Mears expects to swing to small full-year profit

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Mears Group PLC (LON:MER) has said it expects to swing to a small full-year profit before tax after posting losses of GBP5mln for the first half of 2020 and of GBP87mln for full-year 2019.


The housing solutions provider said total revenues for the year to December 31, 2020, are expected to come in at GBP825mln, down from GBP982mln a year ago.


READ: Mears Group to sell TerraQuest business for up to GBP72mln


The group’s average daily net debt position for the five months to November 30, 2020, was GBP88mln, and it also benefited from a GBP16mln VAT deferral for the quarter to last March.


After the TerraQuest Solutions sale, where buyer Apse Capital funds will issue GBP61.8mln of cash, is completed, the firm said it expects to be in a net cash positive at year end.


In the company’s social housing maintenance contracts, work volumes strengthened steadily through the third quarter reaching 79% in October, as clients cautiously extended the scope of works permissible in people’s homes but coronavirus safety protocols continued to reduce operative productivity.


However, the group said it did not see a significant impact on work volumes in November during the second national lockdown, while the central government contracts continued to perform strongly through the second half.


Mears said 2021 should see it transition back to more normalised levels, although near-term forecasting remains difficult due to coronavirus restrictions.


In the central case, work volumes in maintenance are expected to remain at or near current levels of around 80% until spring, while continued coronavirus-related restrictions are likely to keep user numbers elevated within the Central Government contracts before returning to more normalised levels in the second half of 2021.


“This statement should reassure investors that the strategic actions leave Mears better positioned to deliver superior long-term cash flows,” analysts at house broker Peel Hunt noted.


Shares added 4% to 161p early on Tuesday.


–Adds analyst comment, shares–

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