Liberum lowers target price on Mears Group

Analysts at Liberum slightly dropped their target price on housing and social care provider Mears Group on Tuesday from 150.0p to 130.0p as the company's first-half results were largely in line with expectations.

Liberum said Mears' interim results were in line with expectations, with a 7% decline in revenues, leading it to make no changes to its earnings estimates and expectations for fully-diluted earnings per share of 0.4p for 2020.

Average daily net debt increased from £114.0m to £121.0m over the half, with the analysts also leaving their full-year average daily net debt and spot net debt estimates unchanged at £99.0m and £41.0m, respectively.

While Liberum said Mears had "adequate liquidity", it did note that the company may need to request a covenant waiver in December but added that it took "some reassurance" that there would likely be "a high level of government support" given that the company provides essential services.

The analysts also highlighted that Mears' order book increased from the 2019 level of £2.5bn to £2.7bn, helped by some extensions and despite Covid-19.

Liberum's target price reduction was a result of its sum of the parts assessment and the group's "not compelling" price-to-earnings ratio of 5.3x.