Housing services provider Mears (MER) swung to a £1m adjusted operating loss in the six months to 30 June, down from a £23m profit a year earlier. This came as revenue from its maintenance activities dropped by almost a fifth to £262m. While this work is typically non-discretionary, the Covid-19 pandemic saw local authorities and housing associations defer projects and limit contracts to an emergency services only, reducing volumes to around 15 per cent of normal levels at the height of lockdown.
Pandemic disruption also slowed the tendering process for new maintenance contracts, although Mears found that existing agreements were extended rather than being put out for new bids. This, along with £120m worth of new contracts secured, increased the order book by £200m from the start of the year to £2.7bn.
The housing management business held up better during the first half thanks to the ramp up of the UK Asylum Accommodation and Support Contract (AASC). The division’s revenue surged by more than 50 per cent to £136m.
Excluding lease liabilities, net debt has jumped by over a fifth since the December year-end to £62m. Having stress tested a worst-case scenario – whereby there is a second lockdown in the fourth quarter – Mears believes it should have sufficient liquidity but could breach its lending covenants at the December test date.
Liberum anticipates £11m of adjusted operating profit for group for the full year, rising to £40m in 2021.
| MEARS (MER) | ||||
| ORD PRICE: | 126p | MARKET VALUE: | £ 139m | |
| TOUCH: | 125-127p | 12-MONTH HIGH: | 323p | LOW: 115p |
| DIVIDEND YIELD: | NIL | PE RATIO: | 115 | |
| NET ASSET VALUE: | 89p* | NET DEBT: | £331m | |
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2019 | 439 | 12.1 | 8.82 | 3.65 |
| 2020 | 407 | -11.5 | -8.98 | nil |
| % change | -7 | - | - | - |
| Ex-div: | na | |||
| Payment: | na | |||
| *Includes £147m in intangible assets or 133p a share | ||||
