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Mears sees new social housing contracts dip but profits

Mears Group has reported an 11 per cent increase in pre-tax profits in the first half of 2014 despite fewer bidding opportunities.

In the six months to 30 June, turnover dipped 3 per cent to £428.1m, from £439.1m in the first half of 2013.

Pre-tax profits from continuing operations increased 11 per cent to £18.7m, up from £16.9m last year. 

In its social housing business the value of new contracts won fell by 42.5 per cent to £135m, down from £235m in the first half of 2013.

Mears Group chief executive David Miles said its immediate pipeline had been “impacted temporarily from a quieter period of new bidding opportunities”, attributed to changes to housing finance and welfare reforms.

“We have increased our focus upon positioning for future market growth in housing management and continuing margin improvement. I believe the opportunities for us in social housing remain very strong as our clients seek broader solutions to their increasingly complex housing challenges,” he said.

Social housing turnover dipped to £364.9m from £378.6m in 2013, but Mears said it experienced organic growth of 3 per cent after excluding non-recurring Morrison revenues. Its operating margin was 4.2 per cent (2013: 3.7 per cent).

Mears bought Morrison Facilities Services in a £24m deal in November 2012.

In its care business, contract awards were worth £66m in the first half with a win rate of 66 per cent, compared with £21m and 37 per cent in 2013.

Turnover in the sector grew by 5 per cent to £63.2m (2013: £60.5m) and operating margin remained 7.8 per cent.

Mr Miles said Mears would take advantage of long-term opportunities in care by moving away from frameworks towards strategic partnerships.

Overall, its order book was worth £3.7bn at the half-year, down from £3.8bn in 2013.

Net cash at 30 June was £2.7m, compared with debts of £21.7m at the 2013 half-year. Meanwhile, average net debt in the period was £63m, down from £74.2m in the first half of 2013.

Mr Miles said: “We have had a good first half year and, notwithstanding the temporary delays in tendering new opportunities, the board expects earnings for the full year to be in line with its expectations.”

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