Mears wins £170m Lambeth deal

21/04/2010 Robert Tyerman

Social housing specialist Mears Group has clinched a chunky seven-year contract with the London Borough of Lambeth.

The deal is fully listed Mears’ first with the South London borough and covers repairs, refurbishment, estate management and maintenance. The ‘partnership contract’ can be extended for a further three years, subject to performance, in which case the company would receive £170 million revenues over 10 years.

Chairman Bob Holt says the Lambeth award, following a recent £200 million deal with Brighton, is another example of the larger contracts Mears is now winning. He argues increasingly cash-conscious local authorities and other clients are ‘looking for value for money, not necessarily the cheapest quote'.

‘They want long-term relationships’, maintains Holt, adding ‘we see ourselves winning more deals like this'. That would augur well for the company, which increased pre-tax profits by 19 per cent last year to £18.4 million, on turnover up 12.3 per cent to £470 million.

Bulls see Mears increasing pre-tax profits 60 per cent to £29.5 million this year, for earnings of 24.5p a share. At 293.5p, against a year’s high of 300.5p and a 223.5p low, that would put the shares on a fairly undemanding prospective price/earnings ratio of 12.