Mears : Preliminary results for FY2021 - Investor Presentation

Mears Group

Preliminary results for the 12 months ended 31 December 2021

Executive Summary

"A year of significant progress, driven by operational delivery, market leadership, contract success, and strong cash generation, with a positive outlook."

Financial

•  Strong revenue recovery through FY 2021 to £878m +9.0% y-on-y

•  Margins strengthened further in H2 to 3.7%; (H1: 3.1%); PBT: £25.6m

•  Excellent cash performance, avg. daily net cash £0.4m (FY 2020: £97m net debt)

•  Final dividend of 5.5p (FY 2021 full year: 8.0p)

Operational High levels of client service, customer satisfaction and contract KPIs despite challenging operating backdrop

•  Prior investment in workforce and systems is proving a key differentiator, particularly post-Covid

•  Most contracts index-linked helping mitigate supply chain inflation

Strategic

•  Orderbook of £2.4bn, including RLAP award and pipeline in excess of £1bn which underpins organic growth strategy

•  Positive Q1 22 and retention success gives good visibility over revenues and profits

•  Strong cash generation enables increased investment; key areas of focus digital innovation and decarbonisation

A year of operational excellence

"Continued delivery of operational excellence to clients and customers is the key to long term sustainable growth."

A strong operational recovery from Covid

Volume and activity levels returned during the year across the majority of the Group

• • Responsive repairs back to pre-pandemic levels by Q4 2021 and have continued into Q1 2022

• • Volumes were and remain above expected contract levels in AASC

• • Some deferral of planned works is on-going; expected to return from H2 2022

Clients' housing needs are evolving

• • Legislation (Social Housing White Paper) driving greater emphasis on quality provision

• • Technology and digitisation becoming a key differentiator (e.g. using AI within our database as a predictive tool of future cost profiles)

• • Client's housing problems are becoming more complex (eg decarbonisation, fuel poverty, housing standards, asset utilisation, ESG requirements)

• • These changes already play to our core strengths and competences

• • Modest increase in investment to further develop our offer

Customer service and its measurement remain key

• • Agile, multi-channel digital survey rolled-out across the contract portfolio

• • NPS and 'Satisfied with Service' KPIs remained high

Managing a balanced commercial approach

"Well-positioned to manage workforce and supply-chain pressures, but requires careful management with employees, clients and suppliers"

Current sector and industry pressure and our responses

• • Contractual indexation increases

• • Staff retention

• • Career development

• • Subcontractor management

• • Supply chain relationships

• • Customer planning and cooperation

Balanced commercial approach

Key contract update

Key contracts

Residential and Living Accommodation Programme ("RLAP")

Key updates

• • Contract successfully retained, as announced in Feb-22 mobilises in Apr-22

• • Revenues in excess of £50m, for up to 7 years

• • 5-year contract extension to 2027 in respect of 17,000 homes

  Responsive repair, voids and planned works

• • Originally came into the Group through the MPS acquisition

• • Mobilised Jul-21; annual contract value £10m

  Transitional housing services for prisoner on release

• • Positive initial feedback from MOJ; further extension granted

  Responsive repair, voids and planned works

• • Contract extension that will take Mears relationship with Thanet DC beyond 30 years duration

• • Contract extension until 2025

  Asylum and Accommodation Support Contract ("AASC")

• • Elevated numbers throughout FY 2021 and into FY 2022

• • Mears continued to provide highest levels of support