Mears predicts 'modest' lockdown losses

Mears expects to see “modest” operating losses during lockdown, the housing services group said on Tuesday, as it moves to emergency-only contracts.

Housing maintenance activities normally account for more than 60% of group revenues. But the Covid-19 shutdown has seen all planned works deferred, and Mears – whose clients include local authorities and housing associations – is now providing emergency services only.

However, the company said it secured “interim arrangements” with the majority of is clients “which, together with the use of the government’s furlough scheme, ensure recovery of direct labour and local overheads. This has substantially reduced the financial downside risk.”

In addition, housing management activities - which normally account for around 25% of group revenues - had seen no reduction in demand, "given the large numbers of vulnerable people who often need daily support".

The company continued: “Excellent progress has been made in mitigating the financial impact of operational changes. The group believe that operating losses during the full lockdown period, where an emergency-only service is being provided, will be modest, and a small positive free cash flow should be generated.”

Mears said its existing banking facilities of £170m, which had maturities extending out to November 2022, would provide “sufficient” liquidity, but it was still looking to increase its facilities by around £22.6m.

“The board considered it prudent to secure additional headroom, given these are unique and uncertain times,” management confirmed.

Average net daily debt in 2019 was £114.4m, although that rose to £126.1m during the fourth quarter following the start of significant Home Office contracts to provide housing to asylum seekers.

David Miles, chief executive, said: “While it is not possible to predict the future with certainty, I am confident as to the financial stability and the long-term wellbeing of the group.”

As at 1200 BST, shares in Mears were trading 4% higher at 170.22p.