Mears bolts in growth

19/08/2008 Robert Tyerman

Social housing and care-in-the-home provider Mears Group reports strong orders after increasing first-half profits 15 per cent to £7.6 million.

A new London Stock Exchange arrival, whose shares become ‘index-trackable’ on the witching date of 11 September, Gloucester-based Mears increased turnover 48.5 per cent to £203.3 million in the six months to June.

Dealing primarily with municipal medical and private heath care providers, the company says it has forward orders equivalent to more than 80 per cent of this year’s revenues and more than 50 per cent of 2009’s revenues, which chairman Bob Holt argues stand a good chance of topping £500 million, against £305 million in 2007 and more than £400 million likely for this year.

Pre-tax margins narrowed somewhat in the first half of this year, but Mears, which received £2.8 million on selling its fleet distribution division, is moving towards establishing 10 years as the average life of a social housing contract (with periodic price reviews), says Holt.

He argues that cash-strapped local authorities are anxious to cut costs by outsourcing and are therefore co-operative, while stressing Mears provides residential services and is not a principal property provider – unlike those in the care home business hit by the credit crunch.

However, Mears shares have not escaped the backwash from that sector’s gloom and have fallen from 377p last year to 299.75p now, valuing the company at £221 million. That leaves them well placed to outperform their peers.

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