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Major housing contractor outlines plan to navigate coronavirus outbreak

A major housing contractor has said it expects to focus on emergency maintenance and essential services as it outlined its plan to navigate the coronavirus outbreak to investors this morning.

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Major housing contractor outlines plan to navigate coronavirus outbreak #ukhousing

A major housing contractor has said it expects to focus on emergency maintenance and essential services as it outlined its plan to navigate the coronavirus outbreak to investors this morning #ukhousing

Mears Group, which provides repairs and maintenance services to many social landlords, issued an update to investors this morning about the impact of the outbreak.

The organisation will not pay a dividend to investors, is in advanced discussions with lenders about the potential for taking on loans to keep it secure through the crisis, and declined to make a financial forecast due to the disruption. 

Its chief executive said the group was “well placed to battle through these short-term challenges”. Mears, which has an annual turnover of close to £900m, saw its share price rise 2.34% in the early trading. 

In the detailed statement, available below, it said “an element” of its services are regarded by government as “essential” and are expected to continue, with housing providers also expected to keep requiring emergency maintenance throughout the period.


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This work constitutes 30% of the group’s revenue, which will “continue to be paid for and delivered”. 

However, it added that lower-priority work – such as upgrades and improvements to housing stock – which provide “a consistent and highly visible revenue stream” are likely to be deferred. 

Mears said where contracts took the form of block payments, clients were expected to continue paying, but revenue would reduce “immediately” for contracts paid “per activity”. 

The group said it was taking steps to protect its liquidity, but noted that the government has told local authorities to continue paying contractors throughout the disruption. It said 90% of its debtors are public bodies.

The firm said negotiations were underway with housing clients in regard to contracts that are paid more than half “per activity” to agree some form of payment that would protect its workforce. 

“This key mitigating action would provide the greatest protection to revenue, profit and cash,” the update said. It will also use the government wage protection scheme to ‘furlough’ some employees.

It said lenders have “indicated their strong support and the group would expect to secure additional facilities over the next month”. “There is no immediate requirement but the board wishes to secure sufficient headroom in the event that the current emergency continues for an extended period,” the statement added. 

Mears has a committed revolving credit facility to the value of £170m which expires in November 2022, with net debt at £51.0m at the end of the last year. 

Its lending covenants require it to keep its net debt at a maximum of three times its earnings before interest and other deductions (EBITDA). The covenants will be tested on 30 June, and the group said it will keep them under review.

“The board has concluded that, while positive progress is being made on the actions above, the level of uncertainty created by the COVID-19 pandemic is such that it should not provide guidance with regard to financial performance for the current year until a clearer outlook emerges,” it said. 

David Miles, chief executive of Mears, said: “The rapidly evolving public health emergency created by COVID-19 will place increased demands on the group’s services, its people and its finances. We are taking all the necessary steps to overcome these challenges. 

“I am confident that our staff will rise to the challenge of effective delivery in these difficult circumstances and that the group will come through well. I thank all of our stakeholders for their forbearance and their support in these uniquely challenging times.

“The group is well placed to battle through these short-term challenges. Our long-term goal continues to be delivering controlled growth, improved profitability and reduced indebtedness.”

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