TIDMMER
RNS Number : 8874L
Mears Group PLC
05 May 2020
5 May 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.
Since providing an initial update on 25 March 2020, Mears has
made excellent progress in adjusting the business to address the
current challenges whilst ensuring that the Group is well
positioned once the UK sees a return towards normality. The Group's
primary focus is the safety and well-being of our customers and
staff and to ensure continuity of service as far as possible. The
Group has quickly adapted to new working practices, following and
often exceeding Government guidelines. This has been enabled by our
long established cultural focus on safety, service and social
responsibility.
Operational progress
Normally, the Group's housing maintenance activities would
account for around two-thirds of Group revenues. These services are
largely non-discretionary and provide a consistent and highly
visible revenue stream. However in the current climate, we have
worked with Local Authority and Housing Association clients to
agree to defer works and only to deliver an emergency service. The
Group has secured interim arrangements with the majority of
maintenance clients which, together with the use of the
Government's furlough scheme, ensure recovery of direct labour and
local overheads. This has substantially reduced the financial
downside risk. The Group will continue dialogue with each client in
respect of transitioning services away from a full lockdown as
Government guidance changes and the Board will provide further
updates to the market as circumstances change.
The Group's housing management activities normally amount to
around one-quarter of Group revenues. There is no reduction in
demand in this area, given the large numbers of vulnerable people,
who often need daily support. The challenge is to continue to
support vulnerable service users whilst adhering to the strict
rules around how our employees can safely interact with colleagues
and service users. Indeed, within the Group's Asylum contract,
volume numbers are increasing, with new service users entering the
system and few exiting. Whilst the requirement for additional
accommodation is challenging in the short-term from an operational
perspective, the contractual mechanism reduces much of the
financial risk.
The Group's development activities would normally account for
around five per cent. of Group revenue. These activities have been
mothballed, and action taken to immediately reduce the fixed cost
base. This area is considered low risk from both an operational and
financial standpoint. The working capital already absorbed in this
area is secure but will unwind over a longer time horizon than
originally envisaged.
The Group's care activities account for the balance of Group
revenues and continue to deliver service as normal. The Board is
very appreciative of the hard work and professionalism of the Care
team where we continue to provide an excellent service to a
particularly vulnerable group of service users. The Group has
successfully used every avenue possible to ensure our staff have
the PPE needed to carry out their work and to support them in every
way we can. Feedback from our customers has been exceptionally
positive.
Financial impact
Excellent progress has been made in mitigating the financial
impact of the operational changes described above. The Group
believes that operating losses during the full lockdown period,
where an emergency only service is being provided, will be modest,
and a small positive free cash flow should be generated.
The Group has taken advantage of a number of reliefs made
available by Central Government. The Group has furloughed staff
where appropriate and only where staff costs could not be recovered
through our customer contracts. The Group has also enjoyed the
benefit of the deferral of its VAT liability for the March 2020
quarter, which now becomes payable in March 2021.
Liquidity and funding
The Group reported average daily net debt in 2019 of GBP114.4m.
However, following the mobilisation of the Group's Asylum contract,
average net debt during the last quarter of 2019 was GBP126.1m
which is more reflective of the debt requirement of the business at
the start of 2020. Average daily net debt in the first four months
of 2020 continued at a similar level. Importantly, cash flow in
April was positive, reflecting our clients' commitment to pay
efficiently during this period.
The Company believes that its existing banking facilities, a
total commitment of GBP170m with maturity out to November 2022,
will provide sufficient liquidity. However, the Board has
considered it prudent to secure additional headroom given these are
unique and uncertain times. An increase in facilities totalling
circa GBP22.6m is agreed and paperwork to enable availability of
funds will be completed in the next few weeks. The Board remains
confident that it will be fully compliant with its banking
covenants on 30 June 2020, being the next measurement point.
The Company announced on 25 March 2020 that it believed it
inappropriate to declare a final dividend in respect of the 2019
year. However, it remains the Board's intention to return to a
progressive dividend policy once it is confident that activity and
working practices have returned to normal and that it would be
prudent to do so. For the time being, the Company considers that it
should refrain from providing guidance as to likely financial
performance for the 2020 year.
David Miles, Chief Executive Officer of the Group,
commented:
"The Group has made excellent progress in taking the necessary
steps to address these current challenges. Whilst it is not
possible to predict the future with certainty, I am confident as to
the financial stability and the long-term wellbeing of the Group. I
am extremely proud of the professionalism and hard work shown by
the Mears team in the most challenging of circumstances."
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 7,500 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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