Mears Group PLC, the provider of services to the Housing and Care sectors in the UK, announces its financial results for the year ended 31 December 2017.
Group revenue of £900.2m (2016: £940.1m), impacted by both delays to the timing of planned workloads following the tragic events at Grenfell Tower and a slow period in securing new contract revenues in Housing, combined with the planned rationalisation of Care contracts.
Group profit before tax and before amortisation of acquisition intangibles reduced to £37.1m (2016: £40.1m), with the diluted EPS reducing by 8% to 28.05p (2016: 30.36p).
Housing operating margins reduced to 5.2% (2016: 5.6%), reflecting the revenue reduction and a resulting lower overhead recovery.
Service quality remains our key differentiator; the proportion of customers rating our service as ‘excellent’ showed further improvement at 92% (2016: 91%).
Care revenue decreased by 12% to £134.1m (2016: £152.6m), reflecting the restructuring of the Care contract portfolio following the closure of branches accounting for around 27% of Care revenues. The restructuring is now complete and our remaining Care contracts have a much improved mix of longevity, certainty of spend and price.
The Care division returned to profit as planned, delivering an operating profit for the full year of £0.5m (2016: loss £1.2m), representing an operating margin for the second half of 2.3%.
Exceptional loss of £16.5m reported in discontinued activities relating to the full provision against performance guarantees in the legacy M&E division.
EBITDA to cash conversion of 61% (2016: 70%) is below our historical norm reflecting the changing sales mix.
Reported net debt position of £25.8m (2016: £12.4m) at the year end. The average net debt over the year was £96.4m (2016: £85.0m), in part reflecting the changing sales mix and after funding of both the deferred consideration on earlier acquisitions and the cash outflow included within the loss on discontinued activities.
New separate debt facility of £30m to fund short-term purchase of properties as part of the Group’s development of longer-term homelessness solutions.
Total dividend increased by 3% to 12.00p (2016: 11.70p), reflecting the Board’s confidence in the underlying performance and the long term prospects of the Group.
Order book at £2.6 billion (2016: £3.1 billion). The current bidding pipeline is in excess of £2 billion for 2018, which is well in excess of normal bidding levels. The strategic evolution of Mears means greater access to opportunities previously out of our reach.
Commenting, David Miles, Chief Executive Officer, Mears, said:
“Whilst 2017 proved to be a challenging year, we have made solid operational progress. The decline in housing revenues following the tragic events at Grenfell Tower has stabilised although there still remains some uncertainty as to the speed at which these revenues will recover.
“The performance of the Care division has been a highlight, returning to profitability as planned following a period of restructuring, putting the Care division on a stable footing.
“On a positive note, the current pipeline of opportunities for Mears has never been greater. We anticipate competitively bidding contract values in excess of £2 billion during the course of 2018. The strategic evolution of our business means we are gaining access to opportunities that previously would have been out of our reach. While the Board has decided to adopt a more conservative approach in how it guides the market on its expectations, the Mears operation is performing very well and I am encouraged that our excellent service delivery is putting us in a good position to secure new opportunities.”
A presentation for analysts will be held at 9.00 a.m. today at the offices of Buchanan, 107 Cheapside, London, EC2V 6DN.
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