Mears : Annual Report and Accounts 2020

Mears Group PLC

Annual Report and Accounts 2020

Secure.

Responsible.

Innovative.

Mears today

Mears is one of the UK's leading and most trusted providers of a wide range of specialist Housing services to Local and Central Government.

Large addressable markets underpinned by legislation:

• Help clients address UK housing shortage
• Our services are non-discretionary
• Required by legislation
• Often funded from ring-fenced resources

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thorities

Contracts deliver stable revenues and margins:

• Average contract length is 7 years
• Lump-sumand volume-based arrangements
• Ancillary growth opportunities
• Mobilisation payments
• Indexation

	Emergency
	call centre
Responsive repair	Refurbishment

H	Void management
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Tenant welfare	t
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No.1 outsourced provider of responsive repair:

• Trusted client relationships
• Reputation for quality, customer service, and operational excellence
• Track record of innovation

Temporary

accommodation

Property

management

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Gas servicing
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Capital-light model with good cash conversion:

• Low working capital requirements
• Delivers strong operating cashflows
• Low capex requirements and strengthened balance sheet
• Capital allocation focussed on organic growth, debt reduction

and dividends

Specialists in housing solutions

Our purpose

Working together to help people and communities thrive. This is the guiding principle that defines our brand and

Our business at a glance

Where we operate

We operate across the UK through a range of local branches and facilities with a national coverage. A sample of our branches and recent contract wins is given below.

drives our activities. It is what makes Mears distinctive and is the starting point for all of our activities.

Our vision

To be the leading provider of housing services and solutions to the affordable housing market in the UK.

Our values

We value our customers and communities, putting their needs at the heart of everything we do.

We value teamwork,

supporting each other, sharing ideas and never excluding others.

We value personal responsibility, setting consistently high standards for our work and holding ourselves accountable for achieving them.

We value innovation, being inventive in our approach and empowering people to take reasonable action without fear

or discrimination.

1. Awarded a £2 million contract for kitchens and bathrooms with A2Dominion on top of its current contract London & South East
2. Won Crawley contract valued at £167 million over 10 years Crawley
3. Signed our new Rotherham R&M contract which went live in April 2020 transitioning a new service at the commencement of the first national lock down Rotherham
4. Won 30 year partnership contract in Cornwall to deliver extra care homes in Hayle, St Austell, Newquay, Falmouth and Liskeard Cornwall
5. Renewed repairs response and void refurbishment contract to the London Borough of Hammersmith and Fulham
   West London
6. Won repairs contract for Accent Housing's Eastern region East of England
7. Retained our £40 million contract with Islington Council for a range of planned works Central London
8. Awarded a repairs contract with Longhurst
   Midlands and East of England

1. Contract Extension with Leeds City Council Leeds
2. Contract Extension with East Kent Housing Kent
3. Contract Extension with Home Group North East Newcastle
4. Contract Extension with Milton Keynes
   Milton Keynes
5. MPS Contract Extension with Wrexham Council Wrexham
6. Appointed to be Exeter City Council's partner to deliver the new Integrated Asset Management contract Exeter
7. Environmental Works win contract with Aster Group South West
8. The third year of our contract within Aberdeenshire Council sees a significant increase in volume to the first two years due to great service. The change in profile will see our revenues double from the current year to circa £13 million Aberdeenshire

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Mears Group PLC Annual Report and Accounts 2020

Introduction

What we do

Mears has a single minded focus on the housing market and delivering services to the residents of these homes. We operate within the affordable housing sector, which is an area that will see continued investment given the significant housing shortage and the rising number of people who are regarded as statutorily homeless.

Our services

Our core services are in the maintenance and management of homes. Increasingly we operate an intelligent approach to maintenance, using technology and experience to operate preventative maintenance programmes that reduce levels of emergency repairs. As regards management, we collect rent and ensure homes are managed and maintained to a decent standard, whilst often providing other welfare services to the tenants. Our particular focus is on providing sustainable alternatives to homelessness, helping reduce the rising problems created by the housing shortage in the UK.

Our customers

We work predominantly with Central Government and Local Government, in the delivery of housing services. These are typically through long term contracts. We equally consider that the residents of the homes that we manage and/or maintain, to be our customers, and we take pride in the high levels of customer satisfaction that we achieve.

Long-term drivers

The shortage of housing in the UK has made investment in housing both a political and an economic priority. More recently, the Social Housing White Paper and the Grenfell tragedy have put greater focus on tenant engagement and safety. Long-term UK carbon reduction targets will also mean that significant further investment in housing is needed, including the replacement of gas boilers.

As such, we anticipate rising investment in our markets and a greater attention to the quality of delivery.

Demographic change is also a key long-term driver, given the growing and ageing population of the UK. This will create opportunity for more specialist housing, where management and maintenance services can be effectively combined through a single partner.

Revenue £m

Maintenance-led contracts

2020	536.9
2019	660.7
Management-led contracts
2020	253.8
2019	181.3
Development
2020	15.1
2019	39.5

Mears Group PLC Annual Report and Accounts 2020	01

HighlightsContents

O P E R C I G E AT R T S

Financial highlights

Group revenue*	Net debt (inclusive of lease obligations)
£805.8m	£152.2m
(2019: £881.5m)	(2019: £256.2m)
	Adjusted net cash
Adjusted loss before tax**	(exclusive of lease obligations)
£3.4m	£56.9m
(2019: profit £32.4m)	(2019: net debt £51.0m)
Reported loss before tax*	EBITDA to cash conversion***
£15.2m	185%
(2019: profit £20.3m)	(2019: 113%)
Order book	Accident frequency rate
£2.6bn	0.15
(2019: £2.5 bn)	(2019: 0.23)

• On continuing activities
• On continuing activities, stated before exceptional costs and amortisation of acquisition intangibles
• Being EBITDA divided by cash inflow from operating activities of continuing operations

Strategic highlights

During a year which has seen unprecedented challenges, the Group made strong progress against all of its key strategic objectives as detailed below:

• Completed the exit from standalone Domiciliary Care
• Completed the disposal of its planning solutions business ('Terraquest'), generating an upfront cash inflow of £56.9m
• Continued to make progress in managing the controlled closure of the Development activities, to unlock working capital absorbed in that area
• Significant reduction in its indebtedness, reporting net cash at the year together with a reduction in the daily net debt

Strategic report 01 Highlights

1. 2020 accreditations

1. Chairman's letter

1. Chief Executive Officer's review

1. Financial review

28 Providing homes and supporting communities

30 Meeting the extra care needs in Cornwall

1. Listening to our stakeholders

1. S172 Statement

1. Market drivers

1. Business model

1. Our strategy

1. Key performance indicators

1. Our approach to ESG

1. Why invest

1. Risk management

1. Principal risks and uncertainties

1. Business planning and financial viability

Corporate governance

1. Chairman's introduction
2. Board of Directors

1. Corporate governance framework
2. Key board activities in 2020
3. Promoting the success of the Company
4. Stakeholder engagement

1. Roles and responsibilities

1. Board composition
2. Report of the Nomination Committee

1. Report of the Audit Committee

1. Report of the Remuneration Committee

1. Annual report on remuneration

1. Report of the Directors

1. Statement of Directors' responsibilities

Financial statements

113 Independent auditor's report

1. Consolidated statement of profit or loss
2. Consolidated statement of comprehensive income
3. Consolidated balance sheet
4. Consolidated cash flow statement
5. Consolidated statement of changes in equity
6. Notes to the financial statements
   - Group

1. Parent Company balance sheet
2. Parent Company statement of changes in equity
3. Notes to the financial statements
   - Company

Shareholder information

1. Five-yearrecord (unaudited)
2. Shareholder and corporate information

T R

N O I AT M R O F N I R E LD O H E R A H S S T N E M E TAT S L A I C N A N I F E C N A N R E OV G E AT R O P R O C

Reconciliations between the statutory figures and the alternative performance measures are reconciled on pages 16 to 18 of the Finance Review. The Financial review also provides detailed analysis of the financial impact from the discontinued operations.