25 May 2012

Mears driving ahead

10/01/2012 Miles Nolan

Social housing to domiciliary care specialist Mears (MER) has issued a positive trading update, buoyed by news of a record order book valued at £2.8 billion.

In social housing, the fully listed firm has secured new business worth £550 million, which equates to 44 per cent by value of all contracts bid for in the past nine months. Recent work includes a three-year partnership deal worth an initial £60 million with Gateshead Council to provide responsive repairs, gas servicing and maintenance. In addition, it has landed a £40 million deal with Tamworth Council to provide repairs and void maintenance.

The care arm is also powering ahead. Indeed, over recent months it has won new business worth £60 million, which accounts for more than two-thirds of the work it has bid for. As it moves up the value chain, Mears has secured its first specialist care contract for people with complex needs. Worth £1 million, it is based in Hartlepool.

In November, shares in Mears took a knock following a U-turn by the government to halve the solar panel feed-in tariff. The latest wins mean that the group now has forward visibility of consensus forecasts of 93 per cent of 2012 numbers and 78 per cent for 2013. With a bid pipeline worth over £3 billion, there is clearly plenty more to go for.

We urged investors not to panic following the downgrade last year. Broker Numis predicts 2011 pre-tax profits of £31.2 million and EPS of 25.2p – another record performance. Expect an encouraging update when Mears reports its preliminary results on 20 March.

Tags: Growth company, Main market, Record order book, Strong outlook

Sector: Support Services

Companies: Mears Group

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