consensus forecast revenues for 2013 (including visibility of Social Housing revenues of 94%). Our bid pipeline remains robust at in excess of £3.0 billion.

·      The Group's non-core M&E business experienced difficult trading conditions, particularly in the final quarter, and is expected to show an operating loss for the 2012 year.

The Group will be announcing its preliminary results for the year ended 31 December 2012 on Tuesday, 19 March 2013.

Acquisition of Morrison Facilities Services ('Morrison')

On 8 November 2012 the Group announced the acquisition of Morrison for a consideration of £24.0 million. Mears had identified significant strategic and operational synergy benefits from combining with Morrison. Whilst Morrison is currently loss making, Mears has an excellent track record in terms of service delivery and profitability and a strong track record of turning around, integrating and extracting substantial value from acquired businesses. The Group is pleased with the early progress made since the acquisition and remains confident in the returns this business will generate following a period of restructuring which is already underway.

Mears was aware in the period leading up to completion of the acquisition that a number of Morrison contracts were encountering significant service delivery failures and poor client relationships.  Mears is committed to investing in these long term opportunities and the primary focus since completion has been to put structure and process in place to deliver excellent customer service.  The response from Morrison clients since the acquisition has been positive and no contract losses of any materiality have been experienced, which is ahead of management's acquisition plan.

The trading performance of Morrison in the period between completion and 31 December 2012 is in line with management expectations.

Social Housing contract awards

The Group has continued to experience significant success in tendering new contract opportunities. In Social Housing we have won 32% by value of all contracts bid, with a total value in excess of £380 million. The most recent awards include:

United Welsh

A substantial strategic partnership with United Welsh for an initial period of 8 years with an option to extend for a further 7 years, valued at up to £145 million over the fifteen year period.  The contract includes a wide range of services to the housing stock and estates covering eleven Local Authority regions in Wales. Services provided include responsive repairs, voids, gas servicing and breakdown, fire servicing and installation, grounds maintenance, cleaning and estate services.    The contract is due to commence in April 2013 and represents the Group's second significant contract award in Wales over the last twelve months.

Richmond Housing Partnership

A contract with Richmond Housing Partnership (RHP) to provide responsive repairs, gas repairs and servicing, voids repairs and planned maintenance services to circa 8,700 properties.    This award is particularly pleasing as this was the first material partnering awarded to the Group back in 2001 and demonstrates success in renewing contracts with existing clients.  The contract, which is for an initial period of 5 year period with an option to extend for a further 5 years, is valued at £80 million and commences in April 2013.

Domiciliary Care contract awards

In Domiciliary Care, new contract bidding success rate (by value) is 57% of all contracts bid amounting to a total value of £63 million, including:

Cambridgeshire County Council

A strategic partnership to work alongside the Council to find new innovative ways to improve services. The contract term is five years with a potential for a further two year extension. Over 30 providers are being removed from the Cambridgeshire Framework as part of this tender. Annual revenues with Cambridgeshire are expected to grow from £2m to £3m, with further upside potential. This has been driven through an increase in hours in core domiciliary work, as well as through working in partnership with the in house team in providing re-ablement services, aimed at supporting the independence of service users.

Other recent care wins include a 4 year contact with the London Borough of Havering valued at £2.8m and a 4 year contract with the London Borough of Sutton estimated to be worth £1.6m.

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

"2012 has been a transformational year for the Group. I am very encouraged by the progress made in integrating the Morrison acquisition and the early indications are encouraging.

"I believe that the opportunities currently available within the Social Housing sector are stronger today than at any time since I joined the Group seventeen years ago.

"The Care market is going through a period of significant change and I am proud of the robust business we have established. We will continue to be at the forefront of change in the sector in 2013. Whilst I am disappointed that we have not completed any acquisitions in Care in 2012, I am encouraged at the high value now being placed on comparable care assets.

"I am delighted that we continue to achieve high levels of service delivery and customer satisfaction. The quality of our service delivery continues to be our key differentiator and underpins our new contract bidding success in both our core growth sectors."

-ENDS-

For further information, contact:

Mears
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]
Gable Communications              John Bick/Justine James           [e-mail]	Tel: [phone] Tel: [phone]

Notes for editors

Mears is a leading social housing repairs and maintenance service provider to Local Authorities and Registered Social Landlords in the UK and 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 15% of the UK social housing stock. Mears also provides over 160,000 hours of care to 20,000 service users each week.  www.mearsgroup.co.uk

 

END

 

 

TSTZMGMMRDLGFZM