Mears reports £100m-worth of new awards and strong cash inflow

Mears has issued a trading update which confirms £100m-worth of new contract wins since it last published information on the Stock Exchange – which was as recently as 10 March.

The group’s latest interim management statement for the period from 1 January to date also highlights:

• cash conversion is strong with continued improvement
• integration of the 3C acquisition is on track.

Bob Holt, chairman, said: “It is particularly pleasing that the group's cash conversion is strong following the effects of substantial revenue growth experienced in 2008 and the initial cash investment in mobilising a number of larger contracts.

Holt reported on the position with 3C Asset Management by commenting: “The integration of 3C, acquired in January, into the Mears Social Housing division has proceeded well.

“As announced at the time of the acquisition, the business had generated material losses in the previous three years’ trading and Mears expected to make improvements.

“The level of contract retention since completing the acquisition has exceeded the group's initial targets and is a credit to the operational team.”

Since being acquired by Mears, the division has been awarded a two-year contract extension with Accord Housing Association and Ashram Housing Association as well as incorporating a third and new revenue stream with Caldmore Housing Association.

All three Housing Associations are members of the Accord Housing Group and will deliver forecast revenues of £7m over the two-year term commencing in April 2009.

In line with the board's expectations and after charging restructuring costs, 3C is expected to record a loss in H1 (the first half of 2009) but is anticipated to be in profit in H2.

As a result, overall performance for the year anticipated to be around breakeven.

Social Housing

The bid pipeline remains strong and Mears “continues to be seen as a preferred supplier of services to a number of large buyers of its full range of services”. 

Domiciliary Care

Careforce continues to build a presence across a growing geographical area.

Mechanical and Electrical (M&E)

The M&E division is on track in the current year despite the economic climate.

Overall outlook

Mears has secured revenues for the current year in excess of 92% of consensus forecast revenue and the management team has been extremely successful in building the Group's forward order book which continues to grow and currently stands at in excess of £1.6bn.

Mears' two growth markets, Social Housing and Domiciliary Care, which account for over 80% of group revenues, are defensive sectors where spend is predominantly non-discretionary and cash generation is robust.

Holt said: “Given the group's public sector client base, Mears is substantially immune to bad debts and our customer work patterns and payment terms have remained on schedule.”