Half Yearly Report

RNS Number : 4102M
Mears Group PLC
16 August 2011
 



16 August 2011

Mears Group PLC

("Mears" or "the Group")

 

Interim Results

For the six months to 30 June 2011

 

Mears Group PLC, the support services group to the Social Housing and Care sectors in the UK, is pleased to announce another set of record interim results for the six months to 30 June 2011.

Financial Highlights

Six months to 30 June 2011

Six months to 30 June 2010

Change


Revenue


£292.6m


£252.6m


up 16%


Adjusted operating profit*


£15.2m


£14.6m


up 4%

 

Adjusted profit before tax*

 

£14.1m

 

£13.2m

 

up 7%


Diluted EPS


8.97p


5.73p


up 57%


Normalised diluted EPS**


11.42p


10.80p


up 6%


Dividend per share


2.15p


1.90p


up 13%

 

* Adjusted measure is stated before amortisation of acquisition intangibles and before exceptional costs

** Normalised EPS is stated before amortisation of acquisition intangibles and before exceptional costs and adjusted to reflect a full tax charge

 

Summary of Operations and Outlook

Financial:

·      Revenue increased by 16%

·      Profit to cash conversion at 94% (2010: 94%)

·      A successful period of new contract bidding with in excess of £300 million of new orders booked across all divisions

·      Strong balance sheet

 

Social Housing Division:

·      Revenue increased by 12% to £207.2m (2010: £184.7m)

·      Operating margin increased to 5.5%

·      Further development of the British Gas partnership

·      New contract bidding success rate (by value) of 56%, amounting to a value of £268 million

 

Care Division:

·      Revenue increased by 8% to £51.7m (2010: £47.8m)

·      Operating margin maintained at 7.5%

·      Continuing trend of Local Authorities to procure services from fewer and larger care providers

·      New contract bidding success rate (by value) of 60%, amounting to a value of £39 million

 

Group Outlook:

·      Unprecedented levels of opportunity in the public sector

·      Order book of £2.7 billion (2010: £2.6 billion)

·      97% visibility of consensus forecast revenue for 2011 and approaching 85% for 2012

·      Social Housing - bid pipeline in excess of £3.0 billion, of which £1.7 billion of new contract opportunities are available for award within the next 12 months.

·      Care - the acquisition of Choices enables the Group to broaden its care offering

 

Commenting, David Miles, Chief Executive, Mears Group, said:

 

"We now run a more diversified but complementary business compared to the pure social housing operation we started in 1996. We continue to conduct regular strategic reviews of our operations in order to ensure we deliver enhanced opportunities and value for our shareholders, customers and employees.

 

The first half of the year has delivered excellent progress against our strategic objectives. As well as maintaining strong financial performance, we have recently completed the key acquisition of Choices that will strengthen our capability in more acute care delivery. We have secured significant work in the emerging environmental improvement space and in the bid room we have benefited from winning work previously held by Connaught and Rok. This has been achieved during a period of significant Public Sector change.

 

The future outlook is also excellent, given the strength of our operational delivery and the move towards greater investment in energy efficiency in housing. Similarly, in Care, Government policy continues to drive investment towards supporting people in their own homes rather than in residential or NHS settings. We have never been better placed to consolidate our leadership position in our sectors"

 

A presentation for analysts will be held at 10.00 a.m. today at the offices of Collins Stewart, 88 Wood Street, London EC2V 7QR.

 

 

Enquiries:

 

 

Mears Group PLC


David Miles, Chief Executive

Tel: +44(0)7778 220 185

Andrew Smith, Finance Director

Tel: +44(0)7712 866 461

Bob Holt, Chairman

Tel: +44(0)7778 798 816

Joint Broker - Investec


Keith Anderson/Daniel Adams

Tel: +44(0)20 7597 5970

Joint Broker - Collins Stewart


Mark Dickenson/Ileana Antypas

Tel: +44(0)20 7523 8350

IR - Gable Communications

Tel: +44(0) 20 7193 7463

John Bick/Justine James

mears@gablecommunications.com

Tel: +44(0)7872 061 007

 

 

About Mears

www.mearsgroup.co.uk

(tickers: MER.L MER.LN  MERG.L MER.PL)

 

Mears is a leading social housing repairs and maintenance service provider to Local Authorities and Registered Social Landlords in the UK and, following the acquisitions of Supporta and Choices Care, now commands a leading position in the UK Local Authorities' outsourced care market, providing personal care services to people in their own homes.

 

Mears employs in excess of 12,000 people and provides maintenance and repairs services to in excess of 10% of the UK social housing stock. Mears also provides  care to over 20,000 service users each week.



Mears Group PLC

Interim Statement

It is with the greatest pleasure that we announce another set of record interim results for the six months ended 30 June 2011.  Revenue was up 16% to £292.6m. Adjusted operating profit was up 4% to £15.2m with the underlying diluted earnings per share up 6% to 11.42p. We have 97% visibility of consensus forecast revenue for the current year and approaching 85% for 2012. Once again, we are delighted with our strong cash position with the cash generated from operations as a proportion of the profit (before tax and amortisation) amounting to 94% for the rolling 12 month period to 30 June 2011. The Directors are declaring an interim dividend of 2.15p per share payable on 2 November 2011 to shareholders on the register of members on 14 October 2011. This represents an increase of 13% (2010: 1.90p.) which is again above the increase in earnings reflecting the Board's confidence and strong cash management.

 

Acquisition of Choices

On 4 August Mears announced the acquisition of the Supported Living division of Choices Care Community Services Limited ('Choices'), a leading provider of Social Care services in Scotland and the North East of England.  This is the first acquisition which enables the Group to implement its strategy to develop a broader care offering to its clients.  The main business of Choices is the provision of a Supported Living Service to adults with learning disabilities, autism and mental health needs. Service recipients tend to have much larger care support packages than is seen in the more traditional domiciliary care area.

 

The Group has acquired the trade and certain assets of the Supported Living division of Choices for a cash consideration of £7.40 million.  The consideration is being satisfied from Mears' existing debt facilities. The gross assets of the business being acquired are £150,000, and the annualised operating profit associated with the assets being acquired is estimated to be in the region of £1.50 million.  The consideration includes a refundable deposit of £5.0 million dependent upon the successful novation of the acquired contracts.

 

The Group will look to integrate this acquisition into its Care division which already has a strong presence in Scotland.  The principal benefits of the acquisition are anticipated to arise in 2012 and beyond and it is expected to be earnings neutral for the year ending 31 December 2011, after the costs of restructure, and earnings enhancing for the year ending 31 December 2012.  

 

Choices is recognised by both Scottish and English authorities for the quality of care it provides.  Mears believes that this acquisition will give the Group the scale and platform to win more contracts of this nature across the rest of the UK.

 

This acquisition is consistent with Mears' stated strategy of targeting growth in higher need care areas and we will look for further acquisition opportunities in acute care areas going forward, as our expectation is that significant growth opportunities will evolve.

 

New contract awards

The Group has had a really positive period since we announced our 2010 results in March 2011, winning all the key target contracts bid for.

In social housing we won 56% by value of all contracts bid in the last five months amounting to a total value of £268 million. The sales pipeline stands at in excess of £3 billion of which £1.7 billion of new contract opportunities are available for award within the next 12 months.

We are particularly pleased to announce a number of new contract awards from former customers of Connaught Partnerships, ('Connaught').  When Connaught went into administration in September 2010, a number of its former clients put in place short-term cover whilst a formal procurement process was undertaken. As anticipated, much of the fall-out and opportunity for Mears in the aftermath of the failure of Connaught is now crystallising. Notable successes include:

·      A 10 year contract with Barnet Homes.  The contract is valued at £69 million over the 10 year period to provide responsive repairs, void maintenance and cleaning services to approximately 11,100 properties. This is due to commence in October 2011.

·      A 4 to 10 year contract with Notting Hill Housing.  The contract is valued at £11.2 million (£28 million with extension) over the initial 4 year period to provide external maintenance and component renewal. There is an option to extend the contract for up to a maximum period of 10 years. This is due to commence in September 2011.

·      A 3 to 10 year contract with Arun District Council. The contract is valued at £7.5 million (£25 million with extension) over the initial 3 year period to provide responsive repairs and void maintenance services to approximately 3,400 properties. There is an option to extend the contract for up to a maximum period of 10 years. This is due to commence in August 2011.

During November 2010, Mears announced that it had entered into a contract to acquire the social housing business assets of the Bristol Social Housing division of Rok. The Group has been impressed with the performance of the pre-existing local management team which has demonstrated both operational strength and strong client relationships.  We are delighted therefore to have been awarded a contract with an estimated value of £21 million with Neath Port Talbot Homes. The contract relates to Kitchen and Bathroom refurbishment and Central Heating installations and is to be delivered over a 6 year period and is due to commence in October 2011.  Wales is a key geographical target for the Group, and this contract award is of particular importance.

In addition to the contracts listed above, we have been successful in a further £105 million of tendering opportunities in the Social Housing space including:

·      A framework contract has been won with Cyntra which has an estimated value of £40 million. This was the former London Area Procurement Network (LAPN) framework, but will now operate on a national basis.

·      A 10 year contract with Bedfordshire Pilgrims Housing Association ("BPHA").  The contract is valued at £52 million over the 10 year period to provide responsive repairs, void and planned maintenance services to approximately 5,200 properties in North Bedfordshire and Cambridgeshire. The contract was mobilised in July 2011. 

Within our Care division, our new contract bidding success rate (by value) is 60% of all contracts bid in the last five month period amounting to a total value of £39 million. Notable successes include:

·      The most significant single award has been with Wirral Council.  The contract has an expected value of £14 million with a term of five years. Wirral Council is an existing Mears Care client and having retained our existing business we added further specialist services, which is representative of our strategy to increase work in the higher end care areas.

·      The award of a new contract to be a main provider of care for Bolton Council, with an estimated value of £2 million over the 2 year period. This is a new client for Mears, with work including caring for people with physical disabilities, learning disabilities, brain injuries, autism and sensory impairment.

Environmental opportunity

In August, the Group was awarded the first major contract for its British Gas partnership by Cross Keys Homes. We believe this will be the biggest Photovoltaic solar panel scheme in the UK, with the works being carried out to in excess of 3,500 homes in Peterborough.

 

Mears will be carrying out a significant proportion of the installations, as well as all associated works such as scaffolding and electrical components. This scheme will see the first PV panel fitted in September 2011. The Group has valued its share of the contract to be in the region of £20 million.

In addition, a number of British Gas funded CESP schemes have been agreed, which support our clients' ability to carry through capital works projects, delivered by Mears.

Operationally under the Microgeneration Certification Scheme, Mears is already accredited to deliver on Solar Thermal, Air Source Heat Pumps, Photovoltaics and Ground Source Heat Pumps. Our aim is clearly to be able to deliver microgeneration benefits to all the Social Housing stock (which for Mears already equates to some 500,000 dwellings) not just those homes whose roofs and position are suitable for photovoltaic solutions. 

We have trained key customer facing staff to deliver energy saving advice and will develop these skills further in readiness for the requirements of the Green Deal. This, together with our on-going energy efficiency improvement work, in areas such as internal and external insulation, will mean that Mears can make a real contribution to tackling the rising problems of fuel poverty, that are faced by so many of our tenants and service users.

Whilst the detail of the Green Deal and other Energy Efficiency Government policies are still to be finalised, we see 2011 as the tip of the iceberg in terms of Environmental works. By having such an important reference point established with Cross Keys, together with the British Gas partnership, we believe that we are better placed than anyone in terms of benefiting from the increased investment expected to materialise between 2012 and 2020.

Operations

The social housing business has continued to perform well and reported growth of 12%.  The impact of the acquisitions of Jackson Lloyd and the Home Improvement Agencies added in the region of £13 million to revenues. The contribution to Group revenues through the relationships acquired with the Bristol social housing division of Rok contributed a further £6 million.  As reported previously, 2011 and 2012 will see a reduction in our capital works revenues as Decent Homes comes to a natural conclusion. This has resulted in an £18 million reduction in first half year revenues and it is anticipated to fall by in the region of  £30 million in each of the full years 2011 and 2012. After adjusting for the impact of acquisitions and Decent Homes, it is pleasing to report solid double digit  growth in our core Social Housing maintenance operations.

In recent months, there has been significant discussion in our sector around suggested margin pressure. To be clear, we see no underlying margin pressure within the new contract bidding environment. Whilst there have always been competitors with a greater appetite for revenue growth, we remain highly selective, and there is no shortage of opportunities where potential clients are willing to focus on quality and consider not simply the price paid to Mears, but more importantly the overall cost of delivering the outsourced service.

The continuing reduction in works related to Decent Homes, which has been happening for some time and is in line with management's expectations, does inevitably add a challenge to margin in the short term given that these contracts generated a solid margin and are being replaced by revenues that through their early stages will generate a reduced margin. Against this, in the medium term, the opportunities around the Green Agenda are expected to provide scope for margin accretion.

We have always emphasised the importance of investing in our operational infrastructure. In our experience, margin pressure is less to do with macroeconomics but typically poor operational processes and an absence of good old fashioned cost control. In Mears, such underperforming contracts receive a high level of focus with a view to a speedy resolution.

The first half year has seen the successful mobilisation of the new contracts with Tower Hamlets, London Borough of Lambeth and Leeds City Council, on which the quality of service delivered has been good on all new contracts. Across the UK, almost 80% of tenants regard our service as excellent, a level of service delivery that would be leading in any market.

A new modular home solution was launched in June 2011 for customers planning to build new Social Homes, utilising increased Government incentives in this area. Mears homes are initially constructed in an "offsite setting" with heating, plumbing and environmental systems installed prior to moving to site. Once moved to site, the externals of the home are added. These homes are built to the highest environmental standards (Codes 4 and 5) and come with warranties that significantly reduce on-going maintenance costs. They have the added advantage that the time spent working on site can be reduced significantly.  We have built two show homes at the Mears branch in Wakefield and are seeing significant interest from our customers for this concept.

The Board is delighted at the performance of our Care division in terms of both the quality of service delivery together with its strong financial performance. The division is now bedded down after the hectic integration period following the acquisition of Supporta in January 2010.

The Care division has experienced continued success bidding for new contracts with £39 million won over the past five months at a conversion rate of 60%. The Care division suffered some loss of revenue on the back of the procurement of the new West London Alliance, however this has been more than compensated for by the new contract successes.

Mears Other Services predominantly comprises its M&E operation.  This division has experienced a significant upturn in activity over the past six months, with revenues increasing by 65%. Whilst it is pleasing to report this significant increase in new works, the M&E environment is currently highly competitive and pricing is keen. Added to this, a number of the new contracts remain in their early stages and as such a reduced margin has been reported within the first half year. The Group remains confident that the divisional result for the full year period will be comparable with that generated in 2010; however the result for the first half year is significantly lower that that delivered in the first half of 2010 and this does significantly impact upon the Group's margin and EPS measures. Whilst the trading environment remains competitive and is expected to continue in the short-term, the division does have full visibility of forecast revenues for the current year and has a significant element of 2012 already committed.

Sector developments - Social Housing

 

On 1 April 2012, the Government is set to abolish the HRA (Housing Revenue Account) subsidy system and introduce self-financing for council housing. A joint report by The Smith Institute and PwC was released in June titled 'Making the Most out of HRA Reform'.  The main findings of the research are that Councils can look at their housing as a real asset capable of generating substantial additional investment resources. Over the next 30 years councils are forecast to generate more than £300 billion of rental income with efficient operation of the HRA potentially leading to £50 billion of new investment across the country.

 

The report concludes that by effective management of these resources councils will be able to shape their "housing business" to deliver against their local service and investment priorities. In the past, meaningful HRA strategic financial planning had not been possible - it will now be essential if the potential benefits are to be realised.

 

We believe that  Mears we will be at the forefront in assisting our customers to meet these challenges.

 

Sector Developments - Social Care

 

Mears has committed to work closely with Local Authorities to find innovative ways to improve their quality of care and to achieve ways of improving efficiency within the market. We are particularly pleased to have reached an agreement with Hertfordshire Council whereby Mears makes upfront investment in preventative telecare technologies in return for sharing in the savings made from the reduced cost of ongoing care provision. Whilst this is a pilot which starts in October, we see this as an important first step in the Group's long term ambition to partner with Local Authorities to achieve an outcome based solution and provide real change, and are grateful to Hertfordshire for sharing the vision.

 

The Group is leading the market in joining up service provision, and the acquisition of Home Improvement Agencies at the beginning of 2011 has increased our ability to offer a holistic service to customers across care, telecare adaptations and property services. This unique integrated approach is currently being rolled out across the Mears operations.

 

There was significant activity within the Social Care and Health sectors in the first half of 2011. The key long term strategic direction of focus on care and support in people's homes and an emphasis on the importance of service integration were reinforced by the Dilnot Commission and the All Party Parliamentary Group, looking at the impact of demographic challenges on housing and care, under the Living Well at Home Inquiry. Mears gave evidence to both of these important reviews.

 



The main Dilnot Report recommendations being:

·      Individuals' lifetime contributions towards their social care costs - which are currently potentially unlimited - should be capped at around £35,000. After the cap is reached, individuals would be eligible for full state support;

·      The means-tested threshold, above which people are liable for their full care costs, should be increased from £23,250 to £100,000;

·      National eligibility criteria and portable assessments should be introduced to ensure greater consistency;

·      The report calls for a national standard of access to care, seeking to remove the risk of 'postcode lottery' on what care services you receive been determined by where you live and the size of your local authorities budget;

·      People should contribute a standard amount to cover their general living costs, like food and accommodation, in residential care; and

·      The Government should develop a major new information and advice strategy to help when care needs arise. It also should increase focus on adaptations and telecare.

The Government has responded positively to the above recommendations and the second half of 2011 will see whether the challenge of finding some £2bn increased investment will be met.

 

The Living Well at Home enquiry, published in July 2011, made the following recommendations which may favourably impact upon Mears in the future:

 

·      Sustaining advice and information services

That local authorities and service providers should improve the way they produce and convey information for older people about the service options, costs, quality outcomes and sources of further assistance that can both educate and enable older people to plan for their future housing and care needs and aspirations;

·      Adapting to a more integrated approach

That Government should encourage local authorities and the NHS strategically to commission integrated community based support, Home Improvement Agency and handy-person services for older people across housing, health and social care, thereby combatting fuel poverty, and reducing excess winter deaths, accidents in the home, and longer stays in hospital; and

·      Strengthening the strategic links between housing, health and social care

That Government should use the provisions of the Health and Social Care legislation to ensure that housing matters are covered by Health and Wellbeing Boards.

 

The National Housing Federation concluded in its recent report that  'There are considerable advantages to service users, to the public purse, and to meeting the shared objectives of prevention and tackling inequalities, of increased collaboration across health, housing care and support. This is a key moment for public services, and a time at which there are major challenges facing service providers and commissioners in both sectors'.

 

Mears is in a unique situation where its joined up services are becoming increasingly required to drive forward professional value for money services which have an immediate impact on the economy. 

 

The provision of residential care services to local authorities has been destabilised by the well publicised problems of Southern Cross. We see this as part of the long term movement away from care in residential settings.  

Balance Sheet

Strong working capital management has always been and remains a cornerstone of our business. The internally developed IT systems have a strong financial focus and this is a driving force behind efficient cash management.  The IT system is also central to the valuation of work in progress and amounts recoverable on contracts and ensures that valuations are robust and are less reliant upon significant estimates or judgments. We maintain a conservative balance sheet. All costs relating to tender, contract set-up and the initial inefficiencies during the period of contract mobilisation are written off as they are incurred.

The period has seen a reduction in the level of core debt and we have sufficient headroom within our existing borrowing facilities. The net debt at 30 June 2011 was £9.3m having converted 94% of profit into cash over the rolling twelve month period to June 2011. The average net debt for the six month period was £59 million.

Total shareholders' equity rose from £141.6m to £146.1m at 30 June 2011. The increase in net assets is primarily due to retained profits.

People

We strive to have the best-trained and equipped workforce and are committed to a policy of providing enhanced career opportunities for all of our staff. We commend our workforce at all levels for their commitment, endeavour and resilience.

The management team, which has been further strengthened in the period, continues to win many awards and we are particularly proud to have won the National Award for our Health and Safety training. This award is just one of the measures upon which customers continue to award the Group new opportunities and also extend and retain existing contracts. Our customer service levels reached new heights of excellence in the period.

Given the difficult economic climate, we are particularly keen to support Apprenticeships and we have 200 people in such schemes at the present time, the majority of whom derive directly from the Communities in which we work.

We have taken our middle management team through a comprehensive leadership development programme and recruited new people into our Graduate scheme. Development of people at every level is at the heart of Mears, which is one reason the Group has held Investor in People (IIP) accreditation since 1995 and indeed why we successfully retain our key staff.

Our Communities

The Group works throughout the UK and our regional offices are dedicated towards helping to improve people's lives. We do work in some of the most socially deprived areas of the country so we feel a strong sense of responsibility towards the wider community. Helping a community to thrive increases the quality of life for residents and supports community cohesion and development.

Board Changes

We would like to acknowledge the tremendous contribution made to the Group by Michael Macario who stepped down as a Director at the recent Annual General Meeting. Michael, a Chartered Accountant, headed the Group's audit committee since our original flotation and also played a central role in undertaking due diligence at the time of potential acquisitions. We wish Michael all the best in his retirement. Davida Marston has been appointed to head the Audit Committee and Peter Dicks has been appointed as our Senior Independent Non-Executive Director.

Outlook

 

We are delivering on our strategy today, a strategy that will consolidate our leadership within the growth markets of Social Housing and Care. Mears leads on quality, innovation and long term value for money. Our approach to focus on sustainable margins has been ratified time and time again. The Public Sector is seeing significant change and we will continue to support our clients to achieve their goals through this difficult period

 

We see real opportunities in the next decade. Our housing leadership has never been stronger and we have established what we believe to be the highest quality, most efficient national care company in the UK.  Our growth markets have significant opportunities for organic growth and for acquisitions.

 

 

David Miles                                                   Bob Holt

david.miles@mearsgroup.co.uk            bob.holt@mearsgroup.co.uk

Chief Executive                                           Chairman


 

Half-year condensed consolidated income statement

for the six months ended 30 June 2011

 

 

 

Six months ended

30 June 2011

 

Six months ended

30 June 2010

 

Note

£'000

£'000

 

£'000

£'000

Sales revenue

3

 

292,639

 

 

252,637

Cost of sales

 

 

(208,448)

 

 

(180,102)

Gross profit

 

 

84,191

 

 

72,535

Other administration expenses

 

(68,969)

 

 

(57,960)

 

Operating result before exceptional items and intangible amortisation

3

15,222

 

 

14,575

 

Intangible amortisation

 

(3,179)

 

 

(3,738)

 

Total administration expenses

 

 

(72,148)

 

 

(61,698)

Operating result before exceptional costs

 

 

12,043

 

 

10,837

Costs of the acquisition and integration of Supporta

 

 

-

 

 

(2,447)

Operating profit

3

 

12,043

 

 

8,390

Finance income

4

 

2

 

 

23

Finance costs

4

 

(1,162)

 

 

(1,396)

Profit for the period before tax

 

 

10,883

 

 

7,017

Tax expense

5

 

(2,765)

 

 

(1,977)

Net profit for the period

 

 

8,118

 

 

5,040

Attributable to:

 

 

 

 

 

 

Equity holders of the parent

 

 

8,118

 

 

5,040








Earnings per share

 

 

 

 

 

 

Basic

7

 

9.56p

 

 

6.13p

Diluted

7

 

8.97p

 

 

5.73p

 

 

 

 


 

Half-year condensed consolidated income statement of comprehensive income for the six months ended 30 June 2011


 

 


 

 

Six months

Six months

 

 ended

ended

 

30 June

30 June

 

2011

2010

 

£'000

£'000

Net result for the period

8,118

5,040

Other comprehensive income/(expense):

 

 

- actuarial losses on defined benefit pension schemes

-

-

- increase in deferred tax asset

-

-

Other comprehensive income for the period

-

-

Total comprehensive income for the period

8,118

5,040




Attributable to:

 

 

- equity holders of the parent

8,118

5,040

 

 


    

 

Half-year condensed consolidated balance sheet

as at 30 June 2011


 

 

 


 

 

 

As at

As at

As at

 

30 June

31 December

30 June

 

2011

2010

2010


£'000

£'000

£'000

Assets

 

 

 

Non-current

 

 

 

Goodwill

97,675

97,405

94,291

Intangible assets

24,635

27,136

24,141

Property, plant and equipment

12,213

12,113

12,909

Deferred tax asset

8,056

8,056

7,483

Trade and other receivables

2,105

1,929

2,036

 

144,684

146,639

140,860

Current

 

 

 

Inventories

13,110

12,147

23,094

Trade and other receivables

120,097

109,765

92,975

Cash at bank and in hand

45,609

21,757

31,485

 

178,816

143,669

147,554

Total assets

323,500

290,308

288,414

Equity

 

 

 

Equity attributable to the shareholders of Mears Group PLC

 

 

 

Called up share capital

850

848

846

Share premium account

33,382

33,243

33,032

Share-based payment reserve

3,355

2,905

2,989

Merger reserve

38,243

38,243

38,243

Retained earnings

70,310

66,315

60,053

Total equity

146,140

141,554

135,163

Liabilities

 

 

 

Non-current

 

 

 

Pension and other employee benefits

7,693

7,693

8,149

Deferred tax liabilities

6,099

6,983

6,590

Other liabilities

879

959

1,230

 

14,671

15,635

15,969

Current

 

 

 

Short-term borrowings and overdrafts

55,000

34,000

45,000

Trade and other payables

99,386

97,879

84,382

Current tax liabilities

4,180

1,240

4,431

Dividend payable

4,123

-

3,469

 

162,689

133,119

137,282

Total liabilities

177,360

148,754

153,251

Total equity and liabilities

323,500

290,308

288,414

 


 

Half-year condensed cash flow statement

for the six months ended 30 June 2011

 

 


 

 

 

 


 

 

 

 

Six months

Year

Six months

 

 

 ended

ended

ended

 

 

30 June

30 June

 30 June

 

 

2011

2011

2010

 

Note

£'000

£'000

£'000

Operating activities

 

 


 

Result for the period before tax

 

10,883

20,218

7,017

Adjustments

8

6,721

16,735

7,785

Change in inventories and operating receivables

 

(11,679)

(11,850)

(8,077)

Change in operating payables

 

1,600

2,729

(698)

Cash inflow from operating activities before taxes paid

 

7,525

27,832

6,027

Taxes paid

 

(716)

(4,512)

(2,803)

Net cash inflow from operating activities

 

6,809

23,320

3,224

Investing activities

 

 

 

 

Additions to property, plant and equipment

 

(1,820)

(3,161)

(1,593)

Additions to other intangible assets

 

(524)

(1,119)

(325)

Proceeds from disposals of property, plant and equipment

 

-

179

65

Acquisition of subsidiary undertaking, net of cash

 

(329)

(8,230)

(20,223)

Disposal of business activities, net of cash

 

-

986

-

Interest received

 

2

3

23

Net cash outflow from investing activities

 

(2,671)

(11,342)

(22,053)

Financing activities

 

 

 

 

Proceeds from share issue

 

142

354

530

Discharge of finance lease liability

 

(54)

(102)

(508)

Interest paid

 

(1,374)

(3,027)

(1,219)

Dividends paid

 

-

(5,079)

-

Net cash outflow from financing activities

 

(1,286)

(7,854)

(1,197)

Cash and cash equivalents at beginning of period

 

(12,243)

(13,515)

6,511

Net increase (decrease) in cash and cash equivalents

 

2,852

4,124

(20,026)

Cash and cash equivalents at end of period

 

(9,391)

(9,391)

(13,515)

 

 

 

 

 

Cash and cash equivalents is comprised as follows:

 

 

 

 

- cash at bank and in hand

 

45,609

45,609

31,485

- short-term borrowings and overdrafts

 

(55,000)

(55,000)

(45,000)

Cash and cash equivalents

 

(9,391)

(9,391)

(13,515)

 

 


 

Half-year condensed consolidated statement of changes in equity for the six months ended 30 June 2011

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share

Share-based

 

 

 

 

Share

premium

payment

Merger

Retained

Total

 

capital

 account

 reserve

reserve

 earnings

equity

 

£'000

£'000

£'000

£'000

£'000

£'000

At 1 January 2010

744

32,505

2,649

11,548

58,482

105,928

Net result for the period

-

-

-

-

5,040

5,040

Increase in deferred tax asset

-

-

-

-

-

-

Total comprehensive income for the period

-

-

-

-

5,040

5,040

Issue of shares

102

527

-

26,695

-

27,324

Share option charges

-

-

340

-

-

340

Equity dividends declared

-

-

-

-

(3,469)

(3,469)

Transactions with owners

102

527

340

26,695

(3,469)

24,195

At 30 June 2010

846

33,032

2,989

38,243

60,053

135,163

At 1 January 2011

848

33,243

2,905

38,243

66,315

141,554

Net result for the period

-

-

-

-

8,118

8,118

Increase in deferred tax asset

-

-

-

-

-

-

Total comprehensive income for the period

-

-

-

-

8,118

8,118

Issue of shares

2

139

-

-

-

141

Share option charges

-

-

450

-

-

450

Equity dividends declared

-

-

-

-

(4,123)

(4,123)

Transactions with owners

2

139

450

-

(4,123)

(3,532)

At 30 June 2011

850

33,382

3,355

38,243

70,310

146,140

 


 

 

Notes to the half-year condensed consolidated financial statements

for the six months ended 30 June 2011

 

 

1. Corporate information

Mears Group PLC is a public limited company incorporated in England and Wales whose shares are publicly traded. The half-year condensed consolidated financial statements of the Company and its subsidiaries for the six months ended 30 June 2011 were authorised for issue in accordance with a resolution of the Directors on [•] August 2011.

 

2. Basis of preparation and accounting principles

(a) Basis of preparation

The half-year condensed consolidated financial statements for the six months ended 30 June 2011 have been prepared in accordance with the Disclosure and Transparency Rules (DTR) of the Financial Services Authority and with IAS 34 'Interim Financial Reporting'. The half-year condensed consolidated financial statements do not include all the information and disclosures required in the annual financial statements and should be read in conjunction with the Group's annual financial statements as at 31 December 2010, which have been prepared in accordance with IFRS as adopted by the European Union.

This condensed consolidated half-year financial information does not comprise statutory accounts within the meaning of Section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 December 2010 were approved by the Board of Directors on 15 April 2011. These accounts, which contained an unqualified audit report under Section 495 of the Companies Act 2006 and which did not make any statements under Section 498 of the Companies Act 2006, have been delivered to the Registrar of Companies in accordance with Section 441 of the Companies Act 2006.

The half-year condensed consolidated financial statements for the six months ended 30 June 2011 have not been audited or reviewed by auditors pursuant to the Auditing Practices Board guidance on Review of Interim Financial Information.

There have been no significant changes to estimates of amounts reported in prior financial years.

 

(b) Significant accounting policies

The accounting policies adopted in the preparation of the half-year condensed consolidated financial statements are consistent with those followed in the preparation of the Group's annual financial statements for the year ended 31 December 2010.



 

3. Segment reporting

Segment information is presented in respect of the Group's business segments. Segments are determined by reference to the internal reports reviewed by the chief operating decision maker.

The Group operated three business segments during the year:

     Social Housing - services within this segment comprise a full repairs and maintenance service to Local Authorities and other Registered Social Housing Landlords in the UK;

     Care - services within this segment comprise personal care services for people in their own homes; and

     Other Services - services within this segment comprise provision of design and build M&E services and other professional services.

All of the Group's activities are carried out within the UK and the Group's principal reporting to its chief operation decision maker is not segmented by geography. The principal measures utilised by the chief operating decision mater to review the performance of the business are operating result pre amortisation of acquisition intangibles and share-based payment. Segments do not trade with each other and there is therefore no intra-segment revenue. There is a small element of cyclicality to the Group's activities, which combined with organic growth results in the second half of the year traditionally showing increased margins over and above the first half of the year.

    


Six months ended 30 June 2011

 

Six months ended 30 June 2010

 

 

Operating

 

 

Operating

 

Revenue

result

 

Revenue

result

 

£'000

£'000

 

£'000

£'000

Social Housing

207,221

11,495

 

184,697

9,994

Domiciliary Care

51,688

3,883

 

47,796

3,565

Other Services

33,730

294

 

20,144

1,356

 

292,639

15,672

 

252,637

14,915

Share option costs

-

(450)

 

-

(340)

Costs relating to the acquisition and integration of Supporta

-

-

 

-

(2,447)

Amortisation of acquisition intangible

-

(3,179)

 

-

(3,738)

 

292,639

12,043

 

252,637

8,390

 

Reconciliation to the Half-year Condensed Consolidated Income Statement:

 

Six months

Six months


ended

ended

 

30 June

30 June


2011

2010

 

£'000

£'000

Operating result

12,043

8,390

Finance costs, net

(1,160)

(1,373)

Tax expense

(2,765)

(1,977)

Net result for the period

8,118

5,040

 



 

4. Finance income and finance costs

 

Six months

Six months


ended

ended

 

30 June

30 June


2011

2010

 

£'000

£'000

Interest charge on overdrafts and short-term loans

(1,055)

(882)

Fair value losses on interest rate swap

(92)

(464)

Finance charges in respect of finance leases

(15)

(50)

Interest charge on defined benefit obligation

-

-

Unwinding of discounting in deferred consideration

-

-

Finance costs

(1,162)

(1,396)

Interest income resulting from short-term bank deposits

2

23

Interest income resulting from defined benefit obligation

-

-

Net finance charge

(1,160)

(1,373)

 

5. Tax expense

The tax charge for the six months ended 30 June 2011 has been based on the estimated tax rate for the full year. The estimated effective rate of tax for the current year is 26.0% (2010: 14.3%).

 

6. Dividends

The interim dividend of 2.15p (2010: 1.90p) per share is not recognised as liability at 30 June 2011 and will be payable on 2 November 2011 to shareholders on the register at the close of business on 14 October 2011. The dividend disclosed within the Condensed Consolidated Statement of Changes in Equity represents the final dividend of 4.85p (2010: 4.10p) per share proposed in the 31 December 2010 financial statements and approved at the Group's Annual General Meeting (not recognised as a liability at 31 December 2010).

 

7. Earnings per share

 

Basic

 

Diluted

 

Six months

Six months

 

Six months

Six months

 

ended

ended


ended

ended


30 June

30 June

 

30 June

30 June

 

2011

2010

 

2011

2010

 

p

p

 

p

p

Earnings per share

9.56

6.13

 

8.97

5.73

Effect of amortisation of acquisition intangibles

3.74

4.55

 

3.51

4.25

Effect of the cost of acquisition and integration of Supporta

-

2.14

 

-

2.00

Effect of full tax adjustment

(1.13)

(1.25)

 

(1.06)

(1.18)

Normalised earnings per share

12.17

11.57

 

11.42

10.80

 

Normalised earnings exclude amortisation of acquisition intangibles and, for the prior year, the costs relating to the acquisition and integration of Supporta. A further adjustment is made to reflect a full tax charge. This normalised measure better allows the assessment of operational performance, the analysis of trends over time, the comparison of different businesses and the projection of future performance. The profit attributable to shareholders before and after adjustments for both basic and diluted earnings per share is:

 

 

 

 

 

 

 

 

 

 

 

Six months

Six months

 

ended

ended


30 June

30 June

 

2011

2010

 

£'000

£'000

Profit attributable to shareholders:

8,118

5,040

- amortisation of acquisition intangibles

3,179

3,738

- effect of the cost of acquisition and integration of Supporta (post tax)

-

1,767

- full tax adjustment

(961)

(1,034)

Adjusted profit attributable to shareholders

10,336

9,511

 

The calculation of earnings per share is based on a weighted average number of ordinary shares in issue during the period. The diluted earnings per share is based on a weighted average number of ordinary shares calculated in accordance with IAS 33 'Earnings per Share', which assumes that all dilutive options will be exercised. The additional normalised basic and diluted earnings per share use the same weighted average number of shares as the basic and diluted earnings per share.

 

Six months

Six months

 

ended

ended


30 June

30 June

 

2011

2010

 

Millions

Millions

Weighted average number of shares in issue:

84.93

82.23

- dilutive effect of share options

5.54

5.77

Weighted average number of share for calculating diluted earnings per share

90.47

88.00

 

8. Notes to the consolidated cash flow statement

The following non-operating cash flow adjustments have been made to the pre-tax result for the period:

 

Six months

Year ended

Six months

 

to 30 June

30 June

to 30 June

 

2011

2011

2010

 

£'000

£'000

£'000

Depreciation

1,719

3,558

1,345

Loss on disposal of property, plant and equipment

-

124

45

Intangible amortisation

3,392

9,967

3,935

Share-based payment charges

450

900

340

Finance income

(2)

(3)

(23)

Finance cost

1,162

2,189

1,396

Costs associated with acquisitions recorded as expenses

-

-

747

Total

6,721

16,735

7,785

 

10. Half-year condensed consolidated financial statements

Further copies of the Interim Report are available from the registered office of Mears Group PLC at 1390 Montpellier Court, Gloucester Business Park, Brockworth, Gloucester GL3 4AH or www.mearsgroup.co.uk.

 

11. Principal risks and uncertainties

The nature of the principal risks and uncertainties faced by the Group have not changed significantly since the 2010 Annual Report and Accounts was published.

 

12. Forward-looking statements

This report contains certain forward-looking statements with respect to the financial condition, results of operations and businesses of Mears Group PLC. These statements involve risk and uncertainty because they relate to events and depend upon circumstances that will occur in the future. There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by these forward-looking statements.

 


 

 

Statement of Directors' responsibilities

 

The Directors confirm, to the best of their knowledge, that this condensed set of financial statements has been prepared in accordance with IAS 34 as adopted by the European Union and that the Interim Report includes a fair review of the information required by Rules 4.2.4, 4.2.7 and 4.2.8 of the Disclosure and Transparency Rules of the UK Financial Services Authority.

The names and functions of the Directors of Mears Group PLC are as listed in the Group's Annual Report for 2010.

By order of the Board

 

D Miles

Chief Executive

16 August 2011

 

A C M Smith

Finance Director

16 August 2011


Bob Holt

Chairman

 

David J Miles

Chief Executive Officer

 

Andrew C M Smith

Finance Director

 

Alan Long

Executive Director

 

Reginald B Pomphrett

Company Secretary

 

Peter F Dicks

Non-Executive Deputy Chairman

 

Michael G Rogers

Non-Executive Director

 

David L Hosein

Non-Executive Director

 

Davida Marston

Non-Executive Director

 

Rory Macnamara

Non-Executive Director

 

Internet

The Group operates a website which can be found at www.mearsgroup.co.uk. This site is regularly updated to provide information about the Group. In particular all of the Group's press releases and announcements can be found on the site.

 

Registrar

Any enquiries concerning your shareholding should be addressed to the Company's Registrar. The Registrar should be notified promptly of any change in a shareholder's address or other details.

 

Investor relations

Requests for further copies of the Annual Report and Accounts, or other investor relations enquiries, should be addressed to the registered office.

 

Registered office

1390 Montpellier Court

Gloucester Business Park

Brockworth

Gloucester GL3 4AH

Tel: 01452 634600

www.mearsgroup.co.uk

 

Company registration number

3232863

 

Company Secretary

Reginald B Pomphrett

1390 Montpellier Court

Gloucester Business Park

Brockworth

Gloucester GL3 4AH

Tel: 01452 634600

 

Bankers

Barclays Bank PLC

Wales and South West

Business Banking

PO Box 119

Park House

Newbrick Road

Stoke Gifford

Bristol BS34 8TN

Tel: 01452 365353

 

HSBC Bank plc

West & Wales Corporate Banking Centre

3 Rivergate

Temple Quay

Bristol BS1 6ER

Tel: 0845 583 9796

 

Solicitors

BPE

St James' House

St James' Square

Cheltenham GL50 3PR

Tel: 01242 224433

 

Auditor

Grant Thornton UK LLP

Registered Auditor

Chartered Accountants

Hartwell House

55-61 Victoria Street

Bristol BS1 6FT

Tel: 0117 305 7600

 

Joint financial advisers

and stockbrokers

Investec Bank PLC

2 Gresham Street

London EC2V 7QP

Tel: 020 7597 2000

 

Collins Stewart Europe Ltd

88 Wood Street

London EC2V 7QR

Tel: 020 7523 8000

 

Advisers

Zeus Capital Ltd

3 Ralli Courts

West Riverside

Manchester M3 5FT

Tel: 0161 831 1512

 

Registrar

Neville Registrars Ltd

Neville House

18 Laurel Lane

Halesowen

West Midlands B63 3DA

Tel: 0121 585 1131

 

Investor relations

Gable Communications

34 Lime Street

London ECM 7AT

Tel: 020 7193 7463

 

 


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