TIDMMER
RNS Number : 4712H
Mears Group PLC
25 March 2020
25 March 2020
Mears Group PLC
("Mears" or "the Group" or "the Company")
Covid-19 update
Mears Group PLC, a leading provider of services to the Housing
sector in the UK, provides the following update on the impact of
Covid-19.
Introduction
Mears provides vital front-line services, in many cases to
vulnerable people. The Group's primary focus at the current time is
to ensure continuity of service as far as possible, with the
well-being of our customers and the health and safety of our staff
of utmost importance. Working practices are evolving so as to
minimise the spread of the virus. The Group recognises that it can
play a significant role in supporting the national effort in
navigating through the emerging situation. Mears is proud of doing
the right thing in communities and, where the workforce is not
engaged in essential maintenance, they may be available to provide
other services to local communities.
Operational Impact
Over 90 per cent. of the Group's revenue is sourced through
contracts with local and central government entities and
accordingly, the Group is not exposed to counterparty credit
risk.
An element of the Group's housing activities are regarded by
central government as essential services. In addition, the Group
provides emergency maintenance services and our Housing clients
will wish to ensure that those services continue to be delivered.
The Company believes that these services, which amount to around
30% of Group revenues, will continue to be paid for and
delivered.
Other housing services will be classified as lower priority in
the current environment. These services are largely
non-discretionary and in normal circumstance provide a consistent
and highly visible revenue stream. However in the current climate,
local authorities may choose to defer these works at least for the
period of the emergency and Mears expects to see a reduction in
these activities in the short term. Where these services are paid
under a block arrangement, clients are expected to continue to make
payments under the contract. However where services are paid on a
'per activity' basis, this will result in an immediate revenue
reduction. The Company expects these activities to recover when
conditions return to normality.
The nature and potential scale of disruption means that it is
unlikely that Mears will continue to interact with its customers as
usual. The Company considers that it is likely that the Group will
experience some disruption over the coming period.
Mitigating Actions
Given the uncertainty and rapidly changing nature of the
situation, Mears is actively focused on cash conservation and cost
management. The Group has been assessing a number of downside
scenarios and is taking a number of actions to ensure that it
protects the Group's liquidity.
The Government has given all public sector contracting
authorities a clear directive to put in place the most appropriate
payment measures to support supplier cash flow. Where services are
paid 'per activity', which accounts for around half of Group
revenues, the Group is holding discussions with its Local Authority
customers to agree alternative pricing mechanisms which would allow
the Group to retain those employees engaged on those activities and
more broadly support the local supply chain. This key mitigating
action would provide the greatest protection to revenue, profit and
cash.
Over 90 per cent of debtors are with public bodies, and the
Government has made a clear commitment that invoices will be
settled quickly to maintain cash flow to the supply chain and to
protect jobs. The Government's measures relating to workforce
protection are also being implemented and will further reduce the
Group's exposure.
The Board will also monitor other areas of discretionary spend,
including capex, to ensure that only essential expenditure is
incurred, to further preserve cash.
The Group has commenced dialogue with debt providers with regard
to increasing the Group's facilities during this period of
uncertainty. The Group's debt providers have indicated their strong
support and the Group would expect to secure additional facilities
over the next month. There is no immediate requirement but the
Board wishes to secure sufficient headroom in the event that the
current emergency continues for an extended period.
However, the Board has concluded, given the over-riding
importance of cash management that it would currently be
inappropriate to pay a dividend and therefore it confirms that it
will not declare a final dividend with its final results when they
are published in the near future. This decision will be kept under
review and the Company would wish and expect to return to the
payment of dividends once it is prudent so to do.
Balance Sheet and Liquidity
The Group has a committed revolving credit facility to the value
of GBP170m which expires in November 2022. Net debt at 31 December
2019 was GBP51.0m, h owever the Directors consider the average
daily net debt to be more reflective of the debt requirements of
the business, and this was GBP114.4m for 2019. Following the
mobilisation of the Group's AASC contract, average net debt during
the last quarter of 2019 was GBP126.1m.
The Group has two banking covenants: Consolidated Net Debt to
Consolidated EBITDA (before exceptional items) at 3.00x, and
Consolidated EBITDA (before exceptional items) to Consolidated Net
Finance Charges at 3.50x. The covenants are tested biannually on 30
June and 31 December. The Company will keep these covenants under
review.
Outlook
The Board has concluded that, while positive progress is being
made on the actions above, the level of uncertainty created by the
Covid-19 pandemic is such that it should not provide guidance with
regard to financial performance for the current year until a
clearer outlook emerges.
The situation is evolving rapidly. Mears will provide further
updates to the market as and when it is able to do so. While the
short term remains uncertain, Mears considers that the services it
provides will continue to be required by its customers in the
longer term and that those long term prospects remain very
positive.
David Miles, Chief Executive Officer of the Group,
commented:
"The rapidly evolving public health emergency created by
Covid-19 will place increased demands on the Group's services, its
people and its finances. We are taking all the necessary steps to
overcome these challenges. I am confident that our staff will rise
to the challenge of effective delivery in these difficult
circumstances and that the Group will come through well. I thank
all of our stakeholders for their forbearance and their support in
these uniquely challenging times.
"The Group is well placed to battle through these short term
challenges. Our long-term goal continues to be delivering
controlled growth, improved profitability and reduced
indebtedness."
Certain information contained in this announcement would have
constituted inside information (as defined by Article 7 of
Regulation (EU) No 596/2014) ("MAR") prior to its release as part
of this announcement and is disclosed in accordance with the
Company's obligations under Article 17 of those Regulations.
For further information, contact:
Mears Group PLC
David Miles, Chief Executive Tel: +44(0)7778 220 185
Officer
Andrew Smith, Finance Director Tel: +44(0)7712 866 461
Alan Long, Executive Director Tel: +44(0)7979 966 453
www.mearsgroup.co.uk
Buchanan
Mark Court/Charlotte Slater Tel: +44(0)20 7466 5000
mears@buchanan.uk.com
About Mears
Mears currently employs around 6,500 people and provides
services in every region of the UK. In partnership with our Housing
clients, we maintain, repair and upgrade the homes of hundreds of
thousands of people in communities from remote rural villages to
large inner city estates. Mears has extended its activities to
provide broader housing solutions to solve the challenge posed by
the lack of affordable housing and to provide accommodation and
support for the most vulnerable.
We focus on long-term outcomes for people rather than short-term
solutions, and invest in innovations that have a positive impact on
people's quality of life and on their communities' social, economic
and environmental wellbeing. Our innovative approaches and market
leading positions are intended to create value for our customers
and the people they serve while also driving sustainable financial
returns for our providers of capital, especially our
shareholders.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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