Social housing repairs provider says underbidding has led to failures, allowing it to ’pick up the pieces’
Mears has profited from the failure of its competitors, including Connaught and Rok, the firm said as it unveiled its results for 2010.
Reporting its 15th consecutive year of revenue growth, the social housing repairs and maintenance provider blamed its competitors’ failures on underbidding.
Mears chairman Bob Holt said: “The social housing sector has recently seen some very public corporate failures. A contributing factor to these failures was and continues to be the practice of tendering at unsustainable prices, which leads to consequences that benefit no one.”
Holt, whose firm has snapped up contracts from rivals Connaught and Rok, added: “Mears’ long-term partnership approach and financial and operational discipline means that it is well placed to pick up the pieces from competitor failures.”
Holt told investors that Mears’ revenue was up 11% in 2010, to £524m, compared with £470m in 2009. Pre-tax profit was down 5% to £18.7m in the year but this fall was mainly caused by financing acquisitions. After allowing for exceptional charges, its operating profit was up 27%, to £31.3m.
During the year, Mears spent £28.1m acquiring Supporta and paying nominal fees for a number of Connaught and Rok contracts. The Supporta deal resulted in higher margins in its domiciliary care business and has “exceeded expectations”, according to David Miles, Mears’ chief executive.
Mears also won new work during the year. It secured contracts worth £1.2bn, including contract extensions, as its order book grew to £2.7bn, compared with £2bn at the end of 2009.
Revenue in Mears’ social housing division increased by 7% during 2010, to £379.4m. Its domiciliary care division reported revenue 67% higher, to £100.4m, boosted by Supporta.
At the end of 2010, Mears had secured 93% of analysts’ forecast revenue for 2011 and 80% for 2012.
Andy Brown, a Panmure Gordon analyst, said: “This is another set of good FY results, with progress on revenue and margin enabling the group to put the dividend up by a healthy 18%.