David BurrowsMears group reported back in in August 2017 of an increased level of uncertainty in respect of its housing revenues, as clients' attention was diverted towards ensuring their portfolios were safe and compliant, resulting in a short-term impact to the housing division's planned workloads.
Since then, the housing division has seen some further softening of revenues for the current financial year.
The support services provider shows that trading in its care division remains in line with expectations and remains confident that it will deliver a profit in the second half and for the full year overall.
According to its latest trading update, Mears is enjoying a busy period of new contract bidding opportunities through both its traditional bid pipeline and increasingly through other negotiated routes giving confidence that it is well positioned to meet 2018 expectations.
The challenges encountered in 2017 have led to the Group taking a more detailed review of its central support structures so as to ensure that its support functions deliver best value
Disposals
In 2013, the group disposed of its mechanical and electrical division, which included an entity operating in the UAE with a number of contractual performance guarantees from the group which remain in place for a limited period following disposal and are due to fall away in 2018 as the underlying commitments unwind.
A number of those performance guarantees have been called and the group is required to settle funds against those contingent liabilities.
Mears has taken legal advice and believes there is a realistic expectation that these funds will be recovered in due course.
Costs
However, it is currently the intention to fully provide for this as an exceptional item within the 2017 results. This exceptional item is expected to be up to £16.5m which includes a provision for future legal costs and a full provision for all outstanding performance guarantees.
Commenting on the latest trading update, David Miles, Chief Executive, Mears, said:
"I do not wish to gloss over our 2017 performance and I understand the importance of delivering against our financial targets in the short term.
“Whilst some of the short-term challenges in housing could not have been anticipated, it is frustrating a number of other opportunities that could have helped mitigate these challenges did not develop quickly enough. Nonetheless, I am pleased with the progress made over the last year across the entire Mears business and on a range of important indictors."
Mears Group saw it share price fall markedly in early trading - down over 7.5% to 388.80.