TIDMMER
RNS Number : 3853A
Mears Group PLC
21 January 2020
21 January 2020
The information contained within this announcement is deemed by
the Company to constitute inside information stipulated under the
Market Abuse Regulation (EU) No 596/2014). Upon the publication of
this announcement via the Regulatory Information Service, this
inside information is now considered to be in the public
domain.
Mears Group PLC
("Mears" or "the Group" or "the Company")
Full Year Trading Update, planned disposal of standalone
Domiciliary Care activities
and Notice of Results
Mears (LSE: MER), the provider of support services to the UK
Housing sector, announces the following unaudited update for the
year ended 31 December 2019 ('FY2019') and also that it is at an
advanced stage in the sale and exit from its standalone Domiciliary
Care operations.
Overview
Mears expects to report underlying profit before tax on
continuing activities in line with Board expectations and with a
strong closing cash performance. The Board has reached an advanced
stage in the sale of the England and Wales Domiciliary Care
business and intends to dispose of its Scottish standalone
Domiciliary Care business in 2020. Both these activities will
accordingly be reported as discontinuing within the 2019
results.
The Board expects to report revenues, on continuing activities
which excludes the Group's standalone Domiciliary Care activities,
of more than GBP900m (2018 adjusted: GBP773m). The revenue growth
of around 16% is predominantly driven by the acquisition of MPS,
which delivered revenues of circa GBP115m.
The Group is expected to report a closing net debt of circa
GBP52m (2018: GBP65.9m) which reflects conversion of EBITDA to
operating cash in excess of 100%. Average daily net debt during
2019 was GBP114m, which was impacted by the working capital
absorbed during the mobilisation of the Asylum Accommodation and
Support Contract ('AASC').
The Group continues to target a pre-IFRS 16 average net debt to
EBITDA of 1x.
The order book, adjusted to reflect continuing activities only,
stands at GBP2.5bn (2018 adjusted: GBP3.0bn) which is lower due to
the timing of existing contracts coming up for renewal.
Asylum Accommodation and Support Contract
The Board is pleased to report that the AASC mobilisation has
been executed successfully and is now fully operational. The
contract has delivered revenues in the year of approximately
GBP45m, with annualised revenues expected to be in excess of
GBP100m. Mears made substantial changes to the contract's property
portfolio during the fourth quarter which better positions the
Group to improve returns whilst delivering a high quality service.
The Company is well placed to deliver further improvements in
2020.
Housing Development
As previously advised, the Group intends to reduce its exposure
to Development. The Company continues to withdraw from this
activity through a controlled unwinding of revenue whilst keeping
working capital under tight control.
Also, as previously indicated, the property acquisition
facility, which was introduced in 2017 to enable the Group to
acquire and build portfolios of properties prior to their disposal
to long term funding partners, was paid down and has been
cancelled.
Planned disposal of standalone Domiciliary Care activities
As indicated previously, the Group has considered opportunities
to accelerate an exit from standalone care. The Group has continued
to progress this since indicating this intention within the 2019
half year statement.
The Group announces that it is at an advanced stage in the sale
of the England and Wales Domiciliary Care business. These
activities generated revenues of circa GBP36.0m and a profit
contribution, after an allocation of support costs, of circa GBP1.7
million in 2019. The disposal will result in around 1,500 employees
leaving the Group across 18 branches.
In addition, during the fourth quarter of 2019, the Group
completed the closure of a small number of England-based branches,
delivering annual revenues of circa GBP21.0m and a low profit
contribution, which were not subject to the sale.
The Board expects to complete the disposal of its Scotland
Domiciliary Care business during 2020. The Scottish business
generated revenues of circa GBP22m and a profit contribution, after
an allocation of support costs, of circa GBP0.9m in 2019. It
employs around 1,000 people across 16 branches.
The standalone Domiciliary Care activities as a whole will be
reported as discontinuing in the 2019 results and the associated
intangible asset will be written down to reflect this. This
impairment review will be concluded before the 2019 results are
reported but it is estimated that the goodwill impairment will be
approximately GBP85.0m before other costs relating to the closure,
including the impairment of fixed assets and transaction related
legal costs. Full provision will be made for the closure and
disposal in the 2019 results. The impairment of goodwill and fixed
assets are non-cash items.
Importantly, as a result of the Domiciliary Care disposal, a
number of personnel from a range of support functions also transfer
with the business. This will provide the Group an opportunity to
further rationalise its support functions in due course.
The Extra Care and Supported Living activities remain core to
the Group's Housing with Care strategy and will be retained. In the
year ended 31 December 2019, revenues from these activities were
approximately GBP20m with an operating margin in excess of 5.0%.
They will be reported within the Housing segment and continuing
activities. The retention of these capabilities provide the Group
with a demonstrable competence in the management of vulnerable
people, and is expected to facilitate other value generating
opportunities in the future.
Capital Markets Event and Notice of Results
The Group is today hosting a number of institutional investors
with a presentation on the Asylum Accommodation and Support
Contract. The presentation will be made available on the Company's
website.
Mears will issue its full year results for FY2019 on Tuesday 24
March 2020.
The numbers in this update remain subject to final close
procedures and the full year audit.
David Miles, Chief Executive Officer of the Group,
commented:
"2019 was a very busy year for Mears. A significant amount of
time and focused effort has been directed towards the integration
of MPS and the mobilisation of the asylum housing contract. I am
confident that we are well placed to benefit from this upfront
investment in our core business.
"Our exit from standalone Domiciliary Care will enable us to
focus our efforts where we can deliver superior returns for
shareholders. In line with this, we also continue to make progress
unwinding our exposure to Development activities.
"We continue to see a good pipeline of opportunities providing
Housing with Care, in the majority of cases to provide, manage and
maintain accommodation and to care for the service users.
"Our deep understanding of the challenges faced by service users
and proven ability to support vulnerable customers, many of whom
have a care requirement, has been central to our success in
Housing, and most recently in securing the asylum housing contract.
This bespoke skillset is key to our future success."
For further information, contact:
Mears Group PLC
David Miles, Chief Executive Tel: +44(0)7778 220 185
Officer
Andrew Smith, Finance Director Tel: +44(0)7712 866 461
Alan Long, Executive Director Tel: +44(0)7979 966 453
www.mearsgroup.co.uk
Buchanan
Mark Court/Charlotte Slater Tel: +44(0)20 7466 5000
mears@buchanan.uk.com
About Mears
Mears currently employs around 9,000 people and provides
services in every region of the UK. In partnership with our Housing
clients, we maintain, repair and upgrade the homes of hundreds of
thousands of people in communities from remote rural villages to
large inner city estates. Mears has extended its activities to
provide broader housing solutions to solve the challenge posed by
the lack of affordable housing and to provide accommodation and
support for the most vulnerable. Following the disposal of the
Group's standalone Domiciliary Care activities, the employee number
will reduce to around 6,500.
We focus on long-term outcomes for people rather than short-term
solutions, and invest in innovations that have a positive impact on
people's quality of life and on their communities' social, economic
and environmental wellbeing. Our innovative approaches and market
leading positions are intended to create value for our customers
and the people they serve while also driving sustainable financial
returns for our providers of capital, especially our
shareholders.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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