News Column

Mears Group Interim Profit Bolstered By Care Division Acquisition

August 19, 2014

Anthony Tshibangu

LONDON (Alliance News) - Social housing repairs and maintenance business Mears Group PLC Tuesday reported an increase in profit for the first half, reflecting new contract wins for the care division.

Gloucester-based Mears posted pretax profit of GBP18.7 million for the six months ended June 30, up from GBP15.5 million a year earlier, even though total group revenue dipped 2.5% to GBP428.1 million from GBP439.1 million.

The company said its care division made gains, with revenue up 4.5% to GBP63.2 million from GBP60.5 million a year earlier, while operating margin was maintained at 7.8%.

Mears said this growth includes a full six months contribution from Independent Living Services, which was acquired in April 2013, without which the underlying business would have reported a reduction in revenues.

The company said it enjoyed its most successful period to date in terms of new contracts for the care division.

However, the social housing division saw revenue fall to GBP364.9 million from GBP378.6 million a year earlier. Mears has attempted to grow the social housing division through the acquisition of Morrison Facilities Services Ltd.

Morrison, which delivers services to social housing clients in the UK, was acquired by Mears in 2012 for GBP24 million. At the time, Morrison was a loss-making business, but Mears said it was confident that it could turn its rival firm around.

As stated in the company full-year results in March, revenue for Morrison in 2013 benefited from a non-recurring spike in revenue in the period immediately following its acquisition. After stripping out the non-recurring revenue from Morrison, organic growth in social housing was 3% in the first half 2014, Mears said.

Mears said it continues to see an increasing number of new in-sourcing contracts which provide an opportunity to deliver higher margins with a low revenue and working capital requirement.

The company now is hoping to enhance the social housing division through a housing management services unit. The aim of the business will be to provide housing and property management services to public sector customers.

Looking ahead, Mears said expects its core social housing business to continue to growth through further contract wins. The company also said it will make regional in-fill acquisitions where appropriate to add to the unit.

"We have had a good first half year and, notwithstanding the temporary delays in tendering new opportunities, the board expects earnings for the full year to be in line with its expectations," Chief Executive David Miles said in a statement.

On the back of its performance Mears increased its interim dividend to 2.85 pence from 2.50 pence.

Mears Group shares were quoted down 0.9% at 489.00 pence Tuesday morning.

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Source: Alliance News

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