Mears Group PLC (LON:MER) shares gained on Wednesday as the provider of support services to the housing and care sectors reaffirmed its full year guidance.
The company said it continues to make “solid progress” in its two core divisions with revenues in the housing arm stabilising in the first half and margins improving in the care business.
The housing division has secured £70mln in new work, including a £62mln contract to deliver repairs and maintenance services to Riverside Housing Association for an initial five years, starting in July.
The group has also partnered with the London Borough of Waltham Forest to purchase and refurbish 365 homes to address the shortfall in affordable housing under a 40-year contract worth £75mln, also beginning in July.
Mears said the care division has experienced a “good first half” with operating margins rising in line with previous guidance, supported by a successful restructuring and a “balance of better quality contracts with a clear and sustainable margin”.
Mears seeks to cut costs
A review of the group’s operations has also identified £5mln in cost savings, as previously expected.
“I am satisfied with the progress made in the first half of 2018,” said chief executive David Miles.
“The current pipeline of opportunities is particularly exciting. The strategic evolution of our business means we are gaining access to opportunities that previously would have been out of our reach and the senior team is very focused on converting these into secured orders.”
In March the company reported a 7% decline in 2017 pre-tax profit to £37.1mln as the Grenfell Tower disaster delayed customer decision making.
READ: Mears revenues fall after Grenfell Tower disaster but outlook positive
Mears had no involvement with Grenfell Tower but last June's fire that killed 80 people caused delays to the timing of the company’s planned workloads as authorities focused on making sure all their properties were safe and compliant.
Shares increased 3.1% to 324p in morning trading.
Liberum remains bullish
Liberum maintained a ‘buy’ rating and target price of 450p on the stock following what it called a “reassuring statement” from Mears. It continues to forecast full year fully diluted (FD) earnings per share (EPS) of 33.3p with an improvement in profits in housing and care.
The broker expects earnings to be 44% weighted to the first half with an estimated FD EPS of 14.7p. The second half will benefit from cost savings, Liberum added.
“Restructuring should save money and improve efficiency and bidding,” it said.
“We continue to expect FY average net debt of £112m, with a seasonal peak in H1.”