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Mears reiterates 2019 guidance, forecasts slight reduction in net debt in first half

The firm said that in the first part of the year it had secured three regions of the asylum accommodation and support contract, issued by the Home Office
Asylum
The AASC contract has an estimated value of £100mln per year over ten years

Social housing and care services provider Mears Group PLC (LON:MER) has reiterated its guidance for 2019 and forecast a slight reduction in its average daily net debt for the first half of the year.

In a trading update ahead of its interims on 13 August, the firm said that in the first part of the year it had secured three regions of the asylum accommodation and support contract (AASC), issued by the UK Home Office, which carried an estimated value of £100mln per year over a ten year period.

READ: Mears weak as 2018 revenue falls, profit misses estimates, and net debt above-forecast

The group also said the first half of the year had seen an “intensive period of mobilisation” that was expected to continue into the second half.

Meanwhile, Mears said the integration of a number of business assets from the property maintenance arm of facilities manager Mitie Group PLC (LON:MTO), which it acquired in November last year, was “progressing well” with the integration of the systems on track to complete by September.

The company added that it had made “solid progress” toward repositioning its development activities away from projects with high requirements for working capital funding as well as unwinding its £30mln property acquisition facility.

The firm was also maintaining tight control of its working capital and as a result expected a “small reduction” in average daily net debt in the first half compared to the average net debt for 2018.

David Miles, chief executive of Mears, said he was “very satisfied” with the progress made in the first half against “well documented challenges” in the support services arena.

In a note, analysts at ‘house’ broker Liberum Capital maintained a buy’ rating and 450p target price on the stock following what they said was a “re-assuring statement”, adding that the company offered “significant upside” to its current share price if the AASC performed well and offered positive contract growth in housing.

In early trading on Tuesday, Mears shares were steady at 251p.

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Mears Group PLC Timeline

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