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Housing maintenance sector near 'breaking point’

17 Mar 15 The social housing maintenance sector is about to be hit by a wave of contract failures, a leading contractor is warning.

Housing maintenance contractor Mears says that contract failures will begin to emerge over the next 18 months and it expects to be on hand to pick up the pieces.

“Over time, we have learned that in addition to excellent service delivery, strict bidding practice and innovation is essential in social housing,” Mears said.  “We appreciate that clients and competitors are under enormous pressure in an increasingly complex market with challenging underlying needs.  We have become more aware this year of a material number of contracts held by competitors that are unsustainable either in terms of service delivery, financial viability or both.”

It added: “We are confident that, over the next 18 months, our patience will be rewarded and our differentiated model vindicated, as these contracts reach breaking point.”

In December Sutton Housing Partnership called in Mears at short notice to replace Rydon Maintenance. Mears does not expect this to be the last such opportunity.

“We mobilised over a period of two days in late December 2014. This contract was awarded on an emergency one year basis after the exit of the incumbent contractor.  he contract covers 6,000 homes in the London Borough of Sutton, delivering responsive repairs, voids and a planned maintenance programme. The contract mobilisation has gone extremely well, especially given the short timescales; our new client has experienced an immediate improvement in quality.”

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The warning came as Mears unveiled pre-tax profits of £29.7m for 2014 on revenue down 3% (on continuing operations) of £838.7m. The reduction was anticipated as contracts that came with the Morrison acquisition came to an end.

Mears also said that was still huge scope for market growth in its markets. “Our clients are looking to consolidate and transform an array of housing management activities, such as planning and asset management, income optimisation, lettings and the operation of related call centre infrastructure. The market for these types of white collar activities is significant, at circa £4 billion per year, and is largely untouched by the private sector. An evolving social housing market, following recent changes in the welfare system and tenancy arrangements, over and above the ongoing pressure on budgets generally, has increased the pressure on our clients to rethink how best to meet the needs of not only existing tenants but also the three million potential tenants on long social housing waiting lists. Recognising how Mears has worked in partnership with them in the past to address more broad-based blue collar challenges, we have been encouraged to collaborate to tackle the sector's housing management issues.”

Chief executive David Miles said: "I am delighted with the progress Mears has made in 2014. I believe the opportunities for us in social housing remain very strong as our clients seek broader solutions to their increasingly complex housing challenges. Our core maintenance business is performing well and I believe we can deliver solid growth in that area through providing 'more of the same'.  We have been focused over the last twelve months on providing a broader housing offering to our customers, mirroring our clients' changing needs. For instance, our investment in housing management and our development of new forms of partnering arrangements are key highlights, including our preferred bidder status for the new local authority planning portal joint venture.

Mr Miles continued: "We see the development of our housing management services as an important extension of our social housing offering. The demand for affordable housing will provide opportunities to work with housing providers to improve the delivery of housing and property management services and to increase the supply and management of housing through innovation and partnership. Currently, this area is highly fragmented and undeveloped. We believe the group is well positioned to progress and deliver strong organic growth in this area. Where appropriate, we will make acquisitions to develop both the breadth of our services and enhance our scale."

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