Trading Update

RNS Number : 6847T

Mears Group PLC

22 July 2020

 

 

Mears Group PLC

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

Trading update

 

Mears Group PLC, the leading provider of services to the Housing sector in the UK, today issues an unaudited trading update ahead of its interim results for the six months to 30 June 2020.

During the public health emergency created by Covid-19, the Group's primary focus has been and remains the safety and well-being of customers and staff and to ensure the continuity of service as far as possible.  The Group continues to adapt to new working practices.

Mears has successfully adapted to address the current challenges. Importantly, the Group secured interim arrangements with the majority of maintenance clients which substantially reduce its financial risk.  For a number of customer relationships, amounting to around five per cent of maintenance revenues, where the Group could not sufficiently mitigate the risk, the Group closed those operations .  In Management and Care, despite the challenges in continuing to support vulnerable service users with essential services, there was no material reduction in demand.

Mears expects to report revenues on continuing activities* for the first half year of circa £405m (2019: continuing revenues £439m) including a reduction in revenue from maintenance activities to £250m (2019: £323m) which was compensated in part by the new Asylum Accommodation and Support Contracts (AASC). As previously indicated, the Group incurred a modest monthly trading loss from March through to June, and expects to report a loss before tax on continuing activities, before the amortisation of acquisition intangibles, of circa £6.0m for the first half (2019: profit £16.7m), which includes the costs and inefficiencies associated with Covid-19.

The Group expects to see a recovery in activity levels during the second half of the year, assuming that infection levels remain relatively low, as working arrangements in the core maintenance business progressively return towards more normal levels by the end of the year. The speed of recovery will vary by contract.

Mears originally expected this year to be a particularly important period for contract renewals, with around one-third of the Group's maintenance business, by value, coming up for re-bid. The impact of Covid-19 has resulted in a number of these existing contracts being extended, with tender processes deferred in the short-term.  Similarly, a number of new bidding opportunities have seen delays. The Group therefore expects new order intake for the current year to be low.

The Group entered 2020 with an underlying average daily net debt of £126m. Cash performance has been good, reflecting clients' commitment to pay efficiently during the lockdown period and a strong focus by the Group on maintaining tight control. Average daily net debt has improved over the course of the first half year with the daily average net debt reducing to £121.3m. The Group was fully compliant with its banking covenants as at 30 June 2020.

As previously reported, the Group considered it prudent to increase its banking facilities to secure additional headroom given both the unique and uncertain times.  The Company increased facilities from £170.0m to £192.7m, with the additional headroom being available through a 364-day arrangement. The Group has not needed to use nor does it anticipate the need to use this additional headroom.

In January 2020, Mears announced that it had completed the disposal of its England and Wales Domiciliary Care business and indicated its intention to complete the disposal of its Scotland Domiciliary Care business during the current year. This remains the goal. In the meantime, the focus has been directed towards service delivery, whilst ensuring the s afety and well-being of our vulnerable service users and our staff. The winding down, over a sensible time frame, of the Group's Development activities continues.

The Board continues to evaluate Mears' portfolio of businesses, and where assets are seen as peripheral to the Group's core strategy, actions are being taken in order to deliver the best financial return for shareholders, and accelerate the Board's stated desire to see a reduction in debt levels.

Whilst Covid-19 will inevitably have a lasting impact on the Company, it has allowed Mears to adopt new innovative ways of working which enable more remote working and greater use of hubs to coordinate services across several branches. . Action has been taken to exit contracts which, both pre and during Covid, the Group has identified as not fitting the criteria key to Mears way of working. As such, the Group will be completing restructuring through the second half year that will lead to some reduction in staff numbers.  These developments are not wholly a result of Covid but also through the ongoing drive for continuous improvement and ensuring the Group's longer term success.

Mears will announce its interim results on Tuesday 18 August 2020.

*continuing activities exclude standalone Domiciliary Care activities

Certain information contained in this announcement would have constituted inside information (as defined by Article 7 of Regulation (EU) No 596/2014) ("MAR") prior to its release as part of this announcement and is disclosed in accordance with the Company's obligations under Article 17 of those Regulations.

David Miles, Chief Executive Officer of the Group, commented:

"The Group has made excellent progress and is continuing to take the necessary steps to address current challenges. Whilst it has been essential for the Group to maintain a sharp focus on short term operational and financial management, it is pleasing that the Group has also taken positive and considered actions during this period to drive improvements which will deliver better value to the business over the longer-term and that will ensure that the Group is stronger and well positioned once the UK sees a return towards normality.

I am very confident as to the financial stability and the long-term wellbeing of the Group. I am extremely proud of the professionalism and hard work shown by the Mears team in the most challenging of circumstances."

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]
www.mearsgroup.co.uk

About Mears

Mears currently employs around 7,500 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.

 

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