Mears to resume dividends as trading normalises

Mears is to resume dividend payouts, the housing services provider confirmed on Tuesday, after strong first-half trading left it on track to meet full-year forecasts.

The firm said trading had been in line with expectations in the calendar year-to-date. Group revenues the for six months to 30 June are expected to be in excess of £430m, while adjusted pre-profits are anticipated to come in around £110m.

Average daily net debt is expected to be around £20m, significantly down on the £97m reported in the 2020 full-year.

Last year, interim revenues were £407m while the adjusted pre-tax loss was £5.3m. Housing maintenance activities normally account for around 60% of group revenues. But lockdowns meant planned works were deferred and Mears – whose clients include local authorities and housing associations – moved to providing emergency services only.

Since then, however, trading has normalised across the group, leaving it on track to meet its full-year guidance and resume dividend payments.

“Given the return of normalised trading arrangements across the business, the strong cash performance and positive pipeline outlook, the board anticipates returning to the dividend list for the six months ended 30 June 2021,” Mears said.

David Miles, chief executive, added: “The group has again performed resiliently though another lockdown-impacted reporting period.

“However, as we look forward, activity levels and operating and financial arrangements are returning to normal across the group, and we are confident that this will be reflected in the group’s financial performance in the second half of the year.

Analysts are currently looking for revenues of between £771m and £811m, and adjusted pre-tax profits in the range of £21.3m to £25.4m.

As at 1030 BST, shares in Mears were ahead 2% at 187.01p.

Andrew Nussey, analyst at Peel Hunt, said: “The update confirmed that 2021 trading remains in line, with first half pre-tax profits expected at around £11m given the positive unlocking momentum.

“The shares continue to offer excellent value, in our view, given the prospects of attractive, sustainable, free cashflow growth.”

Peel Hunt has a ‘buy’ rating on the stock and a 275p target price.