Gulf starts at Sheikh Adi-2 25/05/2012
Iraq-focused oil explorer Gulf Keystone Petroleum (GKP) has begun drilling at the Sheikh Adi-2 well in the Sheikh Adi block.
Government U-turn hits Mears
Social housing to domiciliary care giant Mears (MER) has been forced to scale back forecasts following a decision by the government to halve the solar panel feed-in tariff.
On 31 October the government announced its intention to halve the solar Photovoltaic (PV) feed-in tariff subsidy as of 12 December, which was a major surprise to most in the market. Mears was hoping to benefit from the initiative, but following the news it has been forced to terminate its activity in the area immediately.
The cost of such a move is likely to dent operating profits to the tune of £2.8 million, in addition there will be a need to write-off costs relating to the site set-up, system design and installation - this will amount to a further £2 million. Its a frustrating blow for Mears, which continues to fire on all cylinders in both its social housing and care operations.
Fully listed Mears boasts an order book of £2.7 billion, with secured revenues of 95 per cent of consensus forecasts for 2011, 85 per cent for 2012, and 70 per cent for 2013. It has announced new social housing work today of £109 million, which takes the total of additional business to £350 million in the last eight months alone.
Mears has also replaced its old £85 million bank facility with a new £120 million unsecured facility with Barclays and HSBC, maturing in July 2016. Chairman Bob Holt understandably describes the shift in government stance on fuel poverty as 'extremely frustrating'.
Broker Investec has pared back its current year pre-tax profit forecast by £5.3 million to £29.5 million, delivering EPS of 23.8p. The shares have fallen by 13 per cent to 218p this morning, as the market reacts to the change in guidance. We have been long-term fans of Mears, due to its solid market position in an area which is largely non-discretionary. Though a blow, this is in no way terminal to the group. Hold.
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