28th Jun 2016 08:52
LONDON (Alliance News) - Mears Group PLC on Tuesday said it expects its interim results to be in line with management expectations as its Housing division performed well, but market conditions for its Care division continued to be challenging.
The social housing and care services provider said it has now achieved 97% of visibility of the GBP973.0 million consensus revenue forecast for its full year, and 85% visibility of the GBP1.03 billion consensus revenue forecast for 2017.
Mears said it has seen a strong performance in its Housing division for the six months to end June 30, with the division accounting for around 83% of group revenue.
Mears said the period had been "particularly busy" in terms of new contract mobilisations for the division, having formed a new Regeneration partnership with Milton Keynes Council, mobilised in April and valued at GBP250.0 million over five years. It also mobilised a Key Worker Housing contract throughout the UK, which it said is valued at GBP195.0 million over the initial three-year term.
Mears noted that it is pursuing a "solid pipeline of new bidding opportunities" for the Housing division, with a number resembling those from Milton Keynes award.
However, the Care division, which accounts for around 17% of Mears revenue, continued to find the current market conditions challenging, Mears said, pointing to the impact of the National Living Wage, which came into force on April 1.
"The dialogue with clients around National Living Wage has further emphasised the significant disparity between those clients who recognise that more innovative, outcome-based working practices are key to sustainability and, at the other end of the scale, those commissioners of care whose key driver remains the purchase of care services at the lowest hourly rate," Mears said in a statement.
Mears said that, as such, it has commenced a detailed contract-level review which will conclude over the coming weeks, with the goal of a smaller portfolio of higher-quality contracts.
Mears added it has been notified by Wiltshire Council of its intention to award Mears zones in the North and West regions of the county, where it will be responsible for organising and delivering personal care services. This will make Mears the "prime provider for the significant majority of work across the county, which will double the overall value of the work done by Mears".
"We anticipated the increasingly complex challenges that would face our Housing clients and we broadened our offering accordingly. However, I must say that the speed of industry change and growth in new style opportunities has exceeded my expectations. Our early move into Housing Management has put us in a strong position to benefit from a healthy and wider pipeline of opportunities. We continue to develop our offerings to strengthen our competitive position," Chief Executive Davis Miles said.
"We continue to find the Care market challenging, but we are pleased with progress made in our key partnering contracts. I remain confident that we have the right strategy and that Mears is best placed to take advantage of industry evolution as it happens. In the short-term we will look to place greater emphasis on maintaining a portfolio of good quality contracts at clear, sustainable margins," Miles added.
Mears will release its interim results on August 16.
Shares in Mears were up 1.2% at 349.75 pence on Tuesday.
By Hannah Boland; [email protected]; @Hannaheboland
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