17th Mar 2015 09:03
LONDON (Alliance News) - Mears Group PLC Tuesday reported higher pretax profit for 2014 as improved margins in the Morrison facilities business it bought in late 2012 offset an expected decline in revenue in that business.
The company has been working on improving margins in the Morrison business. It had previously flagged that revenue from Morrison would decline after the business saw a spike in non-recurring business just before Mears bought it, but said Tuesday that it thinks that the new level of revenue is sustainable going forward.
Mears, which provides services to the social housing and care sectors in the UK, reported a pretax profit of GBP29.7 million for 2014, up from GBP21.7 million in 2013, even though revenue from continuing operations declined to GBP838.7 million, from GBP865.6 million.
Its closely-watched pretax profit excluding exceptional costs and amortisation of acquisition intangibles rose to GBP42.0 million, from GBP39.3 million, which it said was a record level, as the operating margin in its social housing division improved to 4.8% from 4.5% due to improved margins being generated by Morrison contracts.
"We are delighted to see an increase in the operating margin to 4.8% (2013: 4.5%) driven primarily by the improving contract margins being generated from the ex-Morrison business; these margins are ahead of our original expectations. A relatively quiet period has allowed the group to progress with margin improvement initiatives whilst there have been fewer contract start-ups, which are typically loss-making during mobilisation," Mears said.
Revenue rose in its care division, and the operating margin was stable at 7.8%.
Mears raised its dividend for 2014 to 10.00 pence, from 8.80p in 2013, which it said closely tracked earnings growth and is a sign of its confidence in future prospects. The final dividend is 7.15p.
It said trading so far in 2015 remains in line with its expectations. Its order book at the end of 2014 was GBP3.3 billion, down from GBP3.8 billion a year earlier, but it said it has a solid pipeline of new opportunities. It also said it has visbility on 92% of consensus forecast revenue for 2015 and 82% for 2016.
Part of its confidence comes from its acquisition of Omega last October, a buy that added housing and property management services to its portfolio.
"I am excited by the medium term organic growth opportunities that will be forthcoming through the development and integration of the Omega business model. I know that our clients welcome our involvement in their challenge to professionalise and stabilise financially their housing management activities," Chairman Bob Holt said in a statement.
Mears also said it has been appointed preferred bidder by the UK government's Department for Communities & Local Government for the commercialisation of its planning portal.
Mears Group shares were down 0.1% at 444.75 pence Tuesday morning.
By Steve McGrath; [email protected]; @stevemcgrath1
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