The housing division at Mears (MER) is beginning to find its feet again after the tragic events at Grenfell Tower, which led clients to reassess their fire protection measures and compliance, either delaying or altering spending decisions. Those flows are starting to return, so even though the second half of the year is typically stronger, first-half revenues were up on the second half of 2017.
Excluding the impact of housing development projects, an increase of management and maintenance in the sales mix pushed cash conversion up 12 percentage points to 84 per cent. Maintenance remains the biggest contributor, within housing bringing in 78 per cent of revenues. Management have been working to decrease dependency on discretionary work, and now estimates just 5 per cent of maintenance spend is discretionary, compared with 15 per cent two years ago.
The smaller care division, once a sore point for the group, performed solidly in the period, with top-line growth sacrificed in favour of margin expansion, evidenced by an 80 basis point increase in the operating margin to 3.1 per cent. Management is working towards a targeted rate between 5.2 and 5.8 per cent.
Investec is forecasting adjusted pre tax profit of £43.1m, giving EPS of 32.8p in 2018 (from £37.1m and 28p in 2017).
| MEARS (MER) | ||||
| ORD PRICE: | 348p | MARKET VALUE: | £361m | |
| TOUCH: | 348-352p | 12-MONTH HIGH: | 512p | LOW: 300p |
| DIVIDEND YIELD: | 3.5% | PE RATIO: | 17 | |
| NET ASSET VALUE: | 180p* | NET DEBT: | 40% | |
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2017 | 471 | 12.7 | 9.90 | 3.45 |
| 2018 | 435 | 12.9 | 10.5 | 3.55 |
| % change | -8 | +1 | +6 | +3 |
| Ex-div: | 18 Oct | |||
| Payment: | 8 Nov | |||
| *Includes intangible assets of £209m, or 201p a share | ||||
