The tragedy at Grenfell Tower last year prompted many companies and organisations to reassess their fire safety and compliance, in an effort to reduce the risk of a similar fire happening again. But the disaster effectively resulted in a hiatus in planned maintenance work for housing services group Mears (MER), knocking £40m off revenues in 2017. This fed through to the division’s operating margin, which contracted by 40 basis points to 5.2 per cent.
At first glance, the care division looks to be in an even worse position, with revenues down 12 per cent through 2017. However, this was due to a comprehensive restructuring, which resulted in the closure of branches that accounted for 27 per cent of segmental revenues. These branches were essentially lower-margin outlets, so the division eventually returned to profit in the year, earning £0.5m against losses of £1.2m in 2016.
A 16 per cent decline in the order book contrasts with significant growth in the pipeline to more than £2bn. The company’s win rate declined to 16 per cent for housing and 59 per cent for care, from 39 per cent and 74 per cent respectively, but management said the rate varied widely between new work and re-bids.
Analysts at Peel Hunt lowered their forecasts and now expect adjusted pre-tax profit of £43m in 2018, giving EPS of 32.4p (up from £37.1m and 28p in 2017).
| MEARS (MER) | ||||
| ORD PRICE: | 355p | MARKET VALUE: | £368m | |
| TOUCH: | 355-358p | 12-MONTH HIGH: | 534p | LOW: 355p |
| DIVIDEND YIELD: | 3.4% | PE RATIO: | 18 | |
| NET ASSET VALUE: | 202p* | NET DEBT: | 12% | |
| Year to 31 Dec | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2013 | 866 | 21.7 | -1.2 | 8.8 |
| 2014 | 839 | 29.7 | 25.0 | 10.0 |
| 2015 | 881 | 25.9 | 20.3 | 11.0 |
| 2016 | 940 | 29.4 | 23.5 | 11.7 |
| 2017 | 900 | 26.5 | 20.3 | 12.0 |
| % change | -4 | -10 | -14 | +3 |
| Ex-div: | 14 Jul | |||
| Payment: | 5 Jul | |||
| *Includes intangible assets of £211m, or 204p a share | ||||
