TIDMMER
RNS Number : 2320H
Mears Group PLC
16 August 2016
16 August 2016
Mears Group PLC
("Mears" or "the Group" or "the Company")
Interim Results
For the six months to 30 June 2016
Mears Group PLC, the provider of support services to the Social
Housing and Care sectors in the UK, is pleased to announce interim
results for the six months to 30 June 2016.
Financial Highlights
2016 2015 change
Revenue GBP466.2m GBP430.0m +8%
Operating profit
margin* 4.2% 4.7%
Profit before
tax* GBP18.2m GBP19.2m -5%
Diluted earnings
per share 9.97p 11.16p -11%
Normalised diluted
EPS* 13.55p 14.62p -7%
Interim dividend
per share 3.30p 3.10p +6%
Cash conversion 91% 92%
------------------- --------- --------- ------
* Stated before amortisation of acquisition intangibles. The
normalised diluted EPS measure is further adjusted to reflect a
full tax charge.
-- Revenue of GBP466.2m (2015: GBP430.0m), growth of 8%.
o The Housing division, which accounts for 84% of Group
revenues, reported revenues increasing to GBP389.6m (2015:
GBP366.5m), organic growth of 6%, following a particularly
successful period of new bidding in the second half of 2015.
o The Care division, which accounts for 16% of Group revenues,
contributed revenues of GBP76.6m (2015: GBP63.5m), reflecting a
flat underlying performance after excluding the impact of the
acquired Care at Home business ('CAH').
-- Operating margin of 4.2% (2015: 4.7%).
o The Housing operating margin decreased as expected to 4.8%
(2015: 5.0%) which reflects the diluting impact from a busy period
of new contract mobilisations.
o Housing margins expected to normalise in the second half of
the year as mobilisations bed down.
o The Care operating margin reduced to 1.3% (2015: 4.6%) which
is in line with management expectations and reflects the trends
reported in 2015.
-- Following the decision to exit unsustainable Care contracts,
the planned reduction in revenues of 20% will reinforce our
commitment to operational quality and allow us to focus on our more
strategically important clients. Given the estimated cost of this
decision, the Care division is expected to be close to break-even
for the full year. All costs of change will be recognised within
normal trading. Our Care margin expectations for 2017 remain
unchanged.
-- Order book at GBP3.5bn (2015: GBP3.2bn) reflecting a
particularly successful period of new contract bidding over the
last twelve months.
-- 98% visibility of consensus forecast revenue for 2016 and 85%
for 2017 (2015: 96% and 85% respectively).
-- Net debt at 30 June 2016 was GBP14.1m (2015: GBP4.2m)
reflecting the increase in working capital required to support the
new contract mobilisations. Cash conversion of 91% of EBITDA from
continuing operations over the rolling twelve month period to June
2016 (2015: 92%) reflects continuing strong working capital
management.
-- The Board is declaring an interim dividend of 3.30p per share
(2015: 3.10p), an increase of 6%, reflecting confidence in the
underlying performance of the Group.
Commenting, David Miles, Chief Executive, Mears, said:
"I am pleased with our progress delivered in the first half of
2016, particularly with the advancement made by our Housing
division. We have positioned ourselves to provide a broader service
offering in housing to a market where we are seeing an increasing
blurring of the boundaries around social, affordable and private
rented housing. Our early move into Housing Management makes us
ideally placed to benefit from a healthy and wider pipeline of
opportunities. The innovative nature of these propositions has
meant that much of our work has been secured without the
requirement for an extended, competitive tender process which I
expect to be a continuing trend.
"We continue to find the Care market challenging. However, we
remain confident that we have the right strategy and that the
business is best placed to take advantage of industry evolution as
it happens. In this period, our key partnering contracts have
delivered well for all stakeholders. Moving forward, we will place
greater emphasis on maintaining a portfolio of high quality
contracts at sustainable margins. Our decision to exit
unsustainable contracts necessarily impacts our results for the
current year, but more importantly, it is an important step in our
and the industry's evolution to a sustainable future.
"We continue to achieve high levels of service delivery and
customer satisfaction. This is particularly pleasing given the
number of new contracts mobilised in the period. The quality of our
service delivery continues to be our key differentiator and
underpins our success in winning new contracts in both of our core
growth sectors.
"We have had a solid first half year. The Board expects
underlying trading for the full year to remain on-track before the
one-off costs associated with the pruning of our Care activities,
and we look forward to updating you with further progress over the
course of the second half."
A presentation for analysts will be held at 9.30 a.m. today at
the offices of Buchanan, 107 Cheapside, London, EC2V 6DN.
For further information, contact:
Mears Group PLC
David Miles, Chief Tel: +44(0)7778 220 185
Executive
Andrew Smith, Finance Tel: +44(0)7712 866 461
Director
Alan Long, Executive Tel: +44(0)7979 966 453
Director
Bob Holt, Non-Executive Tel: +44(0)7778 798 816
Chairman
www.mearsgroup.co.uk
Buchanan
Richard Darby/ Sophie Cowles Tel: +44(0)20 7466 5000
www.buchanan.uk.com
Notes for editors
Mears is a leading provider to Local Authorities, Registered
Social Landlords and the NHS. We deliver repairs and maintenance
services and personal care services directly into communities and
people's own homes.
Increasingly our growth is coming from Housing management
services, that help reduce homelessness and more complex and
integrated care solutions to the NHS that enable people to stay in
their own homes for longer.
Mears employs in excess of 17,000 people and provides
maintenance and repairs services to circa 15% of the UK social
housing stock. Mears also provides care, on a daily basis, to over
30,000 service users.
Business Review
We are pleased to announce a solid set of interim results for
the six months ended 30 June 2016.
Group revenue amounted to GBP466.2m (2015: GBP430.0m), an
increase of 8%, reflecting strong organic growth in Housing
together with the full six month contribution from our 2015
acquisition of Care at Home. ('CAH').
We have enjoyed a successful period of new contract bidding,
securing over GBP420m of new work. The order book has increased to
GBP3.5bn (2015: GBP3.2bn) providing 98% visibility of consensus
forecast revenue for 2016 and in excess of 85% visibility for 2017
(2015: 96% and 85% respectively).
Following the high number of new contract mobilisations in
Housing, combined with a lower margin in Care, profit before tax
and before the amortisation of acquisition intangibles shows a
small reduction, in line with our expectations, to GBP18.2m (2015:
GBP19.2m). Normalised diluted earnings per share, based upon
earnings before amortisation of acquisition intangibles and after
an 18% tax charge, reflects this profit reduction, decreasing by 7%
to 13.55p (2015: 14.62p).
We have continued to deliver solid cash flows with cash
generated from continuing operations as a proportion of EBITDA at
91% for the rolling twelve month period to 30 June 2016 (2015:
92%), this reflects some cash utilisation to fund organic revenue
growth. Average daily net debt for the period increased to GBP75m
(2015: GBP69m), which reflects the outflow of cash to fund
acquisitions.
The Board is declaring an interim dividend of 3.30p per share
payable on 1 November 2016 to shareholders on the Register on 14
October 2016. This represents an increase of 6% (2015: 3.10p) and
indicates the Board's continuing confidence in the Group's
future.
Housing
The Board is very pleased with the progress made by our Housing
division, where we have positioned ourselves to provide a broader
service offering to a market where we are seeing an increasing
blurring of the boundaries around social, affordable and private
rented housing. Whilst we have increased the depth and breadth of
our capabilities, we place particular emphasis upon ensuring that
our wide spectrum of core skills is entwined within the single
operating unit which is important given the increasingly complex
housing challenges being faced by our clients.
The Housing business has continued to deliver excellent
financial performance with revenues of GBP389.6m (2015: GBP366.5m),
an increase of 6% reflecting a particularly busy period of new
contract mobilisations. We have excellent revenue visibility for
the rest of 2016 and we are on track to deliver organic growth for
the full year in the region of 10%. As anticipated at the start of
the year, our operating margin in the first half year of 4.8%
(2015: 5.0%) was diluted by the high number of mobilisations of new
contracts. Typically, the Group anticipates a lower margin from a
new contract during its mobilisation phase, being a time when the
primary focus is in investing resources to establish excellent
customer service. The new contract mobilisations are proceeding to
plan and we expect operating margins to normalise during the second
half of the year.
The Housing division has secured new contracts of GBP259m, with
a new contract win rate on competitively tendered works well ahead
of its historical average of 33% (by value) (2015: GBP185m and
33%). Key to this success, now more than ever, is our ability to
develop and deliver innovative solutions for our customers, as we
have done with our new Milton Keynes contract. Service quality
remains a key differentiator, and I am again pleased to report that
over 90% of tenants continue to rate our service as excellent.
Whilst we focus upon a single Housing division, we have provided
a breakdown of constituent revenue streams to assist
commentary:
2016 2015
GBPm GBPm
----------------------- ----- -----
Maintenance 299.4 294.0
Regeneration 49.2 50.5
Housing management 41.0 22.0
----------------------- ----- -----
Total Housing revenues 389.6 366.5
----------------------- ----- -----
Maintenance
The Housing division saw Maintenance revenues increase to
GBP299.4m (2015: GBP294.0m). Whilst this implies organic growth of
only 1%, the majority of new contracts only commenced in April 2016
and so these new activities are therefore not fully reflected in
the half year figures. Notable contract activities include:
-- Mears formed a new joint venture company with Milton Keynes
Council called YourMK, initially focusing upon the regeneration of
key areas in Milton Keynes. The contract, which mobilised in April
2016, is initially delivering repairs and maintenance services to
nearly 11,500 homes but we are already seeing a significant
extension to the scope of works. This significant contract is
valued at GBP250m over five years.
-- Mears has been awarded additional areas to its existing Home
Group contract. Mears is the incumbent contractor in both the South
West and North East of England, covering circa 20,000 homes. Mears
has been awarded a five year contract to deliver responsive
repairs, voids, gas servicing and planned maintenance services to a
further 5,000 properties in the Central region. In addition, Mears
has also been awarded a twelve month emergency contract to deliver
the same range of services to 10,000 properties in the North West
region. These two additional contracts, which were mobilised over a
short timescale in April 2016, are together valued at around
GBP35m.
-- Mears was re-awarded a contract with Sutton Housing
Partnership to provide responsive repairs, voids and planned
maintenance services to around 6,000 homes. The contract was
previously awarded on an emergency basis following the termination
of the incumbent provider. The new award of a ten year contract,
valued at GBP45m, is a testament to the Group's willingness to take
the contract at short notice. The new contract mobilised in July
2016.
-- As previously reported, this is an important year with three
material contract re-bids. Mears was successful in re-securing the
Sedgefield contract for responsive and planned maintenance to
approximately 8,500 homes and is valued at GBP110m over the ten
year contract term. The new contract started in July 2016. In
addition, we have been notified that we have been successful in
being appointed as Commercial Adviser in respect of our Gateshead
contract. The new contract, which is due to commence in April 2017,
will see Mears take a greater role in the strategic development of
our partnership to an enlarged insourcing solution. Our Manchester
City Council joint venture is the last material re-bid this year,
with the existing contract due to expire in March 2017, and the
tender process is on-going.
Regeneration
The Housing division saw capital work revenues broadly
maintained at GBP49.2m (2015: GBP50.5m). Whilst the level of spend
on one-off refurbishment projects has reduced, we are seeing a high
number of new development opportunities with existing customers.
During the last 12 months, Mears has broadened its service
capability to include the provision of new build services,
primarily targeting our existing Housing clients. Mears is not a
property developer, general builder or asset holder and will focus
on managing assets for the benefit of owners and client public
sector bodies. Notable contracts secured during the period
include:
-- Further to the long-term maintenance works that we are
delivering for our Welwyn and Hatfield Council client, we have been
engaged to develop 29 affordable rented homes on a brownfield site.
The works are valued at GBP5.6m and the contract is due to complete
at the end 2017. Mears will take over the long-term maintenance of
these new homes giving a seamless solution to the housing
requirements of Welwyn and Hatfield Council.
-- Mears' success in securing the venture with Milton Keynes
Council, which saw the commencement of repairs and maintenance
services in April 2016, has already seen the scope of works
expanding. Mears has been engaged to develop 80 new homes, spread
across seven infill sites around the city. These homes will be for
affordable rent, once finished, with a contract value of
approximately GBP11m. Site work starts in Spring 2017 and will
complete in early 2018.
Housing Management
The Housing division saw Housing Management revenues increase by
86% to GBP41.0m (2015: GBP22.0m). This business stream is seeing
significant growth opportunities with an annual revenue run-rate
now exceeding GBP100m. Mears has quickly become the leading
provider of housing management services to the Public sector,
delivering a range of innovative and unique solutions. The
innovative nature of these propositions has meant that much of the
work has been secured without the requirement for an extended,
competitive tender process. We expect this to be a continuing
trend.
The number of units under management at this time are detailed
below:
June 2016 June 2015
Homelessness 4,785 3,384
Affordable 389 336
Key worker 4,132 -
Student 450 -
----------------------------- ----------- -----------
Total units under management 9,756 3,720
----------------------------- ----------- -----------
-- Mears mobilised a Key Worker Housing contract providing a
full Housing Management service throughout the UK. This includes
sourcing properties, managing the application and allocation
process as well as the subsequent day to day administration. The
contract, which fully mobilised in April 2016, is valued at around
GBP190m over the initial three year term.
-- Mears has been engaged by a London Borough to arrange the
purchase and refurbishment of 400 homes, currently under private
ownership. The key aim is to provide the Borough with an
alternative, affordable housing supply to replace the significant
bed and breakfast accommodation costs incurred by the Borough.
Mears has engaged funding partners to finance the purchase of
properties on behalf of the client. We will then carry out
refurbishment works and act as managing agent for the portfolio.
The contract will be operated by the Borough and Mears for up to 40
years and is valued at circa GBP50m. The operation mobilised in
February 2016, and the purchase and refurbishment phase will
continue over a period of 24 months. This is typical of a number of
opportunities within the pipeline.
-- Mears has entered into a contract with Safe Haven, a charity
which acquires homes to use as temporary accommodation for the
London Borough of Ealing. Safe Haven own around 200 homes with a
clear plan to increase this number to 400. Mears is engaged, over
an initial 20 year term, to carry out all housing management
services, including an initial refurbishment programme, so that the
homes will now be a long-term affordable housing provision for the
Council.
-- Mears, through its Registered Provider of Social Housing, and
HB Villages are working in partnership to create a new supply of
purpose built accommodation for the Care sector. The objective is
for HB Villages to develop and fund the new housing with Mears
providing long-term tenancy and asset management services to the
residents. This will provide both the residents, their families and
the local authorities with assurance in the standard of housing
services and the long-term security of affordable housing delivered
by a Registered Provider. At the same time, Mears Care will engage
with social care commissioners to develop the design and provision
in each new development to ensure it meets the requirements of
residents and to better understand local need. A pipeline of some
20 possible developments are being jointly brought forward on this
basis. The first scheme in Northampton is for an 80 home Extra Care
complex with Mears providing both housing management and care.
-- Mears is working with investors and universities to provide
good quality, well managed and value for money accommodation for
students in the UK. We are taking a long-term interest in the
letting, management and maintenance of purpose built accommodation.
Initially, we are focussing on identifying assets which, whilst
enjoying great locations, require investment and refurbishment.
This enables the Group to deploy its combined core strengths of
refurbishment, facilities management and customer service through
management services. The first sites have been secured and it is
anticipated that 2,200 beds across 8 sites will be under management
for the 2016/17 academic year. One such building in Dundee will
undergo a multi-million pound investment programme during the year
to significantly enhance the experience to students. In addition,
two new opportunities are being developed for opening in 2017 and
2018 respectively which will bring the portfolio to 3,000 beds.
Care
The results of the Care division continue to reflect the
challenging trading conditions in the market. Revenues were
GBP76.6m (2015: GBP63.5m), reflecting a flat underlying performance
after excluding the contribution from the acquisition of CAH and
other minor reclassifications. The Care margin reduced to 1.3%
(2015: 4.6%), in line with management expectations, reflecting the
continuing trends reported in 2015, specifically the acquisition of
the loss-making CAH division of Care UK and continued investment in
the Care workforce.
As previously reported, in the second half of 2015 we commenced
a business planning process which involved a detailed review, on a
contract by contract basis, of charge rates and care worker pay
rates. The process placed particular focus upon managing the impact
of the National Living Wage (NLW) and also finding more effective
solutions to the sourcing and retention of sufficient, good
quality, care workers.
It is critical for all care providers to maintain a significant
differential between their care worker pay rates and the NLW. We
have now concluded the dialogue with all our clients. Pleasingly a
large number of care commissioners have shown a deeper
understanding of the true underlying cost of delivering care. This
has resulted in an increasing acceptance that the NLW represents
solely a legal minimum, and that one cannot expect to recruit
individuals to deliver home care, and to accept the
responsibilities that go with this role, at this minimum rate. It
remains a key part of our long-term strategy to see care workers
properly recognised as the skilled workers they undoubtedly
are.
Following this review, we are placing greater emphasis on
maintaining a portfolio of contracts that can provide clear and
sustainable margins. In aggregate, we have seen a blended increase
in our charge rates of circa 6.6%, which is generally in line with
the increase in our carer payroll cost and is better than the
average increase given to providers within the sector. However, our
detailed review has highlighted a significant disparity both
between regions and in some cases within regions. We would not
generally anticipate significant price variances except in London
and in particular rural locations. The outcome of our review has
highlighted those care commissioners who we believe, in the medium
term, have little desire to change their commissioning strategies
and where there is little likelihood of contract pricing that will
allow providers to deliver care responsibly. This outcome has led
to a more aggressive restructuring of our Care division which will
see a reduction in Care revenues of some 20%, a significant
proportion of which arise within our North region, which has the
lowest charge rates and traditional procurement methods.
Where charge rates are not sustainable, Mears has formally
communicated its intention to withdraw from delivering services to
all those clients. We are committed to the well-being of our
service users and are at an advanced stage of agreeing exit plans
with those clients while maintaining a good level of service and
compliance in the lead up to a successful transition. The majority
of the exits will conclude during the second half of 2016 with a
number extending into the early part of 2017. Whilst the local
closures come at a cost, the significant majority of our 1,800
employees attached to the respective branches will have the
opportunity to transfer to the new provider. As a result of the
closures, the Group has also commenced a restructure of all its
Care support functions - our focus is not just to re-size the
business to reflect reduced volumes, but more importantly to create
a long-term support structure that is more scalable. Given the
estimated cost of these changes, we expect the Care division to be
close to break-even for the full year. All costs of change will be
recognised within normal trading and to the extent permissible by
accounting standards, we would look to make full provision for
these exit costs within the current financial year.
During the first half of 2016, encouraging progress has been
made in improving the quality of our Care order book. Notably:
-- Mears was awarded a contract with Devon County Council
(Devon) for the provision of homecare services. The contract is for
an initial five year period with an option to extend for a further
two years and is worth over GBP100m. Mears is acting as the lead
provider partner in four geographic areas across the South of Devon
and is responsible for organising and delivering personal care
services in that area, predominantly co-ordinating and supporting
the local SME providers. The new approach to commissioning local
services aims to ensure a more sustainable supply of care and
support, recognising and rewarding care providers and care workers
in their vital role, whilst also reducing Devon's costs of managing
the outsourced services. The contract commenced in July 2016.
-- Mears was awarded further contracts by Wiltshire Council
(Wiltshire), as lead provider within zones in the North and West
regions of the county, to add to our existing work in the South and
East. This will mean Mears will be the prime provider for the
significant majority of this work across the county. The new
contract will double the overall value of the work done by Mears in
the county. The additional work has been awarded to Mears due to
the high levels of service and partnership working we have
delivered under our existing contract. We believe this is a further
endorsement of our long-term strategy for Care. The new contract
commences in August 2016.
-- Mears has re-secured our existing care contract with the
London Borough of Richmond, a client with whom we have enjoyed a
long-standing relationship. The new contract, which commenced in
July 2016, is for six years and will see us provide around 4,000
hours of support per week, potentially doubling our current sales
volume. The new contract also requires all care workers to be paid
in line with the London Living Wage, being GBP9.40 per hour, which
is very positive for carer recruitment and also better reflects the
high-quality service that our Richmond carers deliver.
-- We currently see three other partnering opportunities in the
pipeline and we expect more to follow this promising trend.
We have become increasingly selective in new contract bidding
focusing on larger sustainable opportunities. We are pleased to
have secured circa GBP165m of contract wins at a win rate of 77% by
value (2015: GBP35m and 60%). More importantly, the quality of the
new orders secured is much improved, enjoying a significantly
higher charge rate, so enabling us to reflect this within our carer
pay and conditions. The average contract lengths of these latest
awards has increased to in excess of five years and the number of
providers reduced significantly, which reflects the trends which we
anticipated and should in the future result in a better quality of
earnings from our Care activities.
The drivers for change in the care and support market have never
been greater. The last five years have seen a 160% increase in the
number of delayed hospital discharges due to lack of care capacity
in the community. The last twelve months alone have seen a 40%
increase. Overall, Local Authority spend has seen a slight increase
in the last year, partly financed by the ability of councils to
increase Council Tax by an additional 2% to help fund NLW cost
increases. The Mears strategy is clear and focused, being to
concentrate our support on those Council and NHS Trusts that are
prepared to invest in front line homecare services as a means to
prevent much greater cost increases across the health and social
care spectrum. We are also demonstrating market leadership by
exiting contracts where councils continue to focus on an outdated
and unsustainable hourly charge rate. We believe it is by
supporting the innovators, and taking a stand on poor commissioning
practices, that we can drive the change that the homecare market
needs. Mears is being widely recognised now as the organisation in
homecare that is doing the most to drive change and which we
believe is a real positive for the long-term development of our
business.
Balance Sheet
The Group's reported total equity at 30 June 2016 of GBP195.1m
(2015: GBP202.1m). The carrying value of goodwill is GBP193.1m
(2015: GBP192.5m) and is not amortised but reviewed for impairment
on an annual basis or more frequently where there is an indication
of impairment. The Board recently carried out a detailed business
planning process which underpins its impairment review and supports
the carrying value of the Care goodwill. The Board remains
confident that its strategy for Care will deliver long-term value
for its stakeholders.
The Group's capital expenditure of GBP5.2m (2015: GBP1.8m)
relates to IT hardware, other office equipment and the
refurbishment of new office premises. The majority of plant
utilised by our operational teams is subject to short-term hire,
whilst motor vehicles are subject to operating leases and hence
neither are included within capital expenditure or recognised as an
asset within the balance sheet. The level of capital expenditure in
respect of property, plant and equipment has been consistent over
several years and we would anticipate these low levels being
maintained.
Trade receivables and inventories remained stable at GBP167.4m
(2015: GBP168.0m), which reflects good working capital management
within a growing business. Trade payables rose to GBP183.2m (2015:
GBP173.6m), in line with the organic growth of the Group.
Strong working capital management has always been and remains a
cornerstone of our business. Our IT systems have a strong financial
focus and this is a driving force behind our efficient cash
management. Our net debt at 30 June 2016 was GBP14.1m (2015:
GBP4.2m) following conversion of 91% of EBITDA from continuing
operations to cash over the rolling twelve month period to June
2016 (2015: 92%). Typically, following an intensive period of cash
collection, the accounting period end has a low debt balance when
compared to the rest of the year. A far more important metric is
the Group's daily net debt balances which provide a better
indication of working capital management throughout the period. The
average net debt over the six months was GBP75.0m (2015: GBP69.0m),
which is pleasing given the Group incurred outflows of GBP16.1m in
respect of acquisitions over the last twelve months.
During the first half year, the Group finalised the 'amend and
extend' to its revolving capital facility which extended the expiry
date from July 2018 to July 2020 plus an extension option of a
further one year. The total commitment under the facility increased
from GBP120m to GBP140m. The revised facility results in a
reduction to the interest cost with the margin payable over and
above LIBOR, which is subject to a ratchet mechanism, reducing to a
range of 120-220bps. The Group continues to maintain a strong
relationship with both of its bankers, Barclays and HSBC.
The Group participates in a number of defined benefits pension
schemes. Whilst the aggregate of all the schemes reports a net
asset position, the Group is mindful of managing its risks in this
area. The Group has not carried out a revised actuarial valuation
in support of the half year position. Under IAS19, pension scheme
liability values are driven by changes in the net discount rate,
which is the yield on high quality corporate bonds less the
long-term rate of expected price inflation. Since late June,
following the result of the EU referendum, an increasingly volatile
macro-economic environment has resulted in a downward move in the
net discount rate. If this position were to remain the same at the
December 2016 year end, one could expect a significant increase to
pension liabilities which may result in the current net asset
position of GBP4m deteriorating to a net deficit position.
Dividend
The Board remains confident in the future opportunities in our
growth markets and consequently it expects to continue following a
progressive dividend policy. The Board is declaring an interim
dividend of 3.30p per share payable on 1 November 2016 to
shareholders on the Register on 14 October 2016. This represents an
increase of 6%, reflecting the Board's confidence in the underlying
performance of the Group. The Board regularly reviews the Group's
dividend policy to maximise returns to shareholders whilst
maintaining a prudent capital structure and retaining the ability
to invest for growth.
Corporate governance and risk management
Our Corporate Governance Report issued within our Annual Report
for 2015 detailed how we approach governance. The Board continues
to set itself high standards of corporate governance.
We continue to review our risk management and principal risks.
The Senior Management Team reviews and identifies the key risks
which will impact upon the achievement of the Group's strategic
goals and considers how these risks are developing with changes in
its operations. The key risks of the Group as at 30 June 2016 are
those detailed within the Annual Report for 2015 and remain
unchanged.
Our people
I commend our employees for their commitment and energy
throughout another significant period for the Group and I continue
to be impressed by their quality, professionalism and loyalty.
Mears has a diverse workforce of over 17,000 staff including 400
apprentices; the vast majority of our employees living in the areas
in which they work. Diversity and respect for all is core to our
induction, recruitment and customer care programmes.
Outlook for the Group
Our dedication to providing our clients with first class service
and value remains undiminished and is key to how we manage the
business.
I am pleased with the progress made by the Group, particularly
within our Housing division, where we have successfully extended
our services from our traditional maintenance base to a broader
affordable housing offering. Our strategy to broaden our service
offering in Housing has created a significant sustainable
competitive advantage for Mears. We expect our Housing business to
continue to grow through further contract wins. Whilst we are the
market leader, we deliver services to around 15% of the UK's social
housing market, which provides us with significant headroom for
growth. Furthermore, our Housing Management capabilities offer
material growth opportunities, as the demand for affordable housing
requires that housing providers work harder and smarter to increase
the supply of suitable housing through innovation and partnership.
We believe the Housing division is well positioned to deliver
strong organic growth. Where appropriate, we will continue to make
acquisitions to develop the breadth and depth of our services.
Our guidance remains unchanged in Housing. We remain on-track to
deliver annual revenue growth of 5-10% per annum over the medium
term and the strong revenue visibility underpins the Board's
confidence. We believe we can maintain our Housing margin at its
historic normalised range of 5.7-6.0%, assisted by the shifting
sales mix towards housing management services, which typically
generate a higher operating margin.
We firmly believe in our long-term Care strategy and that Mears
is best placed to benefit from the inevitable market evolution. The
planned reduction in revenues, following our decision to exit
around 20% of our existing contracts, will allow the business to
focus on operational quality and switch focus to those
strategically important clients which we believe have potential to
develop into partnerships and where we are able to deliver a high
quality service at sustainable margins. Whilst the cost of these
changes will impact negatively on our financial performance in the
current financial year, we believe the margin generated by this
division can reach similar levels to those of Housing in the medium
to long-term.
Continued funding issues in the care market will create a
catalyst for change. Whilst we do not see a strong prospect of
immediate fundamental change, we are clear in our view that,
increasingly, commissioners will have to look to re-balance their
contract estate, focusing on working with fewer, better-run,
service delivery partners. Moreover, further opportunities will
result from localised health related outsourcing. Our
market-leading approach to service quality and innovation puts us
in a strong position, and as the care market evolves, we expect to
benefit disproportionately.
We have had a solid first half year and we look forward to
updating shareholders with further successes over the course of the
second half.
David Miles
david.miles@mearsgroup.co.uk
Chief Executive Officer
16 August 2016
Half year condensed consolidated income statement
For the six months ended 30 June 2016
Six months Six months
ended ended
30 June 2016 30 June 2015
---------------------- ---------------------
Note GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------ ----- ---------- ---------- --------- ----------
Sales revenue 3 466,153 430,022
Cost of sales (346,667) (318,011)
------------------------------------ ----- ---------- ---------- --------- ----------
Gross profit 119,486 112,011
Other administration expenses (100,105) (91,601)
------------------------------------ ----- ---------- ---------- --------- ----------
Operating result before intangible
amortisation 3 19,381 20,410
Amortisation of acquisition
intangibles (5,419) (4,519)
------------------------------------ ----- ---------- ---------- --------- ----------
Total administration expenses (105,524) (96,120)
------------------------------------ ----- ---------- ---------- --------- ----------
Operating profit 3 13,962 15,891
Net finance charge 4 (1,226) (1,199)
------------------------------------ ----- ---------- ---------- --------- ----------
Profit for the period before
tax 12,736 14,692
Tax expense 5 (1,536) (2,487)
------------------------------------ ----- ---------- ---------- --------- ----------
Profit for the period 11,200 12,205
------------------------------------ ----- ---------- ---------- --------- ----------
Attributable to:
Equity holders of the Company 10,266 11,460
Non-controlling interests 934 745
------------------------------------ ----- ---------- ---------- --------- ----------
Profit for period 11,200 12,205
------------------------------------ ----- ---------- ---------- --------- ----------
Earnings per share
Basic 7 10.08p 11.28p
Diluted 7 9.97p 11.16p
Normalised diluted 7 13.55p 14.62p
------------------------------------ ----- ---------- ---------- --------- ----------
Half year condensed consolidated statement of comprehensive
income
For the six months ended 30 June 2016
Six months Six months
ended ended
30 June 30 June
2016 2015
GBP'000 GBP'000
--------------------------------------------- ----------- -----------
Net result for the period 11,200 12,205
--------------------------------------------- ----------- -----------
Other comprehensive income for the period
Which will be subsequently reclassified
to the Income Statement:
Cash flow hedges:
- gains/(losses) arising in the period (126) 151
- reclassification to Income Statement 260 243
Decrease in deferred tax asset in respect
of cash flow hedges (22) (72)
Which will not be subsequently reclassified
to the Income Statement:
Actuarial gain on defined benefit pension - -
scheme
--------------------------------------------- ----------- -----------
Other comprehensive income for the period 112 322
--------------------------------------------- ----------- -----------
Total comprehensive income for the period 11,312 12,527
--------------------------------------------- ----------- -----------
Attributable to:
Equity holders of the parent 10,378 11,782
Non-controlling interests 934 745
--------------------------------------------- ----------- -----------
Total comprehensive income for the period 11,312 12,527
--------------------------------------------- ----------- -----------
Half year condensed consolidated balance sheet
As at 30 June 2016
As at As at As at
30 June 31 December 30 June
2016 2015 2015
Note GBP'000 GBP'000 GBP'000
-------------------------------------- ----- -------- ------------ --------
Assets
Non-current
Goodwill 193,058 193,058 192,470
Intangible assets 30,019 31,851 34,299
Property, plant and equipment 19,468 18,436 16,841
Pensions and other employee
benefits 8,272 8,272 15,131
Financing assets 650 - -
Deferred tax asset 6,617 6,584 9,499
-------------------------------------- ----- -------- ------------ --------
258,084 258,201 268,240
-------------------------------------- ----- -------- ------------ --------
Current
Assets included in disposal - 13,255 -
group classified as held for
sale
Inventories 8,368 9,021 9,341
Trade and other receivables 158,995 146,879 158,651
Financing assets 553 - -
Cash at bank and in hand 53,668 68,612 63,606
-------------------------------------- ----- -------- ------------ --------
221,584 237,767 231,598
-------------------------------------- ----- -------- ------------ --------
Total assets 479,668 495,968 499,838
-------------------------------------- ----- -------- ------------ --------
Equity
Equity attributable to the
shareholders of Mears Group
PLC
Called up share capital 9 1,025 1,019 1,019
Share premium account 58,248 58,124 58,086
Share-based payment reserve 1,651 1,651 2,353
Hedging reserve (460) (572) (640)
Merger reserve 46,214 46,214 46,214
Retained earnings 88,754 86,438 96,353
-------------------------------------- ----- -------- ------------ --------
Total equity shareholders'
funds 195,432 192,874 203,385
Non-controlling interest (312) (1,246) (1,259)
-------------------------------------- ----- -------- ------------ --------
Total equity 195,120 191,628 202,126
-------------------------------------- ----- -------- ------------ --------
Liabilities
Non-current
Long-term borrowing and overdrafts 57,500 57,500 57,500
Pension and other employee
benefits 4,224 4,224 8,372
Deferred tax liabilities 5,906 6,970 9,039
Financing liabilities 1,346 368 451
Other liabilities 9,929 15,396 26,392
-------------------------------------- ----- -------- ------------ --------
78,905 84,458 101,754
-------------------------------------- ----- -------- ------------ --------
Current
Liabilities included in disposal - 13,255 -
group classified as held for
sale
Short-term borrowings and overdrafts 10,284 10,290 10,291
Trade and other payables 183,179 194,103 173,608
Financing liabilities 626 510 533
Current tax liabilities 3,454 1,724 4,240
Dividend payable 8,100 - 7,286
-------------------------------------- ----- -------- ------------ --------
Current liabilities 205,643 219,882 195,958
-------------------------------------- ----- -------- ------------ --------
Total liabilities 284,548 304,340 297,712
-------------------------------------- ----- -------- ------------ --------
Total equity and liabilities 479,668 495,968 499,838
-------------------------------------- ----- -------- ------------ --------
Half year condensed consolidated cash flow statement
For the six months ended 30 June 2016
Twelve
Six months Six
months months
ended ended ended
30 June 30 30 June
June
2016 2016 2015
Note GBP'000 GBP'000 GBP'000
------------------------------------------- ----- --------- --------- ---------
Operating activities
Result for the period before tax 12,736 23,963 14,692
Adjustments 10 10,462 21,443 8,905
Change in inventories and operating
receivables (11,655) (2,823) (2,717)
Change in operating payables (7,226) (2,350) (12,330)
------------------------------------------- ----- --------- --------- ---------
Cash inflow from continuing operating
activities before taxes paid 4,317 40,233 8,550
Taxes paid (924) (5,147) (1,665)
------------------------------------------- ----- --------- --------- ---------
Net cash inflow from operating
activities of continuing operations 3,393 35,086 6,885
------------------------------------------- ----- --------- --------- ---------
Net cash outflow from operating - (4,503) -
activities of discontinued operations
------------------------------------------- ----- --------- --------- ---------
Net cash inflow from operating
activities 3,393 30,583 6,885
------------------------------------------- ----- --------- --------- ---------
Investing activities
Additions to property, plant and
equipment (5,165) (6,225) (1,809)
Additions to other intangible
assets (1,538) (3,061) (1,454)
Proceeds from disposals of property, - 86 -
plant and equipment
Acquisition of subsidiary undertaking,
net of cash (10,019) (17,618) (11,421)
Interest received 10 90 78
------------------------------------------- ----- --------- --------- ---------
Net cash outflow from investing
activities (16,712) (26,728) (14,606)
------------------------------------------- ----- --------- --------- ---------
Financing activities
Proceeds from share issue 130 169 1,380
Finance lease payments (320) (621) (244)
Interest paid (1,429) (2,761) (1,434)
Dividends paid - Mears Group shareholders - (10,445) -
Dividends paid - non controlling - (128) -
interests
------------------------------------------- ----- --------- --------- ---------
Net cash outflow from financing
activities (1,619) (13,786) (298)
------------------------------------------- ----- --------- --------- ---------
Cash and cash equivalents at beginning
of period 822 (4,185) 3,834
------------------------------------------- ----- --------- --------- ---------
Net (decrease)/increase in cash
and cash equivalents (14,938) (9,931) (8,019)
------------------------------------------- ----- --------- --------- ---------
Cash and cash equivalents at end
of period (14,116) (14,116) (4,185)
------------------------------------------- ----- --------- --------- ---------
Cash and cash equivalents is comprised
as follows:
- cash at bank and in hand 53,668 53,668 63,606
- borrowings and overdrafts (67,784) (67,784) (67,791)
------------------------------------------- ----- --------- --------- ---------
Cash and cash equivalents (14,116) (14,116) (4,185)
------------------------------------------- ----- --------- --------- ---------
Cash conversion key performance
indicator
Cash inflow from operating activities 4,317 40,233 8,550
EBITDA 20,675 44,366 23,447
------------------------------------------- ----- --------- --------- ---------
Conversion (%) 20.9% 90.7% 36.4%
------------------------------------------- ----- --------- --------- ---------
Half year condensed consolidated statement of changes in
equity
For the six months ended 30 June 2016
Attributable to equity shareholders
of the Company
---------------------------------------------------------------
Share Share-based Non-
Share premium payment Hedging Merger Retained controlling Total
capital account reserve reserve reserve earnings interests equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------- -------- -------- ------------ -------- -------- --------- ------------ --------
At 1 January
2015 1,011 56,714 1,653 (962) 46,214 92,179 (2,347) 194,462
--------------------- -------- -------- ------------ -------- -------- --------- ------------ --------
Net result for
the period - - - - - 11,460 745 12,205
Other comprehensive
income - - - 322 - - - 322
--------------------- -------- -------- ------------ -------- -------- --------- ------------ --------
Total comprehensive
income for the
period - - - 322 - 11,460 745 12,527
--------------------- -------- -------- ------------ -------- -------- --------- ------------ --------
Issue of shares 8 1,372 - - - - - 1,380
Share option
charges - - 700 - - - - 700
On acquisition - - - - - - 343 343
Dividends - - - - - (7,286) - (7,286)
--------------------- -------- -------- ------------ -------- -------- --------- ------------ --------
At 30 June 2015 1,019 58,086 2,353 (640) 46,214 96,353 (1,259) 202,126
--------------------- -------- -------- ------------ -------- -------- --------- ------------ --------
At 1 January
2016 1,019 58,124 1,651 (572) 46,214 86,438 (1,246) 191,628
--------------------- -------- -------- ------------ -------- -------- --------- ------------ --------
Net result for
the period - - - - - 10,266 934 11,200
Other comprehensive
income - - - 112 - - - 112
--------------------- -------- -------- ------------ -------- -------- --------- ------------ --------
Total comprehensive
income for the
period - - - 112 - 10,266 934 11,312
--------------------- -------- -------- ------------ -------- -------- --------- ------------ --------
Issue of shares 6 124 - - - - - 130
Share option
charges - - 150 - - - - 150
Exercise of
share options - - (150) - - 150 - -
Dividends - - - - - (8,100) - (8,100)
--------------------- -------- -------- ------------ -------- -------- --------- ------------ --------
At 30 June 2016 1,025 58,248 1,651 (460) 46,214 88,754 (312) 195,120
--------------------- -------- -------- ------------ -------- -------- --------- ------------ --------
Notes to the half year condensed consolidated statements
For the six months ended 30 June 2016
1. Corporate information
Mears Group PLC is a public limited company incorporated in
England and Wales whose shares are publicly traded. The half year
condensed consolidated financial statements of the Company and its
subsidiaries for the six months ended 30 June 2016 were authorised
for issue in accordance with a resolution of the Directors on 16
August 2016.
2. Basis of preparation and accounting principles
(a) Basis of preparation
The half year condensed consolidated financial statements for
the six months ended 30 June 2016 have been prepared in accordance
with the Disclosure and Transparency Rules (DTR) of the Financial
Services Authority and with IAS 34 'Interim Financial Reporting'.
The half year condensed consolidated financial statements do not
include all the information and disclosures required in the annual
financial statements and should be read in conjunction with the
Group's annual financial statements as at 31 December 2015, which
have been prepared in accordance with IFRS as adopted by the
European Union.
This half year condensed consolidated financial information does
not comprise statutory accounts within the meaning of Section 434
of the Companies Act 2006. Statutory accounts for the year ended 31
December 2015 were approved by the Board of Directors on 18 March
2016. These accounts, which contained an unqualified audit report
under Section 495 of the Companies Act 2006 and which did not make
any statements under Section 498 of the Companies Act 2006, have
been delivered to the Registrar of Companies in accordance with
Section 441 of the Companies Act 2006.
The half year condensed consolidated financial statements for
the six months ended 30 June 2016 have not been audited or reviewed
by an auditor pursuant to the Auditing Practices Board guidance on
Review of Interim Financial Information.
There have been no significant changes to estimates of amounts
reported in prior financial years.
(b) Significant accounting policies
The accounting policies adopted in the preparation of the half
year condensed consolidated financial statements are consistent
with those followed in the preparation of the Group's annual
financial statements for the year ended 31 December 2015 with the
exception of the adoption of amendments to IAS 16 and IAS 38
relating to the clarification of acceptable methods of depreciation
and amortisation, and the disclosure initiative amendments to IAS 1
'Presentation of financial statements'. These revisions to
standards did not materially affect the financial statements.
3. Segment reporting
Segment information is presented in respect of the Group's
business segments. Segments are determined by reference to the
internal reports reviewed by the chief operating decision
maker.
The Group operated two business segments during the period:
-- Housing - services within this segment comprise a full
housing management service predominately to Local Authorities and
other Registered Social Housing Landlords; and
-- Care - services within this segment comprise personal care
services for people in their own homes.
All of the Group's activities are carried out within the UK and
the Group's principal reporting to its chief operating decision
maker is not segmented by geography.
The principal measures utilised by the chief operating decision
maker to review the performance of the operating segments are that
of revenue growth and operating margins in both core divisions of
Housing and Care. The operating result utilised within the key
performance measures is stated before amortisation of acquisition
intangibles and share-based payments. There is a small cyclical
element to the Group's activities, which, combined with organic
growth, results in the second half of the year traditionally
showing increased margins over and above the first half of the
year.
Six months Six months
ended ended
30 June 2016 30 June 2015
-------------------- --------------------
Operating Operating
Revenue result Revenue result
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------ -------- ---------- -------- ----------
Social Housing 389,588 18,873 366,545 18,203
Care 76,565 1,008 63,477 2,907
------------------------------------ -------- ---------- -------- ----------
466,153 19,881 430,022 21,110
Long-term incentive plans (500) (700)
------------------------------------ -------- ---------- -------- ----------
Operating result before intangible
amortisation 19,381 20,410
Amortisation of acquisition
intangibles (5,419) (4,519)
------------------------------------ -------- ---------- -------- ----------
13,962 15,891
------------------------------------ -------- ---------- -------- ----------
Finance costs, net (1,226) (1,199)
Tax expense (1,536) (2,487)
------------------------------------ -------- ---------- -------- ----------
Profit for the period 11,200 12,205
------------------------------------ -------- ---------- -------- ----------
4. Net finance charge
Six Six
months months
ended ended
30 June 30 June
2016 2015
GBP'000 GBP'000
---------------------------------------------------- -------- --------
Interest charge on overdrafts and short-term
loans (1,151) (1,041)
Interest charge on interest rate swap (effective
hedges) (260) (243)
Interest charge on interest rate swap (ineffective
hedges) - (143)
Interest charge on defined benefit obligation (150) (225)
---------------------------------------------------- -------- --------
Finance costs (1,561) (1,652)
Interest income resulting from short-term
bank deposits 10 78
Interest income resulting from defined benefit
obligation 325 375
---------------------------------------------------- -------- --------
Net finance charge (1,226) (1,199)
---------------------------------------------------- -------- --------
5. Tax expense
The tax charge for the six months ended 30 June 2016 has been
based on the estimated tax rate for the full year.
Tax recognised in the Income Statement:
Six Six
months months
ended ended
30 June 30 June
2016 2015
GBP'000 GBP'000
-------------------------------------------------- -------- --------
United Kingdom corporation tax and total
current tax recognised in Income Statement 2,654 3,391
Adjustment in respect of previous periods - -
-------------------------------------------------- -------- --------
Total current tax recognised in Income Statement 2,654 3,391
Total deferred taxation recognised in Income
Statement (1,118) (904)
-------------------------------------------------- -------- --------
Total tax expense recognised in Income Statement 1,536 2,487
-------------------------------------------------- -------- --------
6. Dividends
The interim dividend of 3.30p (2015: 3.10p) per share is not
recognised as a liability at 30 June 2016 and will be payable on 1
November 2016 to shareholders on the register at the close of
business on 14 October 2016. The dividend disclosed within the half
year Condensed Consolidated Statement of Changes in Equity
represents the final dividend of 7.90p (2015: 7.15p) per share
proposed in the 31 December 2015 financial statements and approved
at the Group's Annual General Meeting on 1 June 2016 (not
recognised as a liability at 31 December 2015).
7. Earnings per share
Basic Diluted
------------------------ ------------------
Six months Six months Six Six
months months
ended ended ended ended
30 June 30 June 30 June 30 June
2016 2015 2016 2015
p p p p
------------------------------- ----------- ----------- -------- --------
Earnings per share 10.08 11.28 9.97 11.16
Effect of amortisation of
acquisition intangibles 5.32 4.45 5.26 4.40
Effect of full tax adjustment (1.70) (0.96) (1.68) (0.94)
------------------------------- ----------- ----------- -------- --------
Normalised earnings per share 13.70 14.77 13.55 14.62
------------------------------- ----------- ----------- -------- --------
A normalised EPS is disclosed in order to show performance
undistorted by amortisation of intangibles and adjusted to reflect
a full tax charge. The Directors believe that this normalised
measure better allows the assessment of operational performance,
the analysis of trends over time, the comparison of different
businesses and the projection of future performance. The profit
attributable to shareholders before and after adjustments for both
basic and diluted EPS is:
Six Six
months months
ended ended
30 June 30 June
2016 2015
GBP'000 GBP'000
------------------------------------------- -------- --------
Profit attributable to shareholders: 10,266 11,460
- amortisation of acquisition intangibles 5,419 4,519
- full tax adjustment (1,732) (971)
------------------------------------------- -------- --------
Normalised earnings 13,953 15,008
------------------------------------------- -------- --------
The calculation of EPS is based on a weighted average of
ordinary shares in issue during the year. The diluted EPS is based
on a weighted average of ordinary shares calculated in accordance
with IAS 33 'Earnings Per Share', which assumes that all dilutive
options will be exercised. The additional normalised basic and
diluted EPS use the same weighted average number of shares as the
basic and diluted EPS.
Six Six
months months
ended ended
30 June 30 June
2016 2015
Millions Millions
--------------------------------------------------- --------- ---------
Weighted average number of shares in issue: 101.84 101.62
- dilutive effect of share options 1.14 1.03
--------------------------------------------------- --------- ---------
Weighted average number of shares for calculating
diluted earnings per share 102.98 102.65
--------------------------------------------------- --------- ---------
8. Fair value measurement of financial instruments
IAS 34 requires that interim financial statements include
certain of the disclosures about fair value of financial
instruments set out in IFRS 13 and IFRS 7. These disclosures
include the classification of fair values within a three-level
hierarchy. The three Levels are defined based on the observability
of significant inputs to the measurement, as follows:
-- Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;
-- Level 2: inputs other than quoted prices included within
Level 1 that are observable for the asset or liability, either
directly or indirectly; and
-- Level 3: unobservable inputs for the asset or liability.
The following table shows the Levels within the hierarchy of
financial assets and liabilities measured at fair value on a
recurring basis at 30 June 2016, 31 December 2015 and 30 June
2015:
As at As at As at
30 June 31 December 30 June
2016 2015 2015
GBP'000 GBP'000 GBP'000
----------------------------------------- ---------- ------------ ----------
Financial assets
Loans and receivables
Trade receivables 54,254 47,364 50,905
Amounts recoverable on contracts 101,250 90,627 100,281
Cash at bank and in hand 53,668 68,612 63,606
Fair value (Level 2)
Forward commodity contracts - effective 1,203 - -
----------------------------------------- ---------- ------------ ----------
210,375 206,603 214,792
----------------------------------------- ---------- ------------ ----------
Financial liabilities
Fair value (Level 2)
Interest rate swaps - effective (1,972) (878) (544)
Interest rate swaps - ineffective - - (440)
Fair value (Level 3)
Contingent consideration in respect
of acquisitions (10,294) (20,861) (21,055)
Amortised cost
Bank borrowings and overdrafts (67,784) (67,790) (67,791)
Trade payables (114,852) (100,385) (113,714)
Accruals and deferred income (40,997) (54,945) (36,589)
Other creditors (6,803) (9,113) (8,276)
----------------------------------------- ---------- ------------ ----------
(242,702) (253,972) (248,409)
----------------------------------------- ---------- ------------ ----------
(32,327) (47,369) (33,617)
----------------------------------------- ---------- ------------ ----------
The fair values of interest rate swaps and forward commodity
contracts have been calculated by a third party expert discounting
estimated future cash flows on the basis of market expectations of
future interest rates (Level 2).
The fair values of deferred and contingent consideration have
been calculated by the Directors by reference to expected future
income and expenditure in respect of the acquired businesses.
There were no transfers between Level 1 and Level 2 during the
six-month period to 30 June 2016 or the year to 31 December
2015.
The reconciliation of the carrying values of financial
instruments classified within Level 3 is as follows:
As at As at As
at
30 June 31 December 30
June
2016 2015 2015
GBP'000 GBP'000 GBP'000
------------------------------------- --------- ------------ --------
Balance, beginning of period 20,861 21,045 21,045
Increase due to new acquisitions in - 123 -
the period
Paid in respect of acquisitions (10,019) (7) -
Released on reassessment (548) (425) -
Unwinding of discounting - 125 10
------------------------------------- --------- ------------ --------
Balance, end of period 10,294 20,861 21,055
------------------------------------- --------- ------------ --------
Contingent consideration represents an estimate of future
consideration likely to be payable in respect of acquisitions.
Contingent consideration is discounted for the likelihood of
payment and for the time value of money. Contingent consideration
becomes payable based upon the profitability of acquired
businesses.
The carrying value of the following financial assets and
liabilities is considered a reasonable approximation of fair
value:
-- trade and other receivables;
-- cash and cash equivalents; and
-- trade and other payables.
9. Share capital
Six months Six
months
ended ended
30 June 30
June
2016 2015
GBP'000 GBP'000
------------------------------------------------- ----------- --------
Allotted, called up and fully paid
At 1 January 101,938,335 (2015: 101,134,142)
ordinary shares of 1p each 1,019 1,011
Issue of 588,089 (2015: 770,458) ordinary
shares of 1p each on exercise of share options 6 8
------------------------------------------------- ----------- --------
At 30 June 2016 102,526,424 (2015: 101,904,600)
ordinary shares of 1p each 1,025 1,019
------------------------------------------------- ----------- --------
588,089 (2015: 770,458) ordinary 1p shares were issued in
respect of share options exercised. The difference between the
nominal value of GBP0.06m and the total consideration of GBP0.1m
has been credited to the share premium account.
10. Notes to the half year condensed consolidated cash flow
statement
The following non-operating cash flow adjustments have been made
to the pre-tax result for the period:
Six months Year Six
months
ended ended ended
30 June 30 June 30 June
2016 2016 2015
GBP'000 GBP'000 GBP'000
--------------------------------------- ----------- -------- --------
Depreciation 2,672 5,241 2,395
Profit on disposal of property, plant - 43 -
and equipment
Intangible amortisation 6,239 13,228 5,161
Share-based payment charges 150 221 700
IAS 19 pension movement - 40 (700)
Net finance charge 1,401 2,670 1,349
--------------------------------------- ----------- -------- --------
Total 10,462 21,443 8,905
--------------------------------------- ----------- -------- --------
11. Half year condensed consolidated financial statements
Further copies of the Interim Report are available from the
registered office of Mears Group PLC at 1390 Montpellier Court,
Gloucester Business Park, Brockworth, Gloucester GL3 4AH or
www.mearsgroup.co.uk
12. Principal risks and uncertainties
The nature of the principal risks and uncertainties faced by the
Group has not changed significantly from those set out on pages 38
to 41 of the 2015 Annual Report and Accounts and is not expected to
change over the next six months. The four principal risks
identified are: reputation, people, health and safety, and IT and
data.
13. Forward-looking statements
This report contains certain forward-looking statements with
respect to the financial condition, results of operations and
businesses of Mears Group PLC. These statements involve risk and
uncertainty because they relate to events and depend upon
circumstances that will occur in the future. There are a number of
factors that could cause actual results or developments to differ
materially from those expressed or implied by these forward-looking
statements.
The Directors confirm, to the best of their knowledge, that this
condensed set of financial statements has been prepared in
accordance with IAS 34 as adopted by the European Union and that
the Interim Report includes a fair review of the information
required by Rules 4.2.4, 4.2.7 and 4.2.8 of the Disclosure and
Transparency Rules of the UK Financial Services Authority.
The names and functions of the Directors of Mears Group PLC are
as listed in the Group's Annual Report for 2015.
By order of the Board
D J Miles A C M Smith
Chief Executive Officer Finance Director
david.miles@mearsgroup.co.uk andrew.smith@mearsgroup.co.uk
16 August 2016
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR GGUGGRUPQGMA
(END) Dow Jones Newswires
August 16, 2016 02:00 ET (06:00 GMT)