13th Aug 2019 09:34
(Alliance News) - Housing and care sector services provider Mears Group PLC on Tuesday reported a drop in interim profit, though said the result met expectations.
Pretax profit for the six months to June was GBP12.5 million, 3% lower than a year before, and the adjusted figure declined by 10% to GBP17.1 million.
Mears' revenue rose by 10% to GBP480.8 million, and the order book as of the end of June was GBP3.0 billion, 43% higher than a year before after a "successful period of bidding wins".
Despite the decline in profit, Mears has increased the interim dividend by 3% to 3.65 pence a share.
Revenue growth was mainly driven by the acquisition of Mitie Group PLC's social housing business, MPS, for GBP35 million, completed in November.
This newly acquired business has, however, led to some initial margin dilution, while the scaling back of activity in the Development business has also led to a fall in profit.
"I am satisfied with the progress made in the first half of 2019. Our financial and market position is robust as we seek to build on existing strengths and take advantage of new opportunities. The board is confident of making further progress for the full year and over the longer-term," said Chief Executive David Miles.
"A significant amount of time and focused effort has been directed towards the integration of MPS and the mobilisation of the asylum accommodation & support services contract. I am confident the group is well placed to benefit from this up-front investment."
"The group will accelerate the evolution of its Care business, placing increasing emphasis on Housing with Care. We will also continue the unwinding of the working capital absorbed within Development activities, reducing the group's indebtedness whilst ensuring that we contribute to the housing development needs of our customers," he continued.
Average daily net debt was GBP110.7 million, slightly lower than the GBP112.1 million a year before. In March, shareholders demanded the firm take steps to reduce debt, with the 2018-end figure worse than expected.
Maintenance, by far Mears's largest segment, increased revenue by 10% to GBP323.3 million, helped by MPS. The core business' revenue fell due to the exit from some smaller contracts.
Management revenue grew 16% to GBP78.7 million, due to the new AASC contract, while Development revenue almost doubled to GBP27.7 million despite a plan to reduce activity. The rise in revenue was due to the phasing of existing contracts.
Lastly, Mears's Care business reported a drop in revenue of 15%, to GBP51.0 million, though profit still rose as the company focuses on margins over revenue growth.
"The board remains confident of delivering its expectations for the full year, in line with previous guidance," said CEO Miles.
Shares were down 0.7% on Tuesday at a price of 269.00p apiece.
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