Mears Group revenue grew by 14% in 2023 to £1,089m (2022: £960m) and pre-tax profit was up by nearly a third to £46.9m (2022: £34.9m).
Mears’ largest single customer is the Home Office, with who it has an asylum accommodation and support contract (AASC). When this contract was won, in 2019, the company expected it to generate annual revenues of around £120m, which would, under normal conditions, amount to around 15% of group revenues.
However, Mears said that the AASC had “experienced elevated volumes as a result of a backlog linked to the challenges of the Covid-19 pandemic. As a result, this customer relationship accounted for over 40% of group revenues in 2023 and this elevated position has continued into 2024.”
That one contract meant that Mears’ management-led activities saw revenues grow by 34% in 2023 to £543.3m.
“It is a tremendous achievement that an area of the business which the group entered less than 10-years ago, and has been grown almost entirely organically, now comprises half the group's revenues,” said chief executive Lucas Critchley.
By contrast Mears’ housing maintenance activities – its traditional core business – reported a revenue increase of just 1% to £543.3m.
However, despite the growth in revenues in management-led activities, segment profits have not improved by so much – £25.7m before tax in 2023 against £24.3m in 2022. By contrast, the housing maintenance segment has substantially improved profits, up from £11.8m to £22.1m, as a result of underperforming contracts completing.
Mears also reports that it is “well-placed” in bidding for a £1.5bn contract with North Lanarkshire Council to provide reactive maintenance, compliance, servicing and planned works. The contract would start in July 2024 and run for 12 years, with an annual value in the region of £125m. North Lanarkshire is already a Mears client but this would double its work for that council.
Chief executive Lucas Critchley summarised: "We are delighted to have delivered strong growth in revenues, profits and cash generation in 2023. The group is recognised as a leading housing specialist, and we continually look to evolve our capabilities to further strengthen our market position. The board believe that the group is well-positioned for the future and is pleased that the strong trading momentum built in 2023 has continued into 2024.”
He added: “The group has benefitted from the strategic redirection of the business over the last five years, having exited from a number of non-core activities and applying a rigorous approach to improving operating margins.”
There are seven AASC contracts operational in the UK in the hands of three contractors: Mears (Northeast/Yorkshire/Humber, Northern Ireland and Scotland); Clearsprings Ready Homes (South and Wales); and Serco (Midlands & East of England and Northwest England). The contracts were signed in January 2019 and run through until 31st August 2029. At time of signing they were collectively worth more than £4.5bn, with Mears' share worth £1.45bn over 10 years.
According to the House of Commons Library, the Home Office spent £3.6bn on asylum support costs in 2022/23, nearly double the spending in 2021/22.
Got a story? Email news@theconstructionindex.co.uk
.gif)
